Hawthorne Gold Bullish On Taurus

Hawthorne Gold (HGC-V, HWTHF-O) is boosting its gold resources by buying American Bonanza Gold’s (BZA-T, ABGFF-O) Taurus gold deposit near Cassiar, in British Columbia.

The Vancouver-based company currently owns about 30% of the Taurus property, which is contiguous to its own Table Mountain gold project.

The purchase of the remaining 70% will consolidate the two properties within the Cassiar gold mining district of north-central B. C.

The Cassiar gold belt is a 23-km greenstone-hosted quartz carbonate formation that stretches from Mount McDame in the north to Juniper Mountain in the southeast.

The realized acquisition cost per ounce of in situ inferred resources, based on acquiring the remaining 70% of the deposit, or 728,000 oz. gold, is estimated at less than C$2.75 per oz. gold.

The acquisition cancels a previous option agreement the two companies had signed in 2007, saving Hawthorne additional cash payments of up to $6 million.

The amended option agreement had required Hawthorne to issue 250,000 shares to American Bonanza in December 2008 and give it cash payments of $3 million in 2009 and a further cash bonus payment of $3 million on the earlier of a feasibility study or the property beginning commercial production.

Under the agreement, Hawthorne will issue 6.75 million shares to American Bonanza in exchange for 46 mineral claims making up about 70% of the property. Ten of the 46 claims acquired are subject to a 2.5% net smelter return royalty in favour of a third party. American Bonanza will own roughly 13% of Hawthorne.

The Taurus project is a large-tonnage, low-grade gold deposit with a National Instrument 43- 101-compliant inferred resource of 1.04-million oz. gold. The resource holds 32.4 million tonnes grading 1 gram gold per tonne using a cutoff grade of 0.5 gram gold per tonne.

The project is made up of wholly owned and optioned mineral claims and the wholly owned Taurus II property, which has been drilled over the last two years. The drilling has expanded the mineralization with grade intercepts similar to the known resource of 1 gram gold per tonne.

A former high-grade, small underground gold operation, the Taurus deposit was mined in the early 1950s and again in the early 1980s. The high-grade areas were eventually abandoned and attention was turned to a large, low-grade mineralized zone, where about 370 holes have been drilled.

With the Taurus acquisition, Hawthorne will hold about 99% of the 56-sq.-km. land package that makes up the Cassiar gold camp, an area in northern British Columbia that over the last 30 years has hosted 13 separate underground mining operations and produced half a million ounces gold.

“It’s a very prolific camp,” Richard Barclay, Hawthorne’s president and chief executive said in a telephone interview from Vancouver. “We feel very fortunate that we have such a prize.”

Not only is the camp connected to major infrastructure, just 10 km away from an airstrip and adjacent to the major highway, all of which will save the company millions of dollars as it moves towards production, but it also has a fully permitted mill and tailings pond, a winterized camp for more than 40 people, and the company has a good working relationship with the local First Nations. “There’s not much more you can ask for,” Barclay says.

In addition, Hawthorne has 25 km of existing underground infrastructure.

“Having extensive and easy access to the numerous mineralized zones will provide the opportunity to fully evaluate the areas of interest in a cost-efficient manner with targeted underground drilling,” explains Peter Ball, Hawthorne’s manager of corporate communications.

“This camp has never really been tested fully at depth, for low-grade mineralization as seen at the Taurus deposit, and in the local surrounding area that we recently staked,” Ball adds. “As we define new zones or extend known high-grade gold veins, we will also continue our reconnaissance exercises to fully evaluate the potential of the gold camp.”

Hawthorne’s goal is to become a junior gold producer by moving the past-producing Table Mountain gold mine in northern British Columbia into production in 2009.

Within the inferred lower-grade, 1-million-oz. Taurus gold deposit, the company believes there may be strategic higher-grade zones that outcrop at surface that could be stockpiled as supplemental mill feed for Table Mountain later this year.

Hawthorne’s 100%-owned Table Mountain mine is a high-grade, underground mining operation that shut down in October 2007. It consists of a 300-ton-per-day, gravity flotation mill, power plant, assay laboratory and permitted tailings pond.

Gold mineralization at Table Mountain is hosted in a greenstone quartz carbonate gold system that is typical of some of Canada’s largest gold camps, including Timmins, Kirkland Lake and Val d’Or, the company notes on its website.

Hawthorne is also working towards a resource estimate at its Frasergold project in the historic Quesnel Trough area in the Cariboo region of south-central British Columbia. The company believes the project has the potential to be developed as a low-grade, bulktonnage open-pit mining operation there.

Hawthorne compares Frasergold’s potential to Kinross Gold’s (K-T, KGC-N) Paracatu gold mine in Brazil and its Fort Knox gold mine near Fairbanks, Alaska, which are both low-grade, open-pit, bulktonnage operations. Paracatu and Fort Knox operate at a grade of 0.38 gram gold per tonne and 0.86 gram gold, respectively, the company notes.

Under a 2006 option agreement with Eureka Resources (EUK-V, ERKAF-O), Hawthorne can earn a 51% interest in the Frasergold property by spending $3.5 million on exploration, finishing a feasibility study by April 30, 2010, and making cash payments totalling $175,000 ($75,000 paid to date) before Oct. 31, 2009. Hawthorne can earn an additional 9% (for a total of 60%) by arranging financing for 70% of the estimated capital costs for production.

At presstime, Hawthorne was trading at 35¢ per share but has traded in a 12¢-$2.41 per share band over the last year. The company has 26.5 million shares outstanding.

American Bonanza Gold traded at 4.5¢ per share in a 52-week window of 2-27¢. The company has 115.6 million shares outstanding.