Lone shareholder thwarts plans Polaris-Taku hinges on merger

About 40 miles southeast of here over a spectacular setting of icefields, rivers, mountains and ocean, lies the Tulsequah River valley in northwestern British Columbia. With underground operations dating back to 1937 at the Polaris-Taku mine, the valley is no stranger to mining.

The Polaris-Taku property is now owned by Rembrandt Gold Mines (ASE) with Suntac Minerals (VSE) holding an option to earn a 60% interest by completing a positive feasibility study by Aug. 1, 1993.

Consultants Watts, Griffis and McOuat recently calculated a preliminary resource of about 750,000 tons grading 0.46 oz. gold per ton for the C vein system and 600,000 tons grading 0.47 oz. gold for the Y vein system based on a 20% dilution factor.

With additional reserves remaining in the old mining area estimated at about 244,000 tons grading 0.33 oz. gold, the total diluted preliminary resource stands at about 1.6 million tons grading 0.44 oz. gold.

But, according to preliminary studies, that’s less than half the reserves needed for a 1,200-ton-per-day operation to be profitable given a gold price of US$350 per oz. And gaining permits for a mining operation may be difficult given the deposit’s arsenic content.

In the meantime, the project is awaiting a court decision on a proposed merger of Rembrandt, Suntac and Canarc Resources (VSE). A single shareholder of Rembrandt, holding about 1.3 million shares, has petitioned to block the merger on the basis it is unfair.

Suntac has already spent the required $3 million as stipulated, although a planned merger will essentially negate the company’s option agreement. Rembrandt and Suntac have already received board and shareholder approvals for a merger with Canarc (VSE) on the basis of 3.5 shares of Suntac or Rembrandt for one share of Canarc, leaving the surviving Canarc with about 9.9 million shares outstanding.

At presstime the court had not handed down judgment on the merger. Bradford Cooke, president of Canarc, said he is confident the merger will receive approval shortly, noting that a majority of the minority shareholders of Rembrandt voted in its favor.

The Polaris-Taku was originally staked in 1929 after gold was discovered in Whitewater Creek on the west side of the Tulsequah River.

During its operation from 1938 to 1942 and then from 1946 to 1951, the mine produced more than 231,000 oz. gold and 11,760 oz. silver from 760,000 tons of ore at an estimated average grade of 0.30 oz. gold and 0.015 oz. silver. The mine was initially developed from adits into the mountainside on five levels spaced roughly on 110-ft. vertical intervals.

In 1941 an internal shaft was sunk to a depth of 750 ft. to establish an additional five levels at 150-ft. vertical intervals.

The lower levels are currently all flooded.

A flotation plant produced arsenical gold concentrates which were barged down the Taku River and transferred to ships for transport to a smelter in Tacoma, Wash.

A roaster and a cyanide plant were constructed at the mine site in September, 1950, but losses forced the company to suspend mining operations in March, 1951.

Although the mine supported a small town, many of the buildings have been dismantled while the old mill and roaster structures have collapsed under the weight of winter snows.

Mineralization at the Polaris-Taku is generally contained in a structural feature known as the Mine Wedge.

The Wedge is defined as a northwest-southeast trending slice of rock over 2,500 ft. wide at the southeast end, narrowing toward the northwest to about 1,000 ft.

Two steeply dipping faults form the limits of the wedge and although the historic mining was contained in the Wedge area, the companies see excellent potential outside its limits.

Gold mineralization occurs within shear zones and related tension fractures within the Wedge. The shear zones are characterized by quartz carbonate veining with disseminated acicular arsenopyrite and anhedral pyrite. Primary mineralized structures include the AB vein set, the Y vein set and the junction arc sets.

The AB vein set, traced for over 4,000 ft. along the southern shear of the Wedge, is believed to be the principal structure controlling the mineralization.

The AB dips 60-70 degrees to the southwest and averages 5-10 ft. in width. The Y-type veins and structures strike in a north-south direction and dip to the east at about 70 degrees. The Y veins also averaged 5-10 ft. in width, swelling in places up to 40 ft.

By far the largest source of ore in the former operation was from the junction arcs, providing in the order of 80% of the mill feed. The arcs essentially connect the Y vein structures to the AB shear zone structure.

There are four known junction arcs in the wedge, each comprised of multiple parallel veins with an overall average width of 10-20 ft.

The junction arcs, which dip at 50-60 degrees, appear to be en echelon structures successively stepping down the mountainside at an apparent frequency of about 1,000 ft.

Christian Marriott, project manager, notes that the width of the Wedge increases toward the Tulsequah River, lengthening the potential strike of the arc and Y vein structures and increasing their potential tonnages at depth. Suntac started exploration on the property in late 1988, representing the first work since the mine’s closure. Since then, the company has completed more than 50,000 ft. of NQ size drilling from surface.

Much of the drilling concentrated on the C zone, the lowest junction arc, tracing it over a vertical extent of about 600 ft. to a depth of about 1,100 ft. and a strike extent of over 1,000 ft.

Drilling on the Y zone concentrated on one cross-section over a vertical extent of about 1,000 ft.

Although virtually all the previous exploration efforts concentrated inside the mine wedge area, Marriott sees excellent exploration potential outside the main fault structures.

Marriott noted, however, that the biggest potential probably lies below the flood plain of the Tulsequah River in the form of a new junction arc. Marriott said a gold occurrence on ground owned by Redfern Resources (TSE) on the east side of the Tulsequah River and on the down-plunge extension of the mine wedge indicates that there could be considerable potential under the valley overburden.

Cooke said preliminary studies indicate a 1,200-ton-per-day operation would be profitable at US$350 per oz. gold and will require at least 1.5 million oz. of reserves.

On the completion of the merger, Canarc plans to conduct an additional 45,000-60,000 ft. of diamond drilling with two rigs, concentrating on drilling the downdip and strike extents of the AB, Y and C veins. Cooke said the company will also do some surface work outside the Mine Wedge area to identify additional drill targets.

Metallurgical testing to date indicates gold recoveries for a combination of flotation, pressure oxidation or roasting and cyanide leach would be about 83%.

Preliminary study indicates on-site processing of the arsenical gold concentrates would eliminate problems associated with transportation and sale of a float concentrate.

Permitting for a future mining operation at the Polaris-Taku will likely present challenges for the group.

The property is on the Tulsequah River about five miles upstream from its confluence with the Taku River. The Taku, which crosses into Alaska a further five miles downstream, is listed as one of the three most productive salmon rivers in the Alaskan panhandle region, supporting a large commercial and small, native food fishery.