MINING MARKETS & INVESMENT NEWS — QUERY — Intergold claims Carlin-sized deposit

Intergold recently informed me that it has made a major gold discovery in south-central Idaho. The company’s comments regarding ore grades appear inconsistent (0.14 oz. per ton versus 0.03 oz. obtained by Bateman Engineering), but I may be missing something due to my lack of understanding of metallurgical testing. (I am in the investment field.)

Given the dimensions of what Intergold claims to have discovered, and the continuity it is alleging, this could be a major discovery (15-70 million oz.) — if they are telling the truth. I am skeptical. Any comments you may have would be greatly appreciated.

Douglas Dobbs

Chelan, Wash.

Newport Beach, Calif.-based Intergold (IGCO-O) claims to have made a gold discovery 38 miles north of Twin Falls, Idaho, on 331 unpatented claims called the Blackhawk property. The claim is based on 10 widely spaced holes drilled in 1995, which the company says “averaged 0.14 oz. gold per ton over the total drilled footage” of 2,055 ft.

That seems unlikely, however, given that most typical ore-grade holes contain a fair bit of waste rock as well. Delgratia Mining made similar claims that gold mineralization was found over the entire length of the holes drilled at its Josh property in southern Nevada. It was later learned that sample tampering and questionable assaying techniques were involved, and Josh is no longer considered a property of merit.

We have now learned that the original work at Blackhawk was carried out by Mindoro, a now-defunct private company founded by Ronald Markham, (a playboy promoter described by securities regulators as “the ultimate con man”) or Markham’s subsequent promotion, International Gold.

In 1993, after evading investigators and irate investors who had been burned in his King Solomon’s Mines scam in England, Markham claimed to have discovered 11 million oz. gold in Oregon — at a property that he had previously touted as “the world’s largest platinum deposit.” The deposits were found to be complete frauds, and Markham was subsequently nailed by British Columbia regulators for spending the monies raised by investors on luxury items for himself and various wives.

Though not present at his hearing, Markham (or “Runaway Ron,” as he became known) was banned for life from trading in the province and from serving as an officer and director of any company. The fugitive is supposedly out of the picture at Intergold, though rumors persist that he still holds shares through trustees.

In any event, Markham’s ghost contines to haunt Intergold. The company conceded that its assay results were questioned — particularly the 23 samples said to “represent” 710 ft. of core, which indicated an average grade of 0.14 oz. gold — because aquia-regia leach-drect atomic absorption (AA) techniques were used, rather than traditional fire-assay.

The company then set out to devise and test a metallurgical recovery process aimed at producing “physical gold at short notice” — a procedure said to involve “the recovery of gold from cyanide leach solutions after electrolysis, by chiddy precipitation with zinc.” This puts the cart ahead of the horse; normally companies prove up a resource before they begin exploring recovery methods.

Questions about the initial assays prompted the company to hire Batemen Engineering to verify its results. However, Bateman’s mandate was somewhat limited. The firm was asked to fire-assay the gold recovered from the metallurgical technique described above, which was performed under its supervision.

In any event, Bateman was not able to verify Intergold’s previous results, as its samples returned values in the range of 0.003-0.035 oz., which is only about 25% of the gold content reported by Intergold.

Undaunted, Intergold says “work is continuing and is intended to improve gold recovery to the 60% levels attained by the corporation independent of Bateman Engineering.” As an interesting aside, the company notes that precious metal recovered from the assay check indicated “99% pure gold,” an unusual result considering that gold typically occurs with silver in deposits in Idaho, and in Nevada’s Carlin trend.

Intergold’s investor packet says “the gold is present as sub-micron-sized particles within a matrix of amorphous silica except for the occasional rare gold micro-nugget of up to 20 microns.”

The mineralization is supposed to be hosted in volcanic tuffs, lavas and sediments associated with the Magic Reservoir caldera, a Miocene-Pliocene feature on the northern edge of the Snake River Plain. The volcanic rocks exhibit a bimodal assemblege of mafic lavas and pyroclastics and rhyolitic domes and lavas. Intergold says the mineralizing system “is deficient in sulphide minerals but distinguished by pervasive hematitic alteration, particularly within the vesicular tuff units.”

In all, the company has outlined an area measuring 6,500 by 2,000 ft., which it believes contains enough mineralized rock for 150 million tons, as stated in the investor packet. A June 19 press release boosts the tonnage to 500 million tons, which the company believes could make the Blackhawk “deposit” rival those found in Nevada’s Carlin trend.

In June, Intergold began a 3-stage drill program, to total 75,000 ft., aimed at outlining the deposit further. The first phase will entail 500 ft. of drilling over a grid pattern with 800 ft. centres.

Intergold, a non-reporting public company, has entered into a joint-venture agreement with another over-the-counter company: Bellingham, Wash.-based Goldstate (GDSA-O). Both companies are run by Dr. Michael Mehrtens, a graduate in geochemistry of the Royal School of Mines in London and former executive of Rio Algom and USMX.

The companies have an additional 439 claims, which are subject to a similar joint venture, called the Blackhawk II property. A third company, Vega-Atlantic (VGAA-O), which operates out of the same office as Intergold, owns another 173 claims, called the Vega claims, near the Blackhawk properties. We have not checked the legal tenure of the properties.

Intergold and its associated companies exhibit characteristics similar to other “desert dirt” plays. They employ the same laboratory used by one desert-dirt company that, several years ago, published good results, though an audit ordered by a Canadian exchange was not able to confirm the presence of gold on the property. Some of Intergold’s samples were tested by Merwin White of Utah, an unconventional assayer who confirmed the presence of gold at Delgratia’s Josh property, and often consults for other “desert-dirt” projects.

Intergold appears to have similar sample reproducibility problems, the hallmark of all desert dirts. While the property may have some gold, claims that it hosts a potential resource of 21-70 million oz. gold have not been substantiated or proved up by close-spaced drilling; nor have the initial results been verified by certified labs or independent consultants.

Typically, the main beneficiaries of desert-dirt plays are the promoters and the “black-box” assayers, who are typically paid high fees to “research” various recovery methods until the promotion runs out of steam.

In this case, your suspicions are well-founded. But despite growing skepticism, the company intends to press ahead. It recently launched a major “public awareness campaign” with an American company that produces news and feature stories for corporate clients, which are then provided to “thousands of print and broadcast media nationwide.”