Fairbanks out to sell stake in Fort Knox gold property

Since its April 1989 initial public offering, Fairbanks Gold (VSE) has concentrated its efforts on outlining a bulk tonnage “porphyry” gold deposit at its 51%-owned Fort Knox property near Fairbanks, Alaska. Having drilled 320 holes totalling over 180,000 ft., the company recently appointed an agent to prepare a marketing document which will be used to solicit and assess offers of interest by major mining companies.

Fairbanks Chairman Eric Friedland said that after spending about US$13.7 million, the project is at the stage where the expertise and financial strength of a major could enhance its development into one of the larger open pit gold mines in North America. The company retained Yorkton Securities to prepare the marketing document and handle all expressions of interest from potential buyers.

“The intensity of interest in the project has accelerated in the last six months,” Friedland said. “This process is intended to enable all interested parties to have an equal opportunity to present proposals, including a possible tender for all of the common shares of the company. And we will also be looking out for the interests of our minority shareholders.”

Eric is the younger brother of Robert Friedland, a well-known mine financier and promoter who recently stepped down from the board of Galactic Resources (TSE) to devote his energies to Ivanhoe Capital, his wholly owned mining venture capital company. (Galactic will have the right to acquire up to 50% of North American mineral property interests acquired in the future by Robert Friedland or Ivanhoe Capital.) The Friedland brothers jointly control about a 55% interest in Fairbanks Gold.

Fort Knox is currently at the prefeasibility stage and although an updated reserve isn’t expected to be released until early next year, management anticipates an 60% increase in tonnage over the 1989 drill indicated oxide resource of 80-100 million tons averaging 0.036 to 0.047 oz. gold per ton. The deposit is still open in three directions, and to depth.

Friedland and Fairbanks President Ian Gray concede that some companies may wish to wait until the prefeasibility study is completed and released early next year. Along with a conceptual mine development plan for the project, the study will determine minable reserves, stripping ratios, production rates and processes, capital cost estimates and a schedule for development.

“The risks may diminish but the price could be higher,” Friedland said.

The oxide deposit at Fort Knox is somewhat unusual in that it is a gold “porphyry” where mineralization occurs as free gold within quartz veinlets, fractures and shears hosted within a quartz monzonite/ granodiorite intrusive. Because the density of the quartz veining appears to have a relationship with gold grade, it’s likely that considerable importance will be placed upon the results of a 48,000-ton (taken from 170,000 mined tons) representative bulk sample. The sample will be used to determine more accurately the overall grade of the deposit, as well as confirm anticipated metallurgical recoveries.

During a meeting with The Northern Miner, Friedland said he expects the project will be of interest to a major company because of the combination of high recoveries (95-97%), low strip ratios, relatively coarse grinding requirements with low work indices and low cyanide consumption.

“This project also has a higher- grade `plum’ that will accelerate the payback period,” Friedland added.

The property is easily accessible by road — and is near power, water and a skilled labor force — so the company expects that overall development and production costs will be comparable to those elsewhere in the U.S. A processing rate of 25,000-35,000 tons per day is envisioned, based on a conventional carbon-in-pulp milling circuit of the type used at the Ridgeway gold mine in South Carolina.

The remaining interest in the Fort Knox project is held by a private individual and Ventures Trident II.