Freewest project hangs on results of feasibility study

After months of considering various development, milling, and underground exploration options for the Holloway project 40 miles east of Matheson, Ont., Noranda (TSE), as operator, has reached the final number-crunching stage.

As this story was being written, Freewest Resources (TSE) president Mac Watson and Teddy Bear Valley Mines (CDN) president Andrew Chater were eagerly awaiting feasibility results for each of their adjoining properties. Together, the two companies have a stake in the Lightning zone, a gold-rich deposit hosting possible and probable reserves of 5.25 million tons grading 0.24 oz. per ton. The deposit remains open at depth.

Freewest, under a 40-60% joint venture with Hemlo Gold Mines (TSE), holds a group of claims on the north side of the project area. Based on drilling to date, the Freewest ground appears to host the bulk of the Lightning zone. A joint venture consisting of Hemlo (51%), Freewest (34%) and Newmont Mining (NYSE) (15%) can earn a 60% interest in the adjacent Teddy Bear property by providing a feasibility study. The group, which has earned a 30% interest to date, can then elect to spend another $10 million for an additional 10% stake. It remains to be seen whether the current study qualifies the joint venture for their 60% interest.

After Noranda released weak results from the eastern edge of the property in late May, a different interpretation of the trend of the gold zone has emerged. Instead of plunging shallowly to the east, as originally thought, the zone may be trending straight down, say both Chater and Watson. Although deep drilling below 2,600 ft. will be needed for confirmation, Teddy Bear stands to benefit significantly if the theory proves correct. Most of the depth potential of the deposit lies on Teddy Bear ground. Some of the deepest intersections taken from the zone include 47.9 ft. grading 0.17 oz., 28.5 at 0.23 oz. and 48 ft. at 0.16 oz.

Teddy Bear shares, of which about 90% are owned by directors of the company, recently traded at $1.50.

Another area that has yet to be explored in detail is the Hanging Wall zone, located north of the Lightning zone on Freewest’s property. The zone has the potential to host another one million tons of reserves.

Prior to the completion of the Holloway feasibility studies, Dave James, a mining analyst for Richardson Greenshields, calculated some likely production statistics. Based on a 1,650-ton-per-day operation, the Lightning zone would produce about 120,000 ounces of gold per year, assuming a 0.25 oz.-per-ton head grade and 90% recovery. At a capital cost of $80 million, the mine could be brought to production by 1994. He estimated operating costs would be about US$195 per oz.