Gunnar, Mill City raise $2 m to explore Fifteen Mile bet

A fifth company has been signed up by Gunnar Gold (TSE) and Mill City Gold (ME) to participate in Pan East Resources’ (ASE) Fifteen Mile Stream gold exploration project in Nova Scotia.

In return for putting up $2.2 million to finance a $5-million exploration program undertaken by Gunnar and Mill City, Lectus Developments (VSE) of Vancouver can earn a 15% interest in the project.

Gunnar and Mill City were scheduled to earn a 37.5% interest from Petromet Resources (TSE) after completing a $4-million underground and surface exploration program designed to give the partners a better understanding of the project’s ore distribution. But the Lectus agreement will dilute their interest to 22.5% when the program is completed this winter.

At that point, Pan East Resources will retain a 50% interest while Petromet’s stake in the property drops to 12.5%.

Under the agreement, Lectus can convert its interest into common shares of Gunnar and Mill City at the price per share calculated and based upon the weighted average closing price of the companies’ shares on the Alberta Stock Exchange 20 days prior to the date of conversion, less any discount permitted by the exchange.

Comprising 51 claims or 2,040 acres, Fifteen Mile Stream is located 60 miles north of Halifax, N.S. Until 1941, previous operators produced 20,328 oz gold (49,800 tons of grade 0.41 oz gold per ton) from several quartz vein systems.

After 83,000 ft of drilling, three near surface deposits — the Hudson, Egerton-McLean and Central Novamin — have been outlined. Most of the work has focused on the Egerton-McLean which contains three old gold mines.

While wide space drilling has shown that the potential exists for more than two million tons of gold mineralization, the nugget-type nature of the gold mineralization means that a grade has not yet been established.

However, more closely spaced drilling on a number of zones in the Egerton- McLean has allowed operators Gunnar and Mill City to announce a drill indicated probable reserve inventory of 270,083 tons grading 0.280 oz.

The reserves in the Egerton- McLean area are divided among the Twin vein in the Nose zone (of the major anticlinal structure on the property) which hosts 137,583 tons of grade 0.310 oz gold per ton.

The Seigel vein on the south limb of the fold contains 72,000 tons grading 0.277 oz while the Twin vein on the north vein hosts 60,500 tons of 0.299 oz.

Based on the results of previous exploration, the partners are attempting to get a better handle on tonnage potential by rehabilitating the McLean shaft and exploring on the 200 ft level.

Gunner and Mill City are part of the Calgary-based Brown Group of companies.