Near reserve threshold Brewery Creek work continues

Partners Hemlo Gold Mines (TSE) and Loki Gold (VSE) plan to spend a further $1.2 million this year to better determine the reserve potential of the Brewery Creek gold project, some 35 miles from this historic mining community.

As it stands now, with preliminary reserves totalling 11.1 million tons grading 0.052 oz. gold per ton, the bulk-tonnage project appears to be somewhat shy of a reserve threshold that would inspire most major mining companies to build a mine in the north.

But since this reserve estimate was calculated at the end of the 1990 program, 255 reverse circulation holes totalling 44,084 ft. were completed during this year’s first-phase drill program. Loki is now awaiting an independent engineering evaluation of reserves that incorporates results from this program, which was more heavily focused on delineating known mineralization than exploring untested targets.

Even before this year’s second-phase program began in late August, Loki had earned a 49% interest in Brewery Creek by funding $4 million of exploration. This is over and above at least $1 million spent on the property by a unit of Noranda (TSE), Loki’s original partner, before a Noranda group reorganization moved Brewery Creek into Hemlo Gold’s project portfolio.

Loki and Hemlo Gold will each fund its share of the current program which is aimed at expanding preliminary reserves contained in nine shallow deposits, all named after various brands of beer in keeping with the brewery theme. They are potentially minable by open pit methods. This time around, the emphasis will be on exploring for new zones and zone extensions. The current program should better determine if Brewery Creek has the mine-making potential to seriously interest a major in these tough times of low gold prices. Current thinking is that Hemlo Gold would like to see at least one million contained ounces gold, preferably in an oxide resource that would be readily amenable to low-cost processing methods.

Loki President Larry Nagy said the company originally took on the project thinking it might prove too small for Noranda, but the right size for a small, technically oriented junior such as Loki to place into production as a heap leach operation. But he is now of the view that the next phase program will demonstrate the project has sufficient reserve potential to warrant Hemlo Gold’s, or any major company’s, ongoing interest.

“We can’t lose no matter what Hemlo Gold decides to do,” Nagy told The Northern Miner during a recent site visit. “What we already see in oxide reserves is enough to start planning a heap leach mine.”

As it stands now, current reserves are divided into three types — limonitic porphyry intrusive (oxide), fresh porphyry intrusive and argillite hosted. The oxide porphyry reserves form the most significant component at 8.28 million tons grading 0.055 oz. gold per ton within eight of the nine zones. These reserves are contained in a string of zones occurring within an intrusive body which has an east-west strike, and which dips at a shallow angle to the south. Some three miles of the favorable 5-mile strike length have been explored to date, and soil geochemical sampling and grid coverage will be extended to other areas, particularly to the east.

Loki Gold’s independent consultant is of the view that the property has potential for a doubling of reserves, which includes potential to increase tonnage in known zones as well as potential for further discoveries based on a number of geochemical responses (gold soil anomalies).

Some of the known zones are more well defined than others, and some have higher-grade plums such as in the Kokanee zone where sampling along a 20-ft. width returned 0.5 oz. gold.

The zones may have their differences, but the geological setting is considered similar. Gold mineralization at Brewery Creek is primarily associated with thrust-faulted wedges of oxidized porphyritic intrusive and, to a lesser extent, unoxidized intrusives in argillaceous host rocks. In general, oxidation is relatively shallow, and extends to depths of 100-130 ft. During the recent property visit, project geologist Rick Diment said ongoing exploration will be focused on seeking more oxide reserves using the same exploration tools that have worked in the past, namely geochemical soil sampling, trenching and drilling.

But he also pointed out that some of this work will be more difficult because some of the newer targets are on the north slopes of hills where permafrost makes geochemistry more difficult, and where stripping ratios are expected to be higher. Most of the zones explored to date are on south slopes, where the mineralized zones tend to follow the dip slope of the hills and make for low stripping ratios.

Diment said the second-phase program will also test for continuity of mineralization between zones. Some of this work will be complicated by the fact that concentrations of windblown sand in lower-lying areas tend to mask geochemical responses. (The deposits are separated by valleys that have eroded into the intrusive.)

Trenching of targets before drilling is an important part of the exploration process at Brewery Creek because some anomalies have been found to represent down-slope migration rather than the deposits themselves.

The current program will also include some diamond drilling. The objective is to twin some reverse circulation holes as a precaution to ensure that down-hole contamination is not a problem in calculating grade. Most of the exploration work will remain shallow and focused on oxide mineralization, at least until questions relating to the sulphide resource are addressed. So far, it appears that the sulphide mineralization is fine-grained and associated with arsenopyrite and other metallurgically challenging elements.

But this year’s program will include metallurgical testing of sul phide mineralization, as well as several deeper holes to test the extent of this mineralization. This work will help determine potential processing methods, such as conventional milling or heap leaching.

Metallurgical test work will also continue on the oxide reserves where early indications show good recoveries for heap leach processing methods. Earlier this year, Loki reported gold recoveries averaged 84.3% and ranged from 76.3% to 90.7% from cyanide column leach tests of small bulk samples. Three 15-ton bulk samples are planned to allow for ongoing metallurgical test work. Despite its northern location, Brewery Creek is easily accessible by road, an important factor when considering future capital costs. The topography is best described as moderately rugged in some areas and gentle in others, and the region has a continental, rather than coastal climate, with low precipitation.

Brewery Creek was discovered by geologists working out of Noranda Exploration’s Whitehorse office. They were attracted to the region because of the work done by the Geological Survey of Canada.

Noranda’s 1987 geochemical reconnaissance program led to the discovery and staking of Brewery Creek, a region that had not been previously explored for lode gold. Except for trenches and road cuts, there are no mineralized outcrops on the property.

A work program was carried out the following summer, consisting of soil sampling, prospecting, geological mapping and hand trenching. These are the primary exploration techniques still used to define targets at Brewery Creek before the drill stage.