Teck bullish on Pogo’s potential

The Pogo project in central Alaska has a gold resource estimated at 5.6 million contained ounces, and operator Teck (TEK-T) believes there is good potential for expansion.

TeckGold, a newly formed, wholly owned unit of the Vancouver-based major, can earn a 40% interest in the project from the subsidiaries of Sumitomo Metal Mining and Sumitomo Corp. by spending US$28 million on exploration and completing a comprehensive feasibility study by Dec. 31, 2001. Teck is also responsible for funding the initial US$33 million of Sumitomo’s share of development costs.

Without a junior on board to promote the project, there has been a lack of news concerning Pogo. Indeed, Teck gave mining analysts their first tour of the project only a few weeks ago.

The project sits in a remote area, 90 miles east-southeast of Fairbanks and 40 miles north of Delta Junction in the Goodpaster district. The property is accessible only by air in the summer, with road access limited to winter months.

Since taking over operatorship of Pogo in 1997, Teck has drilled off a resource of 10.7 million tons grading 0.52 oz. per ton. The resource is contained in the Liese zone, which lies beneath Pogo Ridge in the northwestern corner of the 72-sq. mile property block. The Goodpaster River runs at the base of the ridge.

The Liese zone consists of a series of tabular, gently dipping, subparallel quartz zones, which crosscut Late Proterozoic to Middle Paleozoic amphibolite-grade paragneiss and orthogneiss of the Yukon-Tanana terrane. These gneisses have been intruded by Cretaceous granitoids that are thought to be related to gold mineralization in the Fairbanks area and elsewhere along the Tintina gold belt.

Approximately 73% of the resource is contained in the main L1 quartz zone, with the remainder found in the lower L2 zone, which sits about 500 ft. below L1. The quartz bodies are up to 60 ft. thick, with L1 averaging 12 ft. The L1 zone has a stingray-style geometry.

Teck recently completed an underground evaluation program of the Liese zones, which included more than 7,300 ft. of ramp development, 500 ft. of drifting on the L1 zone and comprehensive underground drilling. At the end of June, 129 underground holes comprising 38,000 ft. had been drilled.

In addition, 12 holes totalling 7,900 ft. were drilled to test the existence of the L3 vein, indicated by two previous deep drill holes. High-grade intersections were encountered in a number of holes, and, although the vein does not appear to be as continuous as the L1 and L2 bodies, it remains open to the northeast. L3 occurs about 400 ft. below L2.

The underground program was designed to provide Teck with definitive reserves, which will serve as the basis for feasibility work. Teck encountered good ground conditions in the ore and footwall rocks, with limited inflow of water. The water is treated in an underground plant before being discharged in accordance with the permitting requirements.

“The only surprise is that the deposit wasn’t more nuggety,” says John Morganti, Teck’s vice-president of evaluations.

Despite its high-grade nature, studies show the gold mineralization is uniformly fine-grained and “quite homogeneous.” About 80% of the gold is less than 50 microns, making it tough to see with the naked eye. There is a strong correlation between gold and bismuth, as well as a weaker correlation between gold and other lithophile elements.

The veins contain about 3% sulphides, including pyrite, pyrrhotite, chalcopyrite, arsenopyrite, loellingite and native bismuth.

Teck has completed a prefeasibility study outlining several alternative project configurations. Options for the process flowsheet, tailings impoundment, site access and power generation have been incorporated into the study.

In order to minimize its footprint at Pogo, Teck will mine the deposit via a 1,750-ft. deep shaft from the top of the ridge. All processing facilities would be located on the ridge, and a dry tailings impoundment would be set in a valley behind the ridge, away from the Goodpaster River. Half the tailings would go back underground as paste-fill. The mining method will be a combination of mainly cut-and-fill, with some room-and-pillar.

A conventional 2,500-to-3,500-tonne-per-day milling facility is planned, utilizing gravity, flotation and cyanidation processes. Metallurgical studies indicate a gold recovery of 92%. Such an operation would produce 350,000 to 500,000 oz. annually at a cash cost of US$130-150 per oz. A 2,500-tonne-per-day operation has an expected life of 12 years. Capital expenditures to build the mine over a 2-year time schedule are estimated at US$200-220 million. The prefeasibility study projects an 18.1% rate of return.

Regulatory approval is required for the construction of a 46-mile all-weather access road. A feasibility study will be carried out once permitting conditions become evident. It is anticipated that the permits required for the Pogo project will only be issued after a thorough and lengthy review by the applicable state and federal authorities. The process is not expected to be completed until the end of 2001, in conjunction with the final feasibility study.

Exploration work outside of the Liese zone has not been a priority for Teck, as its efforts have been concentrated on the development and permitting of Liese. However, over the course of the past two field seasons, Teck’s geologists have defined an 8-mile-long trend of anomalous gold in rocks and soils extending to the east-southeast. Systematic grid sampling has been conducted in several areas where quartz boulder trains have yielded multi-ounce gold values. To date, 18 prospects have been identified. This summer, a 25,000-ft. drill program tested some of these prospects, including Hill 4021, 3.5 miles southeast of the Liese zones. There, 17 holes totalling 11,200 ft. tested some 3,000 ft. of strike length, encountering mineralization in several holes (15.5 ft. of 0.71 oz.), rivaling that of the L1 and L2 zones.

Morganti regards Pogo as an emerging new district, the full potential of which will not be realized for years to come.

The Alaskan subsidiary of Watts Griffis McOuat (WGM) is credited with having discovered Pogo. In 1981, the firm conducted stream-sediment sampling and found that Pogo Creek and, to a lesser extent, Liese Creek returned weak gold and multi-element anomalies. Follow-up work found some gold-mineralized quartz float.

Working on behalf of Sumitomo, WGM returned to the area 10 years later, in 1991, and carried out grid soil sampling that identified a 1-sq.-mile multi-element anomaly, with greater than 100 parts per billion gold. In 1994, three holes were drilled, followed by 13 more the next year.

Teck signed a letter of intent with Sumitomo in June 1997 and concluded a deal later that year.