High grades trigger revival of Red Lake camp

While Red Lake still ranks far behind Ontario’s Timmins gold camp in terms of historic production, new, exceptionally high-grade discoveries there are gaining more and more attention.

In this tough gold market, companies are understandably fixated on production costs, which largely explains why many are focusing on Red Lake.

All things being equal, there’s simply no substitute for grade — something from which producers such as Placer Dome‘s (PDG-T) Campbell mine have benefited for at least five decades. Indeed, the mine’s tailings dumps have, at times, averaged better than most open-pit mining operations in Nevada’s famous Carlin camp. Although the mine’s current reserve grade of 14.5 grams per tonne is off its historic highs, last year Campbell ranked third in the Placer Dome group in terms of cash costs (US$145 per oz.) and total costs (US$201 per oz).

But move over Campbell and make room for Goldcorp (G-T), whose deep-seated gold discovery at the former Arthur White mine ranks among the highest-grade underground deposits in the world. It’s a jewelry box by any stretch of the imagination, and mineral explorers are beginning to take notice, no doubt realizing that the dynamics of the gold industry are shifting back to fundamentals — that is, unit costs of production. (None too soon, we might add!).

In the past four years, Goldcorp has spent more than $25 million on exploration at the Red Lake mine, resulting in the discovery of nearly 2 million oz. The economics of the company’s operation is based on a cut grade of 1.37 oz. per tonne — a number Goldcorp considers conservative given that the uncut grade is 2.86 oz. Mining has already generated some positive surprises that suggest that the anticipated upside potential, grade-wise, is realistic.

The Red Lake gold district contains two operating gold mines and 13 former producers, which together have produced more than 18 million oz. (559,861 kg) of gold since the start of mining in the 1930s. (That’s about one-quarter of the historic production from the Timmins camp). All of these producers are within the Red Lake greenstone belt, a typical Archean sequence of metavolcanic-metasedimentary rocks that records a 300-million-year history of episodic volcanism, sedimentation, deformation and mineralization.

In addition to gold, many other mineral occurrences have been reported from various parts of the district, broadening its exploration appeal.

For several years now, Rubicon Minerals (RMX-V) has been one of the more active explorers in the camp. In May, the junior signed a joint-venture agreement with the Canadian exploration division of AngloGold (AU-N) with respect to its core Red Lake project. Under the agreement, AngloGold initially has to contribute US$3 million over five years to earn a 60% interest in the joint venture, including a firm commitment to spend US$300,000 by Jan. 24, 2001. Rubicon will manage the joint venture during this initial phase.

In addition to its joint venture with AngloGold, Rubicon is earning an interest in the McCuaig and Peterson projects, and it has a further 116 units in Balmer Twp. under option to privately owned Royal Roads Corp., which has met its first-year commitments and is required to spend $150,000 during the second year of exploration.

At last report, Royal Roads was about to start a 750-metre program of exploration drilling on Rubicon’s Adams Lake gold project, some 5 km northeast of the Goldcorp mine. The Adams Lake project covers a favourable assemblage of Archean-age metavolcanics and metasediments.

Earlier this year, Rubicon acquired a 100% interest in 370 claims at the western end of the Red Lake belt, covering seven separate platinum-group-metal/base metal targets and associated gabbros. The claims are in the same area as Goldcorp’s 9,500-acre palladium-nickel discovery, 34 km west of the Goldcorp mine.

Preliminary surface sampling by Goldcorp (comprising more than 200 samples) along 4 km of its property identified six areas aggregating 3.6 km in length that returned assay values greater than 1 gram palladium per tonne. Other grab samples with high assay values included:

2.17 grams palladium per tonne and 1.32% nickel;

5.95 grams palladium and 4.52% nickel; and

6.06 grams palladium and 5.31% nickel.

The geological environment on Rubicon’s properties is similar to that of Goldcorp’s, and the company believes “the potential for PGM [platinum group metal] mineralization is regional in extent.”

Elevated palladium and platinum values were returned from an 873-metre diamond drill program on Rubicon’s Peterson project. Broad zones of anomalous gold mineralization were also intersected in ultra-mafic rocks that are similar to those of the Campbell mine. Rubicon is earning a 60% interest in the Peterson project from Peterson Red Lake Mines.

In July, the company optioned the Pipestone South property, in Ball Twp., from Perry English for cash and stock, adding to its large property portfolio.

Claude Res.

With its Campbell mine still producing after 50 years, Placer Dome is seeking to expand its holdings in the Red Lake camp through joint ventures. The company recently announced a joint-venture option agreement with Claude Resources (CRJ-T) for its Madsen gold property. The agreement is subject to Placer’s conducting due diligence and electing to proceed with the option phase by Dec. 15, 2000.

The option phase will entitle Placer to earn a 55% working interest in the Madsen property by spending $8.2 million over three years and delivering to Claude a bankable feasibility study by the end of the fifth year. Placer may abandon the option at any time after spending $1.2 million. Concurrent with electing to proceed with the option phase, and subject to regulatory approval, Placer will subscribe for 1,000,000 shares of Claude for $750,000. Under the agreement, Claude’s interest can not be reduced below 40%.

Work completed by Claude at the Madsen mine earlier this year was directed at providing drill access and gleaning data so as to develop a model of the mine’s high-grade No. 8 zone. All the historic No. 8 drill holes have been taken into account, as have the historic mine workings for this zone.

In recent years, Claude’s highest priority at the Madsen mine has been a deep drilling program from the 16th level. The program is targeting the mafic/ultramafic contact that hosts the No. 8 zone, a high-grade, quartz lode-hosted deposit discovered in the 1960s and mined on a limited basis between 1969 and 1974, prior to mine’s closure.

The Madsen mine, when operational, worked a series of stacked, en echelon lenses consisting of gold-bearing pyritic shoots with subordinate pyrrhotite and arsenopyrite. The mineralization is hosted within two parallel micaceous units termed the “Austin and McVeigh tuffs,” the continuity and minability of which were evaluated by Claude in 1998 and 1999.

Cypress

In July, Cypress Development (CYP-V) began a work program on its McKenzie Island property. The junior plans to carry out 36 km of line-cutting, a magnetometer survey, plus geological mapping and sampling to define targets for drilling this winter.

Cypress and ITL Capital have been involved in a joint venture with Rupert Resources on the Durham-McEwen property, which adjoins the Goldcorp mine on its eastern boundary. Rupert holds a 100% interest in the property. Two deep test holes have been put down on the property, the first of which reached 5,500 ft. and returned anomalous gold values. A second hole was stopped because of technical difficulties before reaching its intended depth of 6,000-7,000 ft. The property has been dormant for almost two years, and Rupert would seem to be questioning the status of the Cypress/ITL Capital earn-in agreement.

Elsewhere in the Red Lake camp, Wolfden Resources (YWO-V) and Jonpol Resources (NOM-T) have each acquired a half-interest in the Borthwick Lake property, which covers a 1-km-long geophysic
al anomaly that was previously tested by one drill hole. That hole tested the weak end of the anomaly and returned 7.4 grams gold and 48.3 grams silver per tonne across 7 metres (0.22 oz. gold and 1.41 oz. silver per ton over 22.3 ft.), including 15.1 grams gold and 129.3 grams silver across 2 metres (0.44 oz. gold and 3.77 oz. silver across 6.4 ft.). Earlier this year, the joint venture announced plans to conduct surface exploration.