North of 60 Mining News - The mining newspaper for Alaska and Canada's North

Drills will start turning on the Golden Summit property within a month's time of its owner signing a new joint venture agreement with a mid-tier mining company.

Freegold Ventures Ltd., a Vancouver, B.C.-based junior exploration firm, optioned its Fairbanks-area exploration property to Meridian Gold Inc., a low-cost gold producer in North and South America.

The exploration deal, announced Jan. 23, was followed by a Feb. 11 announcement that drilling on the property will start by Feb. 27. It will be among the first exploration work covered by the $740,000 in planned exploration spending by Meridian in 2004, outlined in the joint venture agreement.

Other work planned includes an airborne magnetic survey that will be flown over the 18,000 acre Golden Summit property, data which will help plan the 2004 exploration program.

Golden Summit, which contains a number of historical high-grade gold lode mines on the sloping property, is just a few miles north of the Fort Knox gold mine and mill complex. Freegold has held and worked on the large claim block since the early 1990s.

The exploration deal includes terms that allow Meridian to earn up to a 70 percent interest in Golden Summit.

Initially, to earn a 50 percent interest, Meridian must spend $5 million for exploration in four years, including $740,000 in 2004. The company must also make cash payments of $390,000 to Freegold over four years, and purchase $300,000 via private placements of Freegold common stock by Dec. 31, 2004.

The next stage, giving Meridian a 60 percent interest, calls for Meridian to complete an independent bankable feasibility study. If the study identifies reserves in excess of 500,000 ounces of gold, Meridian is scheduled to pay $1 to Freegold for every economic ounce identified.

To earn the full 70 percent interest, Meridian must arrange all financing and place Golden Summit into commercial production.

Under terms of the deal, Golden Summit is divided into three project areas, A, B and C. Meridian may earn up to a 70 percent interest in areas A and B.

The airborne survey will be flown over the entire area, and Meridian will be granted a first right of refusal to explore Area C, on terms to be agreed on in exchange for funding the survey.

Last year, Freegold spent some $300,000 on Golden Summit, conducting some limited core drilling work below the shuttered Cleary Hill Mine. Several high-grade intercepts identified additional mineralization below the old hard rock mine and stamp mill, which closed during World War II.

Freegold has spent about $6 million on Golden Summit, but only about $500,000 of that has gone to prospect at Cleary Hill. During its mine life, Cleary Hill's gold grade averaged 1.3 ounces per ton of rock.

Past exploration work indicates a mineralization trend at least 1,400 feet in width, open along strike in both directions and at depth. Gold is hosted in quartz veins and quartz stock work zones in highly altered schists.

Three other historical gold mines on the Golden Summit property are located in a trend running from Cleary Hill east, according to Curt Freeman, Freegold's consulting geologist. Similar types of high-grade vein swarms seem to occur in a pattern about 8,000 feet apart.