City Resources Launches Exploration Subsidiary

By late September, City Resources (Canada) (TSE) expects to have in hand the final feasibility study for its Graham Island gold project in British Columbia. In the meantime, the Australian-backed mining company has publicly launched a semi- independent subsidiary, United Pacific Gold (VSE), to act as its exploration arm in North America.

United Pacific’s main asset is an option to earn a 50%-interest in the Golden Zone property owned by Golden Zone Resources (VSE). Located in south-central Alaska, Golden Zone is viewed as an advanced project with proven/probable gold reserves, which could be fast-tracked into production in the range of 650 tons per day by late 1989 or early 1990. The property is about nine miles from the paved Anchorage-Fairbanks highway and can be accessed by 4-wheel drive vehicles.

Since the discovery of gold mineralization in the early 1900s, this project has attracted a colorful succession of prospectors, entrepreneurs and mining companies. But because its ores were considered complex, no serious attempts were made to develop it until the completion of the Alaska Railroad. Golden Zone was put into production in 1941, and mined briefly until the outbreak of WWII.

While still a private company, United Pacific and partner Golden Zone completed a $900,000 Phase I program which included surface drilling and the driving of a 950-ft adit in preparation for underground drilling.

Last week, United Pacific elected to proceed with Stage II of its pre- development program. Work will include surface and underground drilling, underground drifting and metallurgical testing at a cost of about $1.6 million(US). David Shaddrick has been contracted as project manager.

“Basically the Phase II program will move probable and possible ore to the proven category,” said Chip Nichols, an experienced geologist and president of United Gold. “We want a bankable feasibility study by March.” The company also hopes to outline additional reserves and resolve questions relating to mining method, metallurgy and permitting requirements.

Although Golden Zone has been described as a complex of gold- bearing porphyry, breccia pipe, vein and shear zone deposits, Dorian (Dusty) Nichol, vice-president, said recent drilling has concentrated on the near surface, steeply dipping pipe-like breccia and in adjacent wall rocks. Recent dr ill results include: 142.2 ft grading 0.125 oz gold and 0.47 oz silver per ton; 230 ft of 0.134 oz gold and 0.47 oz silver, including 40 ft of 0.6 oz gold and 2.79 oz silver.

Preliminary geological ore reserves as calculated by Gemcom Services earlier this year total some 208,512 oz of gold contained in 1,164,870 tons of ore (using a cutoff of 0.08 oz) at a grade of 0.179 oz gold, 0.675 oz silver and 0.207% copper.

“The project has tremendous potential for expansion of reserves based on the geology we now know,” said Nichols. “There are a lot of targets outside of the conceptual pit and underground workings that we will be testing as the project progresses.”

By the end of the current program, the company hopes to have proven reserves of at least 250,000 oz of gold, most likely to be mined initially from an open pit to the 350-ft level, and then underground to the 650-ft level. Grades are expected to be about 0.15 oz gold in the pit, and 0.18 oz underground. Although still in the ball park stage, Nichol said preliminary numbers suggest open pit gold could be produced for under $220 an ounce, and gold underground for about $240. Capital costs for the project have been roughly estimated at about $17 million, including $3 million for further exploration.

While earlier preliminary metallurgical testing had shown recoveries in excess of 86% by conventional milling, Nichols said a fairly extensive internal audit found that by simply pulverizing the material to 50, 65% of the gold could be recovered by gravity. “We will be continuing optimization tests until the plant is actually designed, but have no doubt we can get recoveries to 90-95% over-all.”

Nichols adds the company has already had “positive” discussion with state agencies for permitting of the project, which is located adjacent to a state park.

The company also has an option on the Mac gold property near Fort St. James, B.C., where gold mineralization is associated with hydrothermally altered intrusions. The company expects its 1988 field season will better delineate the mineralization and define specific drill targets. United Pacific also has 14 claim groups, covering about 20,000 hectares, over gold prospects in coastal British Columbia. The company will be exploring this area for what it believes may be the southern extension of the Iskut River- Silbak Premier gold trend.