Northgate takes gamble on Windy Craggy gold

After reaching into its deep pockets to buy a significant slice of two Canadian gold producers, Northgate Explorations (TSE) is taking a gamble on a promising exploration project in northwestern British Columbia.

In agreeing to acquire a 15% equity stake in Toronto-based Geddes Resources (TSE) for $5 million, Northgate is betting that the Toronto company will find an economic gold deposit at the remote Windy Craggy property.

As part of a plan to reinvest a substantial portion of the $200 million gained selling its two Chibougamau gold-copper mines to Western Mining Corp. of Australia, Northgate is buying 1,666,667 treasury shares of Geddes at $3 per share.

The Geddes deal is similar in style to agreements with Chelsea Resources (VSE) and Campbell Resources (TSE) completed earlier this year. However, in acquiring a 20% equity stake in Chelsea and 13% of Campbell, Northgate was buying guaranteed gold production.

Since the outcome of an underground exploration program at the mountainous Windy Craggy prospect is still far from certain, the Geddes deal appears to be more of a crapshoot.

“We consider this to be a high- risk exploration play that will balance our other investments,” admitted Northgate President John Kearney. They include a stake in Holmer Gold Mines (see page 16).

While the Windy Craggy deposit is thought to contain some 300 million tons grading 1.5% copper, 2 lb cobalt per ton and measurable amounts of gold and silver, Northgate places little value on its copper and base metal content.

“The investment is based on its gold potential,” said Kearney. “It gives us exposure in a different area and to a project which has the potential to be very big.”

Northgate’s confidence is based on a 201-ft intersection which averaged 0.29 oz gold. Pulled during exploration in 1983, it included 77 ft of 0.52 oz.

With one Northgate nominee on the Geddes board of directors, Geddes will attempt to justify Kearney’s confidence by spending the proceeds of the subscription on a $12- million program which includes 35,000 ft of definition drilling.

While Geddes Chairman Geddes Webster said gold is the dominant target of a major underground program, high metal prices will encourage his company to pay close attention to the deposit’s copper content.

A pre-feasibility study is also part of the $12-million program, Webster said.

After completing work on a 7,000- ft adit, designed to access the gold zone where the 201 ft intersection was found, Geddes is currently excavating seven diamond drill stations on the north side of the adit.

From there, the company will test the first 1,000 ft of a mineralized zone outlined along a 6,000-ft strike length.

“We feel that Geddes has done very well in bringing the project along and perhaps we can help them bring it along a little further,” said Kearney, who is looking at other possible investments.

Although Geddes is the 100% owner at Windy Craggy, should the deposit be brought to production, Falconbridge Ltd. (TSE) is entitled to a 22 1/2% net proceeds interests, after Geddes recovers its investment with interest.