`Desert dirts’ all the rage in southwestern U.S.

In the mid-1980s, a junior company touting a huge platinum resource told potential investors that the U.S. Bureau of Mines had “verified” the presence of platinum at its property in Arizona.

“Not true,” the Bureau said, though it did confirm that the company’s president had brought samples to its mineralogists for mineral or metal identifications. In response to inquiries, the Bureau said it could “neither prove nor disprove” Global Energy’s claim that it had a platinum deposit, because it had no information on the history of the samples brought in by its president, Richard Jensen.

“None of his samples were raw rock or ore,” the Bureau wrote. “They all had undergone some treatment or process in an attempt to recover or concentrate the noble metals. Most were barren, but we did find visible platinum in a few of the samples alleged to be heavy-mineral concentrates. These samples contained tiny, polished, perfectly formed spheres of platinum, a suspicious form for native platinum. Both of our mineralogists told Mr. Jensen bluntly that they thought the samples had been salted.”

Global Energy, which has since been renamed Global Platinum & Gold, was not deterred by this scathing comment from a reputable government agency. Rather, it opted to have samples tested at MHS Laboratory in Denver, Colo., whose principal business was reported to be the analysis of platinum group metals. As it turned out, the lab was “a subsidiary” of Mullen High School.

In the late 1980s, Global’s project came to the attention of a Canadian major, which tested samples for gold, platinum and palladium. No significant concentrations of any of these metals were found. State and federal mining officials also jumped into the fray, stating they had not seen any proof that economically developable platinum deposits exist near Wickenburg, “or anywhere else in Arizona,” for that matter.

Global was probably one of the first “desert dirt” projects to come to national attention, but it is by no means the last. A growing number of companies active in the southwestern U.S. have taken on precious metal projects that have one common thread — the so-called mineralization does not respond to traditional assaying methods. Instead, the companies use uncertified labs or use their own “proprietary” techniques and recovery methods that purport to find gold that certified, reputable labs are unable to detect.

Investors in these companies often do not realize that if the gold can not be detected by conventional methods, it also cannot be extracted by conventional recovery methods. As a result of this technical dead end, major mining companies have no interest in acquiring or participating in such projects.

The latest company to fall into this category is Delgratia Mining (delgf-q), a Vancouver-based junior whose shares shot to $30 after it reported results from four holes drilled on the Josh property in Nevada (see separate story on page 1).

Another is Naxos Resources, which no longer trades on the Alberta Stock Exchange after regulatory officials sent out independent consultants to test the mineral potential of the company’s Franklin Lake project in California.

The ASE suspended trading in Naxos following an investigation by two consulting firms appointed by the Exchange. After drilling a 76-metre hole in a location selected by Naxos’ consultant, the two consulting firms (Steffen Robertson & Kirsten and Associated Mining Consultants, based in Vancouver and Calgary, respectively) sent samples to two Canadian labs and to Ledoux Laboratories in New Jersey.

Paul Blumberg, an employee of Ledoux, demonstrated the assaying method Naxos had insisted was necessary to recover gold from the Franklin Lake samples, with staff from the consulting firms and the two other labs in attendance. But when the two Canadian labs analyzed samples from the site, using the same method, they found no detectable gold. “The Naxos samples do not contain gold in concentrations above 0.005 oz. per ton,” Associated Mining Consultants (AMCL) concluded. “This can be confirmed by all the analytical methods used in this study, including Naxos’ own methods.”

The consulting firm also charged that “the Naxos methodology changes continuously, which suggests that there is no such thing as a proprietary process as has been claimed by Naxos. None of the procedures reviewed by AMCL show any acceptable scientific replication of results.”

Undaunted, Naxos blamed “procedural errors, incorrect sampling procedures and errors on the part of the Exchange’s consultants,” and is fighting the de-listing order.

Using two Naxos-approved methods, combined with conventional fire assay, Ledoux continues to crank out gold grades of 0.01 to 0.4 oz. per ton, and Naxos has a drill program planned for the next few weeks at Franklin Lake.

International Platinum

In the early 1990s, a company, then known as International Platinum, acquired claims in Arizona from vendors (or lessors) Dale Runyon and William Marston. The claims were described as having “potential for gold and platinum group elements.”

The company initially reported encouraging gold values (0.39 oz. and higher), as well as values in platinum group elements. Because gold and platinum rarely occur in the same geological setting in North America, state officials were skeptical.

In 1994, the Arizona Department of Mines and Mineral Resources determined, through a state-registered assayer, that samples they had taken from International Platinum’s property returned less than trace gold values (0.003 oz.) and small amounts of silver. The state agency also reported that the registered assayer “saw absolutely no indication of platinum group metals.” The samples were taken from areas where the company had reported values for both gold (0.2 oz. or better) and platinum group elements.

About the same time, International Platinum came under the scrutiny of the Toronto Stock Exchange, which sent out Kilborn Engineering to verify reports that samples had returned potentially economic values of gold, as well as platinum group elements. No significant precious metal values were returned from any of the samples Kilborn took, and, as a result, the TSE suspended trading in the company’s shares.

Company literature says that “the time and effort channelled into restoring the ability to trade hindered the company in completing and filing its financial statements properly,” and its default in filing them opened it to further regulatory action. The Ontario Securities Commission stepped in with a cease-trading order in May 1994, effectively ending International Platinum’s career on the TSE. It dropped on to the Canadian Dealing Network in November 1994, and was delisted by the TSE in June 1995.

In July 1994, the company hired consulting firm Behre Dolbear to “conduct tests to determine if gold in recoverable quantities was present on [the] Black Rock property.” Behre Dolbear drilled eight 50-metre holes using a hollow-stem auger drill, and submitted the samples to a metallurgical plant for gravity concentration, sending portions to several independent labs. The independent labs found nothing; Behre Dolbear reported that “all assays performed by registered assayers indicated only trace or nil amounts of gold,” but the firm also said that measurable amounts of gold were “recovered by amalgamation of concentrates produced by the processing of BRX samples in the DCRS [gravity] plant.” Behre Dolbear acknowledged International Platinum’s suggestion that the gold was held in a mineralogical form that fire assays could not detect, but stopped short of endorsing the recovery technique.

International Platinum subsequently changed its name to International Precious Metals (IPMCF-N and IPMC-C) and continued work at its Arizona property, using Behre Dolbear as a consultant. By late 1995, Behre Dolbear had delivered another report, this time on a monitoring program in International Precious Metals’ sample-preparation lab at Goodyear, Ariz. In this study, Behre Dolbear sent sample leach solutions prepared at the lab to two independent laboratories and compared the
results obtained by each lab. Behre Dolbear inserted a blank sample each day, but the consultant’s report did not say whether the blank sample went through the entire sample preparation procedure or was prepared from reagents on-site and sent directly to the two independent labs. Nor did it present results from the blank samples.

The report concluded that “an apparent strong correlation [exists] between the analytical results from two industry-recognized laboratories.” What the report neglected to mention was that the correlation was an inverse one — higher results from one lab matched lower results from the other.

Last summer, the company carried out a 450-ton bulk sample from the property, only to find that its attempt to recover a precious metals concentrate was “unsuccessful.”

Despite these three strikes, International Precious Metals (IPM) was not out. The company continued to promote the project, brushing aside even its own technical failure to recover precious metals, blaming grain size effects and saying, “the system design of the facility resulted in a large percentage of the contained mineralization being lost.”

IPM has maintained that its gold was mineralogically unusual; company literature refers to “mineralization . . . encapsulated or complexed in other geological elements [sic] such as sulphides, tellurides and silicates, which hinders the mineralization from being recovered . . . [T]he very fine nature of the mineralization, microscopic or possibly even molecular, predetermined an even more arduous recovery process.”

A web site on the Internet was used to help disseminate “news” and, by early March of this year, the company’s shares had reached a high of $20.

At about the same time, the company announced plans to pay US$27 million to acquire the balance of ownership in its property from Phoenix International Mining later this year. The letter of intent calls for IPM to pay $17 million cash and 1 million shares, conditional on a formal agreement.

Once again, however, Arizona state officials jumped into action, calling IPM’s program to extract gold and platinum “a hopeless endeavor.” Mining engineer Nyal Niemuth of the Department of Mines and Mineral Resources says the company’s current reports on work programs and recovery “breakthroughs” are so vague as to be meaningless. As far as he is concerned, nothing has changed since his department visited the site, took its own samples for testing and came up empty-handed. “We were unable to corroborate any economic discovery.”

IPM officials were outraged by these remarks, and threatened legal proceedings against the Department of Mines, Niemuth and, another employee of the Department, Mason Coggin. IPM charged, in part, that when Niemuth and Coggin stated their opinion of the project, they were “clearly acting outside the scope of their authority when they evaluated and commented on the soundness of an investment in IPM, the presence (or lack thereof) of mineralization and the professional competence and reputation of IPM.” IPM’s corporate secretary, David Kornhauser, tells The Northern Miner that “from our understanding, all the Arizona Department does is maintain a rock museum and a library.”

At the centre of the controversy between IPM and the Arizona and Ontario governments is the inability of ordinary analytical techniques to detect gold in samples from Black Rock. All are agreed that conventional fire assay does not find the gold, but where the Arizona scientists and Ontario securities regulators conclude that there is no evidence of any gold in the samples, IPM’s conclusion, summed up by Kornhauser, is that “obviously fire assay does not work.”

But disclosure documents IPM made available to The Northern Miner nowhere indicate how the property’s original vendors came to their conclusion, without accurate geochemical analyses, that there were precious metals on the property. IPM’s recent review of the project says only that “the original claim holder . . . alerted IPM of its strong suspicions of significant mineralization on its properties” — in short, that the vendors somehow knew there was mineralization, though scientifically verifiable detection techniques found nothing. IPM’s early work on the property used fire assays, wet extractions with absorption or emission spectrometry, and even X-ray fluorescence, with varying success that has not been duplicated by any agency that took its own samples. (Behre Dolbear’s 1994 and 1995 studies worked entirely with samples that were processed using IPM’s favored preconcentration and leaching processes.)

IPM continues to work on the project’s “metallurgy,” with Behre Dolbear’s help. Dr. Samuel Shaw, who carried the IPM file as a senior associate at Behre Dolbear, recently retired from the firm and signed on with IPM. A summary of staff qualifications published by Behre Dolbear lists Shaw’s areas of expertise as costing, economics, open-pit and underground mining, and reserve calculation; it does not include him among personnel with a background in geology or metallurgy.

Last month, Behre Dolbear told The Northern Miner that it stands by its statement that IPM’s property contains “measurable amounts of gold,” though it would not quantify the amounts or clarify the statement. The consulting firm does state, however, that it has not confirmed the presence of platinum group metals on IPM’s property; nor has it made any sort of resource estimate.

IPM states it will retain Behre Dolbear to “evaluate the leach recovery process” on samples the consulting firm had already taken from the property, and to calculate a resource figure for the area that has been drilled. Grid drilling at Black Rock started again on March 17, this time on areas outside IPM’s assumed mineral deposit.

IPM’s president, Le Furlong, has been telling investors and at least one friendly newsletter writer that he expects the Black Rock Extension project will become known as the largest precious metal find this century.

That, of course, is a promise we have all heard before.