Mishibishu activity lukewarm but still `prime hunting ground’

This time last year the Mishibishu Lake area in northern Ontario was hopping. Gold discoveries were cropping up on a regular basis, the Magnacon mine was emerging as a regional success story, and some explorationists were comparing the new gold camp to the Hemlo find of the early ’80s. But as in other areas that looked “hot” during the not-so-distant days of easy financing, activity in the Mishibishu camp has turned decidedly lukewarm. Adding to the negative impacts of an industry- wide financing squeeze and a long bout of lower gold prices, a re-evaluation of the reserves at the once-promising Magnacon mine has prompted Echo Bay Mines (TSE) to cancel a financing agreement for the mine and walk away from a $76-million investment in the Muscocho group of companies.

“There’s been a distinct downturn in exploration,” agreed Ed Frey, a government geologist for the Wawa district. “But the area is still a prime hunting ground for gold.” He points to one bright spot in the exploration gloom — the Eagle River project lying due south of the doomed Magnacon.

Noranda (TSE), a unit of Noranda Exploration, which is operating the project on behalf of partners Hemlo Gold Mines (TSE) and Central Crude (TSE), is expected to table the results of a feasibility study on Eagle River any time now. The basis of the study, a 1.7-million-ton deposit grading 0.25 oz. gold per ton, may be nothing to write home about, but two new developments add to the projects viability.

The first is the recent discovery of a new gold zone in the volcanics about 1,000 ft. east of the main diorite-hosted deposit. Recent drilling has confirmed tonnages in the order of 300,000 and the new zone remains open to the east.

“There is no reason to believe that we can’t develop more ore and more tonnage,” said Central Crude President Richard Nemis, referring to the discovery. Central Crude has a 40% interest in the property.

The second is Hemlo Gold’s $9-million bid for the Magnacon mill, an offer that, if accepted, would save the partners millions of dollars in mill construction costs and speed up the time to production. The mill lies less than 10 miles north of Eagle River and has already been through the required permitting procedures.

Outside of the Eagle River ground, Hemlo Gold has tied up several other properties along the Mishibishu deformation zone. The company, a subsidiary of Noranda, is obviously optimistic about the relatively unexplored gold camp, and is encouraged by what it has seen at Eagle River.

“If we can get a mining operation going at Eagle River, there would be a good chance of sustaining exploration in the area,” said Unto Jarvi, a senior evaluation engineer for Noranda Exploration. “And the fact that we have been able to find mineralization in volcanics as well as diorites opens up the potential even more.”

But at the moment, work on Hemlo Gold’s other extensive ground holdings in the area is at a standstill. “Other than some compilation work, there is nothing going on,” Jarvi said. Hemlo has joint venture partnerships with several junior exploration companies in the area including Dominion Explorers (TSE), Mishibishu Gold (VSE) and San Paulo Explorations (ASE).

Meanwhile, at the Magnacon mine to the north of Eagle River, production is continuing on a limited basis, as financially troubled Muscocho Explorations (TSE) and Flanagan McAdam Resources (TSE) continue to process a stockpile of ore.

The partners are negotiating an option agreement with Hemlo Gold, which owns a small stake in Magnacon through affiliate Windarra Minerals (TSE), for further exploration on properties surrounding the two mines.

Another project that looked promising a year ago, Granges’ (TSE) Mishi gold play, has fizzled somewhat. Last July, Granges was increasing grade calculations for both the open pit and underground deposits on the property. At last count, open pit reserves had been upgraded to 751,000 tons averaging 0.13 oz. gold and underground reserves stood at 565,000 tons grading 0.22 oz. Granges was making plans to ship a bulk sample to the nearby Magnacon mill for testing.

Granges is still working on the property but is proceeding cautiously with its exploration expenditures, said Fred Felder, senior vice-president of exploration.

“We are keeping our options open with respect to Mishi,” he said. “I think we can do something with it.” But to avoid another Magnacon-type disaster, Granges wants to be absolutely certain that Mishi’s reserves will support a production decision before making any large capital investments, he added.

Southeast of Mishi and Magnacon, Joutel Resources (TSE) and Queenston Mining (TSE) have completed diamond drilling programs on their respective properties. At Upper Denison Lake, Queenston confirmed the presence of a 3,000-ft. deformation zone containing anomalous gold mineralization. Immediately to the south, Joutel and partner Central Crude intersected what appears to be an extension of this deformation zone, but results from the extension were disappointing. Hemlo Gold is reviewing the possibility of an earn-in agreement on the Queenston property.

Vancouver-based Villeneuve Resources (VSE), which has also staked up some prime pieces of Mishibishu territory, stated in its 1989 annual report that further exploration in the area “will depend primarily on the ability of the company to raise flow-through funds at acceptable levels.” There has been no word of any activity yet this year.