Skyline’s Iskut River a hot B.C. play

In general, gold discoveries in northern British Columbia require a grade premium over comparably-sized deposits further south; the reason, of course, is to offset poor exploration logistics and high mine development costs in these areas which typically have poor infrastructure.

Three discoveries in northern British Columbia, all of which will probably be producers, stand out at the moment: Skyline Explorations’ (TSE) Johnny Mountain project 65 miles northwest of Stewart; the nearby Cominco/Delaware Snip property, currently the subject of a major underground exploration and development program; and the Newhawk Gold/Granduc Mines’ Sulphurets project which should reach feasibility this year. Recent results from Sulphurets have been nothing short of spectacular and the depth potential there has exceeded expectations.

However, the Skyline/Iskut River area will be one of the hottest plays in the country this year and Prime Capital (Murray Pezim’s merchant bank) holds the largest land position in the region. Prime Group companies have concluded option agreements with several juniors in the region and with Vancouver- based North West Gold Syndicate/Iskut Gold Syndicate. At last report, the syndicate still had some ground open in the area.

Prime has agreements with several VSE-listed companies which, over the next few years, will involve expenditures of $10-$15 million in the Skyline-Iskut River area. Some Prime Group companies have concluded joint venture agreements among themselves and the following fall under Prime control or have joint venture agreements with Prime.

One of Prime’s most important agreements (through Pezgold Resources) is with International Prism, a deal that involves five properties and $2 million in expenditures over the next two years. Crest Resources, Dundee Resources and Ascot Resources, all of which are now in the Prime Capital fold, will also be active there this year. Golden Band and American Ore are farming into one of Delaware’s properties, each with the right to earn a one-third interest.

Achilles Resources a Prime company, has an underlying exploration agreement with North West Gold/Iskut Gold Syndicate, Cheryl Resources can earn 50% of Ticker Tape’s property, Pezgold has an agreement to earn 50% of Vanstates Resources property, Wildcat Resources can earn 50% of Brenwest Mining’s ground, while Gigi Resources, Norman Resources, Androne Resources, Achilles Resources, and Regal Resources have all optioned ground from the syndicate. Androne has a property under option from Skyline and Balcor Resources is negotiating for a ground there. Danstar has just optioned a claims from Ascot and Crest Resources is doing a deal with Magenta Development.

There are many other companies in the region which have either prepared or are formulating work programs. Significant land positions are held by: Jazzman Resources, Western Canadian Mining, Kestrel Resources, Cove Energy, Inel Resources, Mt. Calvery, Dryden Resource Corp., Barytex Resources, Hector Resources, Kyle Resources, Big M Petroleum, Gulf International Minerals, Consolidated Sea Gold, Racer Resources and Tanker Oil and Gas. There are many others too.

In recent months attention has been drawn away from the Skyline property to the much larger SNIP discovery which is being developed by Cominco (TSE) and Delaware Resources (VSE). Cominco has the right to earn a 60% interest in the project in return for financing the first stages of mine and plant construction. Delaware will be spending $4.5 million at SNIP this year,3 bringing its total outlay to $8 million. Under their agreement, Cominco will have to fund the next $16 million in exploration and development expenditures.

Reserves have been calculated at 1.2 million tons grading 0.7 oz gold in the Twin zone and this has been diluted by 20% and cut to 4.5 oz. These reserves lie within the geological boundaries of the Twin zone vein and extend from surface to depths ranging from 550-850 ft. Based on drilling and underground development, the vein appears to have good continuity and it’s still open at depth and along strike to the east.

The Twin zone is a discordant shear vein that cuts through a massively-bedded feldspathic greywacke-siltstone sequence the character of which hardly changes over the vertical range tested to date.

Gold mineralization occurs in variably-sized bands of massive calcite, heavily disseminated to massive pyrite, biotite- chlorite, quartz, and pyritic to non-pyritic fault gouge. Considerable amounts of calcite exist throughout the Twin zone and there is only about 2% sulphide in the deposit. Values to 0.3 oz gold per ton have been encountered in rocks adjacent to the Twin but these haven’t been included in reserve calculations. The current program is expected to provide data on ore continuity, grade estimation, mining conditions, and several other elements required for a production decision.

Reserves at Skyline currently total 256,150 tons grading 0.76 oz gold of which 82,150 tons averaging one ounce gold are classified as proven and 174,000 tons grading 0.64 oz gold are classified as drill- indicated and probable. Silver content is estimated at one ounce per ton and copper at 1%.

Two major veins have been explored to date: the 16 vein and Discovery vein both of which are open at depth and along strike. Only about 25% of the known surface length of these veins has been explored thus far. The company apparently has 40,000-60,000 tons of broken ore underground to feed the mill initially. Because the ore occurs in high grade and often narrow shoots, finding sufficient working places could be a problem. It will be interesting to see whether or not the mill suffers from any hunger pangs.

Finally to Newhawk Gold Mines (TSE) and joint venture partner Granduc Mines (TSE). Reserves in the West zone at Sulphurets total some 1.5 million tons grading 0.51 oz gold and 20.2 oz silver. This mineral inventory was as of Dec 31 and does not include extensive drilling completed earlier this year which returned some spectacular results, at times over above average widths.

The Shore zone, with reserves of 539,776 tons grading 0.26 oz gold and 27 oz silver, and the Gossan Hill, with 27,639 tons averaging 1.9 oz gold and 3.5 oz silver, have yet to be fully evaluated and could enhance over-all reserves for the property. Concentrate shipments (with the silver) will have to be made over a glacial road but much of its production will be refined on the property.