PC Gold looks to set Pickle Crow back in flight (August 30, 2008)

It’s not often a junior gets its hands on a former gold mine that was a “money machine” in its day and still contains significant mineralization.

As PC Gold (PKL-T) president and CEO Kevin Keough says, the scenario is “as good as it gets for a junior,” and it’s exactly the situation his company is in with the past-producing Pickle Crow gold mine, 400 km northwest of Thunder Bay, in Ontario.

Pickle Crow started production in 1935 – in the middle of the Great Depression — paid its first dividend to shareholders less than a year after startup, and bolstered the profits of its owner, Teck Corp., for 28 consecutive years.

“This mine was just a consistent moneymaker, it was a money machine and it never closed – they never had any ground problems or cave-ins or anything like that,” Keough says.

The mine did finally close in 1966, after it started to lose money for the first time in 1965 – but that was when the price of gold was still fixed, Keough notes.

“Gold was worth US$35 an ounce for the whole life of this mine, but in real terms, the gold price was going down because of inflation. And the mine was just getting deeper and deeper and deeper, and eventually something had to give.”

Before it closed, the mine produced 1.44 million oz. gold and 168,757 oz. silver from 2.8 million tonnes milled at an average grade of 16.14 grams gold per tonne and 1.88 grams silver.

Now, PC wants to investigate what’s left at Pickle Crow. Using historic drill results, the company is creating models of the remaining mineralization and planning roughly 45,000 metres of drilling in the next year to define it. The historic results, along with its own drilling, will help PC put together a National Instrument 43-101-compliant resource estimate — hopefully sometime next year, Keough says.

PC’s goal is to prove up — and double — the property’s historical resource of 5.7 million tonnes grading 7.26 grams per tonne, compiled by Noramco in 1988.

And Keough is sure there’s more gold to be had.

“We have a lot of confidence in what is there,” says the geologist and former investment banker. “It’s not difficult to find visible gold on this property.”

And because much of the historic work was carried out by companies affiliated with Teck [now Teck Cominco (TCK.B-T, TCK-N)], PC Gold has faith that it was done to a high standard.

Historically, a lot of the mineralization at Pickle Crow was overlooked. Only high-grade, quartz-carbonate vein mineralization on the property was mined — but there’s also banded iron formation-hosted gold that has averaged, in historical drilling, a very respectable 5.5 grams gold per tonne. There’s still some high-grade potential left as well, with the high-grade veins that were mined in the past open at depth, below the workings.

There are three existing shafts at Pickle Lake that have been used to access the mineralization on the property: the No. 1, No. 3 and Albany shafts. The No. 1 shaft, the deepest of the three at 1.23 km, is also the most promising area of exploration. PC Gold’s current drill program is focused on defining mineralization within a 500-km radius of the No. 1 shaft from surface to a depth of 2 km.

The company began shallow drilling (up to 300 metres depth) in August; two more rigs will follow, targeting intermediate (1.2-1.5 km depth) and deep (2-2.5 km) mineralization.

PC Gold doesn’t see the depth of the steeply dipping, almost vertical mineralization at Pickle Crow as a deterrent to its possible development in the future. The company points to profitable gold mines that are similarly deep, such as Goldcorp‘s (G-T, GG-N) Red Lake mine (at 2 km depth) or Agnico-Eagle Mines‘ (AEM-T, AEM-N) Laronde (at 2.4 km).

In the nearer term, the Albany shaft, No. 13 vein and the Southwest Powderhouse zones are key targets for shallow mineralization that could possibly be exploited by open-pit methods.

In any event, Keough is in no rush to production – even though the site is close to production-ready with a small 225-tonne-per-day gravity mill on-site. A former operator built the modular pilot mill before it went into receivership in 2004. But its work wasn’t all for nought; it did complete some metallurgical work that showed gold recoveries from both types of mineralization on the property exceeded 98%, Keough says.

Pickle Crow was under fractured ownership, with Premier Gold Mines (PG-T) holding the deep mining rights and a private company holding the surface mining rights until last year, when PC Gold formed and consolidated ownership of the property. Now PC has 100% of Pickle Crow – acquired for $3.5 million, 9.5 million shares and 2.4 million share purchase warrants — and it’s focused on methodically advancing its sole asset.

The company only listed on the Toronto Stock Exchange this May, and Keough says the strength of the asset was a big part of the reason he was able to lead the junior through a successful initial public offering (at $1 a share) during a time of “sickening” market turbulence.

“If you can find a really fine asset, one that clearly stands head and shoulders above others in the business, then it’s worth focusing on.”

PC Gold shares recently traded at 75 apiece. Since listing in May, the company has seen a low of 70 and a high of $1.25. Premier owns 15% of the stock.