New Carolin looks to reopen old Carolin mine

The Vancouver area is well known as a hub for mining expertise and head offices, but much less so as a suitable location for an active field office.

But for New Carolin Gold (LAD-V) — with its eponymous Carolin mine project sitting 160 km east of Vancouver — the city provides a convenient base of operations. With a head office and core shack in the city of White Rock just south of Vancouver, president and CEO Bruce Downing can theoretically meet with investors in Vancouver in the morning, drive out to the project in the afternoon and be back home by evening.

Scheduling conveniences aside, the project location, combined with the infrastructure from the historic mine, means a lot is already in place for any future mine. There is water on-site, a stable tailings dam with room to grow, a fairly smooth 6 km gravel road from TransCanada to the mine site, power lines 6 km away, old mill equipment and foundations still in place (though in pretty rough shape) and extensive mine workings looking to be in excellent condition.

But one of the most enticing legacies of the New Carolin mine is the mine permit, which, for whatever reason, remained in place after the mine was closed in 1984, and which New Carolin has confirmed is still valid. The existing permit, while requiring amendment for whatever new mine plan the company comes up with, removes a major uncertainty and source of delay in mine development.

Instead of being worried by the mine’s checkered past, however, New Carolin sees opportunity. The company wants to make the most of the poor recoveries of the past by extracting all the gold that now sits in the tailings pond.

New Carolin drilled nine short holes into the tailings in 2009 which, combined with the 60 holes drilled by Athabasca Gold Resources in the mid-1990s, were used to establish a National Instrument 43-101 resource of 404,000 indicated tonnes grading 1.83 grams gold per tonne for 24,000 contained oz., plus 84,400 inferred tonnes grading 1.85 grams gold for a further 5,000 oz. gold.

The company plans to set up a portable 400-tonne-per-day mill at the pond, which, over 60 months of seasonal operation, could yield 25,000 oz. gold with an 85% recovery rate. A March preliminary economic assessment on the plan concluded that, using $1,100 per oz. gold and a 5% discount rate, the project has a net present value of $8 million and an internal rate of return of 35%.

The short-term project could be a much-needed cash-flow generator for the company, which is especially crucial if tough times for credit continue. New Carolin ended its April 30 quarter with $36,000 in cash, while its working capital deficiency stood at $780,750. The company topped up its coffers somewhat in early August with a $415,000 non-brokered unsecured convertible debt financing, but it will need more to truly start advancing the project.

New Carolin also has some way to go before gaining full control of the project. The company first signed an option deal on the property in 2007 with Century Mining — now part of White Tiger Gold (WTG-T) — and revised the deal in June 2011. This gave New Carolin a 10% interest on signing the deal, thanks to what it already paid in the option deal, and its stake gets bumped up to 50% after it pays $1.5 million due this Oct. 31.

The total deal has New Carolin paying $5 million in cash and 3.5 million shares for the property, while Century keeps a 3% net smelter return royalty. New Carolin can buy back the royalty at $1.5 million per 1%, while the royalty doesn’t cover the tailings. The new deal also eliminated back-in and joint-venture rights for Century, clearing the way for New Carolin to advance the project on its own terms.

To help with finances, the company brought on Rosmir Capital and its principal George Goldsmith in July. Rosmir is developing a financial plan for New Carolin, focused especially around getting a small recovery operation going on the tailings deposit. Even for the tailings project, though, the company will need to find a much bigger chunk of capital, with start-up costs estimated at $8.3 million and life-of-project operating costs at $3.5 million.

With its share price sitting around 13¢ financing can become dilutive fairly quickly, but the company has been good at keeping costs low and has a reasonable 50 million shares out at the end of June, plus 10 million in warrants and options.

Besides financing issues, the biggest question facing Carolin’s mine revival is the metallurgy that hampered the first effort. A significant amount of gold at the mine is locked in refractory sulphide material, making it harder to extract, but testing has shown that the pressure-oxidation method of dealing with that sort of ore works.

Using pressure-oxidation and carbon-in-leach methods, testing on a sample from the McMaster zone showed recoveries of 96.3% on the flotation concentrate, while using flotation, pressure oxidation and cyanidation — combined with cyanidation of the flotation tailings — returned overall recoveries of 94.5%.

The testing is encouraging both from a metallurgical standpoint, and because the McMaster zone has potential as an open-pit starter mine. The zone is a surface occurrence along trend 1.2 km northwest of the Carolin mine that was first discovered in 1974, but saw little work after that as efforts concentrated on the main Idaho claims that became the Carolin mine. Athabasca Gold poked some holes in the area in the mid-1990s, and New Carolin drilled six holes in 2009 and five in 2010 to confirm previous results and expand known mineralization, especially downdip and to the east. Drilling on the zone totals 4,185 metres in 38 holes, though the only core available is from 11 holes totalling 1,670 metres.

A May 2012 technical report used the drill results to establish an inferred resource on the McMaster zone of 3.6 million tonnes grading 0.69 gram gold for 79,540 oz. gold using a 0.5 gram gold cut-off. In the same technical report the Carolin mine was estimated to host 2.6 million tonnes averaging 3.34 grams gold for 278,000 oz. gold using a 2-gram gold cut-off, or 12.4 million tonnes grading 1.53 grams gold for 607,000 oz. gold at a 0.5-gram cut-off. The company plans to start a new drill program shortly to further test the McMaster zone.

And while New Carolin is concentrating on its most promising targets, the company sees ample potential elsewhere on its 144 sq. km of property in the area. The company controls about 28 km of the Coquihalla gold belt, which besides the Carolin mine includes modest past producers like the Emancipation mine, reported to have produced 2,900 oz. gold between 1916 and 1941, and the Aurum, Pipestem and Ward adits, reported to have produced 940 oz. gold in the same time frame.

The company has also identified the historic Montana showing, which sits on the northwest edge of the Carolin mine workings. The company did some sampling there, and three samples assayed between 1.71 grams gold and 8.20 grams gold.

New Carolin sees lots of potential for gold discoveries on Vancouver’s doorstep — a claim few other companies can share.