KL Gold and Queenston lock up more of Kirkland Lake

Queenston Mining (QMI-T) and Kirkland Lake Gold (KGI-T, KGI-L) are teaming up again in the Kirkland Lake gold camp.

The companies which already have a joint venture for 50% of Newmont Minings (NMC-T, NEM-N) West Kirkland property are now forming a 50%-50% joint venture on four more exploration properties in the area.

The news sent shares of the two companies up in Toronto on April 17. Queenston gained 8% or 15 to $1.92 on 241,000 shares traded, while Kirkland Lake was up nearly 5% or 54 to $12.44 on 512,000 shares traded.

The properties known as the South Claims and the East Claim — are situated south of Kirkland Lake Golds (KL Gold) Macassa Mine and Queenstons Amalgamated Kirkland property.

KL Gold and Queenston will pay $638,750 in cash and $600,000 worth of Queenston and KL Gold shares over three years for the South Claims with the vendor keeping a sliding scale net smelter return royalty (NSR) ranging from 1.5% to 3% depending on the price of gold.

The East Claim is being bought for $150,000 from a second vendor with a 2% NSR. The JV can buy back half of the NSR for $1 million.

While the companies say the East Claim hasnt yet been explored, its the South Claims that are the key to the deal. The companies believe that ore at KL Golds New South mine trends over to the newly acquired ground.

The deal lets Queenston get it in on the possible expansion of the New South mine complex which, it says, has the potential to become a significant ore body.

For KL Golds part, it says the deal is about locking up the southern area so that it can drill off what it thinks will be a significant deposit of high grade gold.

“Structural analysis to date indicates that a possible source of mineralization for the gold in the New South mine complex may be from further to the south and now together with Queenston Mining our land position covers the entire area of interest,” Brian Hinchcliffe, the president and chief executive of Kirkland Lake said in a statement.

An underground exploration program is planned on the South Claims that will include 1,500 metres diamond drilling. KL Gold will be operator of the joint venture.

KL Gold discovered the ABM zone and the New South zones in the area to the north of the South Claims in 2004 and 2005 respectively.

The best intersections from the two zones include 17 grams gold per tonne over 8.8 metres and 80 grams gold over 27 metres. KL Gold believes both zones trend onto the South Claims.

The South Claims already have an old 122 metre vertical shaft sunk near what is known as the Amalgamated Break. The shaft was sunk in the early 1900s when underground drifting on a series of gold-bearing veins was done. The companies say no exploration has been reported on the property since then.

As for its current JV at Kirkland Lake West the companies are in the second phase of underground exploration. The property is adjacent to and west of the KL Golds Macassa Mine.

The JV is earning a 50% interest at the property from Newmont by spending $2.5 million by June 30, 2008. It has currently spent $970,000.