Tower Hill Finds Niche With AngloGold’s Alaska Portfolio

SITE VISIT

Fairbanks, Alaska — Assembling a decent portfolio of exploration projects in a region as vast and remote as Alaska can be an expensive and protracted task. International Tower Hill Mines (ITH-V, THM-X), however, managed to become one of the top explorers in Alaska almost overnight — the benefit of being in the right place when one of the world’s larger gold companies decided to unload its area assets.

AngloGold Ashanti (AU-N, AGD-L), which did just that in mid-2006 to focus instead on exploration and development in the Democratic Republic of the Congo, Colombia, and Australia, gave Tower Hill first crack at its Alaskan land package — an enviable basket of projects selected by the South African-based gold producer.

To seal the deal for full title to six of AngloGold’s projects, Tower Hill issued just under 6 million shares to the company (giving it a 19.99% interest) and raised just over US$10 million through some rushed equity financings over just a couple of months. As part of the financing round, the junior’s cashed-up sister company Cardero Resource (CDU-T, CDY-X) took down 4 million units in Tower Hill.

With the agreement cemented, Tower Hill entered into secondary deals with the major to earn 60% stakes in two additional projects (LMS and Terra).

The flagship in Tower Hill’s newly acquired portfolio is Livengood, located about 120 km northwest of Fairbanks and within the Tintina gold belt that hosts many deposits and mines.

The project is eyed as the likely source of the more than half a million oz. of placer gold produced in the area since 1914.

“It’s attracted people’s attention for a long time, but nobody did much systematic work here,” says Russell Myers, Tower Hill’s vice-president of exploration.

The company believes that a swarm of monzonite dykes related to similar-aged intrusives that host gold mineralization at Kinross Gold’s (k-t, kgc-n) Fort Knox mine, 50 km away, act as a heat engine driving the metals at Livengood.

“We were pretty lucky in that AngloGold picked it up,” Myers says. “Cambior had it and did a very nice piece of work — geochemically covered the whole hill — and then had other issues and dropped the land flat. All of that data went unused and then the state did some mapping in 2003 (published in 2004) — so for the first time, we actually had a fairly decent and modern map for Livengood. When we came in, it was a real plus for us.”

Describing the system as geologically complex, Tower Hill’s exploration crew has found a Devonian felsic volcanic suite of rocks is the best identified host due to its permeability, particularly when fractured — setting up a stockwork structure overprint.

With a surface gold anomaly trending roughly 3 km northeast-southwest and about 1 km across, early modelling pointed to a potential zone of over 100 million tonnes of low-grade gold. Starting with the results of previous AngloGold and Cambior exploration, Tower Hill is looking to target a higher-grade core to the system.

Based on its significant lateral continuity, Tower Hill geologists believe the volcanic package at Livengood could develop into a sizable deposit. The target horizon lying under the large soil anomaly is 200-300 metres thick and dips shallowly to the south.

Drilling of the volcanics returned many intervals averaging about 75 metres that grade from 0.5-1.5 grams gold per tonne. A pair of Tower Hill’s better intercepts includes MK-06-07, which cut 95 metres of 1.6 grams gold and MK-07-18, which returned 78.6 metres of 1.1 grams gold. Both the holes were collared near Money Knob, a pronounced topographic high on the property.

Sticking with its complex description, a wide variety of gold mineralization styles occur at the project. The precious metal is associated with quartz-arsenopyrite veins in the stockworks, with arsenic in zones of albite and sericite alteration within the felsic volcanics, arsenic-antimony in zones of calcareous siltstone decalcification, and sericite-clay alteration of the Cretaceous intrusives.

The company is studying the metallurgy to get a better grip on potential gold recoveries. Although there is a significant arsenopyrite component to the metallurgy, early indications are that little gold is tied up or encapsulated.

Tower Hill is drilling about 8,000 metres at Livengood this year to expand its understanding of the central target zone around Money Knob.

“The key to this (Livengood) is finding the volcanic stratigraphy since it’s always mineralized,” Myers explains.

Recent stepout drilling has significantly expanded both sediment and volcanic-hosted gold zones to the south and east.

Should the company piece together a significant near-surface bulk-tonnage resource at Livengood, it will likely fall on a few producers’ radars.

Gold fever

A recent visit by The Northern Miner included a flight out to Tower Hill’s Terra gold project, about 200 km west-northwest of Anchorage, in the Revelation Mountains of the Alaska Range.

As a bonanza-grade gold project, it quickly captured the attention and imagination of most on the tour, some of whom were champing at the bit to spall off some high-grade samples.

Gold at Terra occurs in a series of sub-parallel quartz veins associated with the margin of a diorite intrusive. The system shows an intermediate sulphidation level along with banding in the quartz veins, suggesting a deeper epithermal environment. Average grades come in at about 15-20 grams gold per tonne.

The outcropping Terra veins were discovered by Rio Tinto (RTP-N, RIO-L) subsidiary Kennecott in the late 1990s and subsequently transferred to a former employee in 2000 when the major shelved its Alaskan program.

Interestingly, that former employee currently conducts small-scale seasonal hand mining on the high-grade veins and pulls out a modest amount of gold by way of a rudimentary crusher and a well-worn Knelson concentrator. In fact, guests were treated to a run of the concentrator leading to a thick band of “colours” in the recovery pan — more than ample evidence of the free milling nature and likely high gravity recoveries the project would enjoy.

AngloGold acquired Terra in 2005 only to option it to Tower Hill the following year. The junior anticipates reaching its $3-million earn-in obligation by November, giving it a 60% interest. AngloGold holds a 90-day one time back-in right to grab a 60% stake by spending $4 million over two years.

It looks unlikely AngloGold will back-in at Terra; despite the very juicy gold grades, the total potential resource would likely fall well below the major’s minimum threshold. As Tower Hill advances exploration, AngloGold’s interest will probably be diluted.

The vein systems have been tested over about 1.5 km of strike and to roughly 300 metres depth. With an average width of about half a metre, the “back-of-the-napkin” resource potential at this stage falls at around 500,000 tonnes of mineralized material, potentially around 250,000 contained ounces gold.

Quartz stringers, carrying significant gold mineralization, extend modestly outwards from the veins into the diorite wallrock, providing increased potential mining widths should the steeply dipping veins see development.

Given the system’s consistent widths and grades, and the recent discovery of mineralization south at the Ice target, there is potential to expand Terra.

A resource tally on the Ben zone is anticipated by early 2008, after this year’s 15-hole definition drill program is completed. Every hole in this year’s drill campaign intersected the main Ben vein with several cutting multiple secondary gold-bearing veins in the hangingwall and footwall.

With several higher-grade shoots developing within the overall Ben vein system, Tower Hill sees a potential core zone emerging for initial mining at Terra.

While some investors would like to see Tower Hill become a gold producer by way of Terra, a more prudent path would see the proj
ect bought and developed by a mid-tier producer with strong underground operating experience.

Chisna

Tower Hill’s large Chisna porphyry copper-gold prospect is located about 100 km east of Paxon, Alaska, and in the eastern section of the Cretaceous porphyry belt that hosts Northern Dynasty Minerals’ (NDM-V, NAK-X) massive Pebble deposit on its western end.

Separate from the AngloGold deal, as it was staked by Tower Hill, the land package covers a significant area of potential intrusive-hosted mineralization evidenced by abundant colour anomalies and modest programs of surface sampling.

The junior plans airborne geophysics and a follow-up ground program on targets. In terms of potential exploration spending, it would make sense for Tower Hill to partner with a major on Chisna to leverage costs.

One of the interesting aspects of Tower Hill’s deal with AngloGold is the technical team it gives the junior. With a rampant exploration industry skill shortage, inheriting a well-rounded team that cut its teeth on a major’s payroll was a major coup for Tower Hill.

Tower Hill president and CEO, Jeff Pontius, was AngloGold’s North American exploration manager. Bringing with him valuable, senior-level operational experience, Pontius is also a networker in the Alaskan political scene, which is of increasing importance as some mineral development projects in the state increasingly become the targets of opposition.