Homestake releases final resource as Agnico-Eagle takes over

VANCOUVER — Vancouver-based junior Homestake Resource (HSR-V) is turning the page on nine years of exploration at its Homestake Ridge gold-silver property on the Iskut-Stewart-Kitsault belt 32 km northwest of Alice Arm, B.C. A final resource update on Apr. 25 marks the culmination of Homestake’s work on the project, with producer Agnico-Eagle Mines (AEM-T, AEM-N) taking over operations under a property-option agreement signed in late 2012.

Since acquiring the project in 2003, Homestake has invested roughly $30 million into exploration and established a drilling database totalling 66,000 metres over 238 diamond drill holes. The company outlined two high-grade gold-silver deposits during that time and tacked on a third in its South Reef zone, which was the focus of Homestake’s final $2.5 million drill program in 2012.

Agnico optioned Homestake Ridge in late August and agreed to spend $25.3 million on the project over a 5 year period in exchange for a 65% interest. Agnico is scheduled to spend $3.5 million on exploration at Homestake Ridge in 2013, and will earn a 51% interest by spending $10.3 million on the project by the end of 2014.

The larger company can then earn its final 14% by investing an additional $15 million at Homestake Ridge, or taking the project to the feasibility stage. An additional 5% interest may be earned by arranging Homestake’s share of eventual project financing, which would take Agnico’s stake to 70%.

“[Our] consistent and systematic exploration efforts have yielded three significant deposits at Homestake Ridge, making it now one of the top undeveloped higher-grade precious metal projects in the world,” commented president Joe Kizis. “As Agnico-Eagle assumes exploration and development of [the property], we are confident that additional high-grade resources will be found, which will ultimately result in increased value for [our] shareholders. Few junior explorers are as well positioned for success during this period of market uncertainty.”

Mineralization at Homestake Ridge is spatially associated with a large volcanic center which occurs within the prolific Iskut-Stewart-Kitsault belt, with Homestake’s final resource incorporating roughly 70,000 metres of drilling centred on the Main Homestake deposit, Homestake Silver deposit, and newly-discovered South Reef deposit.

Homestake’s drilling resulted in a 40% jump in global resources at the project, with the bulk of the mineralization in the inferred category and totalling 6.8 million tonnes grading 4.2 grams gold per tonne, 93.6 grams silver per tonne, and 0.11% copper. On a gold equivalent basis that equates to roughly 1.23 million contained oz. at an average grade of 5.6 grams per tonne.

The South Reef discovery is a high-grade zone that remains open to the northwest and lies 800 metres southwest of the Homestake Silver zone. South Reef adds 332,000 inferred tonnes grading 13 grams gold and 3.6 grams silver for 140,000 contained oz. of gold equivalent. An $85 net smelter return royalty per tonne cut-off value was applied using average long-term prices of $1,500 per oz. gold, $27 per oz. silver and $3.50 per lb. copper, along with metal recoveries of 92% gold, 88% silver and 88% copper.

With Agnico-Eagle taking over at Homestake Ridge, Homestake will turn its attention to a 623-sq.km piece of adjoining land at its Kinskuch project. The property contains over 37 documented precious and basemetal mineral occurrences, many of which are hosted in the same rocks as those hosting the Homestake Ridge volcanogenic massive sulfide (VMS) and vein deposits.

“Some of the best VMS deposits in the world occur within Jurassic-age Hazelton rocks, and include the past-producing Eskay Creek and nearby Dolly Varden deposits,” VP exploration Rob Macdonald commented. “We feel there is a very good likelihood of developing an attractive resource there, but VMS deposits typically form in clusters so other deposits probably exist in this under-explored region.”

Shares of Homestake rose roughly 18% following news of the resource update to 10¢. The company has traded within a 52-week range of 6¢ and 44¢, and has 29 million shares outstanding for a $2.9 million market capitalization at the time of writing. Homestake will likely be looking to raise additional capital over the next few months to fuel its exploration activities, as the company reported $1.1 million in cash at the end of January.