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

Underworld Resources Inc. began what promises to be a long, exciting summer by reporting results Memorial Day from the first three holes of its 2009 drilling program, currently under way at the White Gold Property in west-central Yukon Territory.

Two weeks later, the aggressive junior churned out additional drill results for one of the three holes, this time identifying deeper gold mineralization that is also rich in silver.

A week later, Underworld closed several private placements that generated C$16.55 million in gross proceeds and gave Kinross Gold Corp. an 11 percent stake in the junior.

Underworld also released more encouraging drill results June 23 for another nine drill holes in phase 1 of its 2009 drilling program, seven holes in the Golden Saddle zone and two in the Arc zone.

Underworld is exploring sediment and vein-hosted gold targets on 845 claims covering 169 square kilometers, or 65.3 square miles, on the White Gold and Black Fox gold Properties in the west-central Yukon Territory, 95 kilometers, or about 60 miles, south of Dawson City. After two years, the junior has nearly doubled its claims in the area and identified significant gold mineralization. News of Underworld's drilling results also has touched off a staking rush in the region.

100 meters of 3.4 grams per metric ton gold

Drillers encountered significant thicknesses of gold mineralization at White Gold within an interpreted shallow-dipping zone in all three of the first holes drilled in the 14,000-meter program. The results are:

WD09-28: 1.84 g/t Au over 102.5 meters from 105 to 207.5 meters

WD09-29: 3.89 g/t Au over 60.5 meters from 145.5 to 206.0 meters

WD09-31: 3.39 g/t Au over 104.0 meters from 100.0 to 204.0 meters

These holes were completed in a fence of four, drilled at the Golden Saddle zone, west of hole WD08-21, which returned 3.1 g/t gold over 50.7 meters.

The objective of the initial drilling was to test for the continuity of mineralization and to test the mineralization to depth, below hole WD08-21, which bottomed in alteration and in mineralization.

The four holes on the section span about 120 meters of down-dip extent, with assays pending for WD09-30 and additional assays pending from above and below the zone identified in WD09-31.

Underworld said its geologists believe the mineralization at Golden Saddle is shallow-dipping; however further assay results and additional drilling are required before they can reliably estimated true thickness.

More gold down below

Underworld June 12 reported discovery of a new, deep gold-silver-rich zone down hole from the earlier drill results. The junior said hole WD09-31 returned 10.5 meters averaging 4.8 g/t Au and 38.2 g/t Ag starting at 401.5 meters within a breccia zone underlying the Golden Saddle Zone.

The deep breccia zone within hole WD09-31 occurs from 401.5 to 412.0 meters and includes 9.40 g/t gold and 73.3 g/t silver over 3.4 meters, underlying the upper zone in this hole.

The mineralization is hosted in a milled hydrothermal breccia with interstitial pyrite and specular hematite.

This zone suggests the potential for stacked mineralized structures within Golden Saddle. Further, the silver/gold ratios within the "upper" Golden Saddle zone are typically greater than 1:3, while silver/gold ratios in the "lower breccia" Golden Saddle zone are 8:1, the junior said.

"This type of mineral zonation is often associated with intrusion-related gold deposits is suggestive and suggests that there may be an intrusive source to mineralization at depth," Underworld Chairman Michael Williams told Mining News.

"We could have tapped into a sizable ore body, rather than a narrow vein. The new structure is brecciated, which is another indication of the system's potential," Williams said June 17.

"In political terms, the deposit has legs," he added.

Underworld said its drillers lost hole WD09-31 at 414.8 meters due to depth limits of the diamond drills currently in use at Golden Saddle. The company will bring a more powerful drill rig to the site to test the new zone to greater depth.

Two diamond drills are currently turning on the White Gold Property, and had completed nine holes at Golden Saddle and five holes at the Arc zone (located two kilometers, or 1.24 miles, southeast of Golden Saddle) as of June 12.

Latest results extend mineralization

Results of drilling at Golden Saddle reported June 23 returned 3.16 g/t gold over 44.5 meters from 179.5 meters and extends Golden Saddle's "upper zone" further down dip in hole WD09-32. WD09-32 is located 60 meters down dip from WD08-21, which returned 3.2 g/t Au over 50.7 meters.

Underworld said hole WD09-34, which returned 1.4 g/t gold over 29.50 meters, demonstrates extension of the mineralized zone further to the north east.

Hole WD09-38, however, intersected 0.95 g/t gold over 153.0 meters, including higher grade upper and lower intervals, including more than 3.1 g/t gold over 17.2 meters and 4.1 g/t gold over 16.0 meters.

WD09-38 intersected the Golden Saddle Zone 60 meters up-dip from WD09-34.

Hole WD09-30 was drilled up-dip from the same collar location as WD09-31, which intersected 3.4 g/t gold over 104.0 meters.

WD09-30 returned 0.6 g/t gold over 70.9 meters, including 2.1 g/t gold over 7.0 meters, but the zone was truncated by an altered and sheared ultramafic unit or dyke, which is interpreted to be a poor host rock to the gold mineralization within the Golden Saddle Zone, the company said.

Underworld also reported significant gold mineralization intercepted in two holes drilled at the Arc Zone, which is located two kilometers southeast of Golden Saddle.

The junior said two drills turning at White Gold are now working on a 6,000-meter phase 2 program for 2009. Assays are still pending for four more holes at Golden Saddle which tested for further extensions to the northeast, spanning an additional 120 meters of strike length.

Offerings raise C$16.5 million

Underworld June 19 said it closed private placements of more than 12.8 million units in several offerings, including one with a syndicate of agents led by Canaccord Capital Corp. and including Axemen Resource Capital and Dundee Securities Corp. The junior said 10 million units sold at a price of C$1.25 each, while 2.415 million flow-through units sold at a price of C$1.45 each for total gross proceeds of more than C$16.5 million. Each unit consists of one common share and one-half of one transferable common share purchase warrant.

Underworld said one of its directors purchased 15,000 units in the offering and, as a result, security holdings of company insiders have increased.

Fort Knox Mine owner, Kinross Gold Corp., also purchased 1.2 million units of the offering. After giving effect to the offering and the exercise of the warrants, Kinross would hold 1.8 million common shares of Underworld, which, together with the 2.72 million common shares already held by Kinross, constitutes 11.1 percent of Underworld's outstanding common stock.

In addition to the brokered financing, Underworld also completed a non-brokered financing, issuing 400,000 units at a price of C$1.25 each and 34,500 flow-through units for C$1.45 each for total gross proceeds of C$550,025.

Underworld said it will use funds raised from offering the flow-through units for general exploration spending in Yukon, and the remaining net proceeds for general working capital.