Barkerville’s new, much smaller Cow Mountain estimate

VANCOUVER — It took almost a year, but Barkerville Gold Mines (BGM-V) has stepped back — way back — from its claim that the Cow Mountain portion of its Cariboo gold project hosts a huge gold resource, and has the potential to host almost 10 times more.

In June 2012 Barkerville announced that Cow Mountain in central B.C. was home to 10.6 million contained oz. gold. The report pegged Cow Mountain’s resource at 69 million indicated tonnes grading 5.28 grams gold per tonne. The previous Cow Mountain estimate in 2006 reported an indicated resource of just 431,000 oz. gold.

An increase of that magnitude (twenty-five fold) is unusual, as is the fact that every tonne and ounce was classified as indicated — the estimate made no mention of inferred resources. Topping off the list of suspect characteristics, the report went on to discuss the project’s “geologic potential,” reporting that the property’s 6.4 km long prospective trend could contain 65 to 90 million oz.

Barkerville’s share price jumped 50% in a day, climbing from 80¢ to above $1.22. But had more of the market believed Barkerville, the stock would have gone much higher. Even its intraday high of $1.78 meant investors were valuing each ounce of supposed Cow Mountain gold at just $18, a pretty paltry valuation. 

Many investors did not believe Barkerville’s resource — and neither did the British Columbia Securities Commission (BCSC). Within a week the BCSC sent Barkerville a list of concerns over how the estimate was calculated, including whether the bulk-tonnage resource model used had resulted in “material overestimation” of the grade and tonnage. 

The concerns were not minor and Barkerville couldn’t address them in short order. As a result, in mid-August the BCSC issued a cease-trade order against the junior — one that has yet to be lifted. 

Trading in Barkerville shares may soon resume, as the company has finally cleared the biggest hurdle in its path. On June 18 Barkerville issued a new Cow Mountain resource estimate that slashed the indicated gold count by 90%, cut the overall gold count in half and reduced the average grade by more than 60%. 

According to the new report, Cow Mountain hosts 17.7 million indicated tonnes grading 2 grams gold for 1.04 million oz. gold. Inferred resources add 49.2 million tonnes averaging 2.74 grams gold, for another 3.94 million oz. gold.

As for Cow Mountain’s “geologic potential,” that too has been slashed. The old report said the 6.4 km long trend could host 405 to 684 million tonnes grading 4.11 to 5.49 grams gold, for 65 to 90 million oz. The new report says the target might host 150 to 450 million tonnes grading between 2 and 5 grams gold, for a potential gold count of 9 to 27 million oz. 

The new estimate is a joint effort. Two independent consulting firms — Snowden Mining Industry Consultants and Apex Geoscience — worked with the geologist who completed the initial report, Peter George, to redo the estimate.

One of the BCSC’s biggest complaints against the initial estimate was that it was an “unconstrained” resource, which means George incorporated drill holes well outside of the core deposit. That type of resource modelling is not acceptable under Canadian regulations. The new report is based on a constrained resource model. 

Barkerville’s original 10 million oz. estimate stunned the junior sector in B.C. And the story of how it played out over the past year is an interesting one. 

In the two months following the BCSC cease-trade order Barkerville said not a word. Finally, in October, the company said it had engaged independent consultants to review the estimate and help the company satisfy the BCSC. 

By November Barkerville said the new resource report was “nearing completion,” but for the next six months there was no new report — just repeated promises that it was pending. Meanwhile, displeased shareholders started to stir the pot.

In December a 7% shareholder petitioned the courts to compel the company to hold an annual general meeting, something the company had not done for over a year. The investor, Rex Harbour, also said shareholders were ready to recapitalize the company with a financing worth $25 to $50 million, but only in exchange for three seats at Barkerville’s five-seat board.

Harbour said he had lost confidence in CEO Frank Callaghan’s ability to run the company. He blamed the company’s precarious state on “mismanagement of all aspects of the business” and pointed out that Callaghan had received $7 million in compensation over the previous 18 months, either directly or through a drilling company he controls.

Barkerville fought back, saying it was better to postpone the AGM — with permission from regulators — until the cease-trade order is lifted. The courts settled the first round of the fight, setting the AGM for April 16. Shareholders settled the second round, rejecting Harbour’s dissident board nominees in favour of Barkerville’s picks. 

So Callaghan and his team had retained control of Barkerville, but almost 10 months after issuing the 10 million oz. estimate and eight months after being ceased traded they had yet to produce the recalculated resource estimate. 

It took another two months for the report to surface. On July 3, Barkerville shares remained suspended at $1.22. The company has 109 million shares outstanding.