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

Among juniors actively working to attract majors to invest in mineral exploration projects scattered across Canada's Far North, one Vancouver, B.C.-based company leaped to the front of the pack recently in Nunavut Territory.

Commander Resources Inc. is exploring the Baffin Island Gold Project, a district-scale project with multimillion-ounce potential covering an entire greenstone belt about 175 kilometers, or 105 miles, in length east to west.

Baffin is one of at least four giant gold deposits currently being explored in Nunavut, which geologists consider to be "elephant country" because much of the territory is underlain by ancient rocks from the Archean age, similar to the most productive geology found in Ontario, Quebec, South Africa, Australia, and Brazil.

After six years of exploration work at the Baffin project, which is located 300 miles, or 484 kilometers, north of Nunavut's capital, Iqaluit, Commander entered a farm-in exploration agreement in September with AngloGold Ashanti Ltd.'s subsidiary, AngloGold Ashanti Holdings Plc.

The property boasts a pipeline of gold zones, prospects and showings, including the advanced Malrok Zone (previously reported drill results include 9.15 grams per metric ton gold over 6.0 meters and 12.10 g/t gold over 3.0 meters), Ridge Lake Zone (previously reported drill results include 21.4 g/t gold over 4.24 meters and 10.17 g/t gold over 4.45 meters), early stage Durette prospect and new and as yet undrilled discoveries such as the 3.5-kilometer-long Hébert Prospect Area that includes the main Hébert Zone (91.06 g/t over 1.6 meters in channel samples and 1,388 g/t gold in grabs), the newly discovered Hébert South (373.9 g/t gold over 0.25 meters, 241.30 g/t gold over 0.25 meters), and Traciane (66.84 g/t gold over 0.38 meters, 31.49 g/t gold over 0.85 meters) prospects.

Major brings solid support

AngloGold may earn a 51 percent participating interest in the district-scale project by spending C$20 million on exploration over a six-year period. Once it acquires 51 percent interest in the Baffin Island Gold Project, the South Africa-based gold producer can elect to increase its ownership stake in the property to 70 percent by funding all expenditures through to completion of a feasibility study.

Commander is known for cutting strategic deals. For years, the junior has employed aggressive land acquisition and strategic partnerships to increase its exposure to discovery opportunities, while reducing its exposure to risk.

Commander's strategy is reflected in its extensive property portfolio, which also includes Storm Copper, an advanced, high-grade copper project in Nunavut, and Orion Gold Deposit, which has a historical resource of about 100,000 ounces in Newfoundland. Commander's history of deal-making also resulted in it acquiring equity in Fjordland (1,517,647 shares with 1 million warrants at $0.16); Diamonds North Resources (258,000 shares), Alto Ventures (1,875,000 shares), Bayswater Uranium (29,400 shares) and GBL Gold Corp. (75,000 shares).

Still, the AngloGold transaction is a major coup.

"The combination of the farm-in deal and a private placement capitalizes the company, provides long-term funding for (the Baffin project) and exposes us to a large international investor and market base given Anglo Gold's global focus," Commander's president and CEO, Kenneth Leigh, told shareholders when the deal was unveiled Sept. 3.

"In fact, the program we ran on Baffin in 2009 was paid for retroactively by Anglo and will be included in the initial earn-in. I anticipate that a budget on the order of $6 million will be funded by Anglo in 2010."

AngloGold also purchased for C$1.2 million about a 10 percent equity position in Commander through a private placement of 1 million units, comprised of common shares and warrants for the purchase of more shares in the future.

The investment was intended to re-capitalize the company in a tough market. At Sept. 30, Commander had C$585,812 in working capital.

In November, AngloGold and Commander amended the agreement so that the major committed to fund $5.5 million in exploration expenditures during an initial 12-month term, which ended Nov. 14, rather than the original 24-month term. The commitment also included completion of a minimum of 3,000 meters of diamond drilling.

Commander also will manage exploration during the initial term and recover a 10 percent management fee from AngloGold on all project spending.

"Our large Baffin gold project is one of the best new emerging gold belts in the world, and this deal recognizes that fact," Leigh said. "The partnership with one of the largest gold producers will provide a solid financial and technical base to advance the project over the coming years."

Leigh described the agreement as being AngloGold's most significant deal in Canada, and called it a good boost for Nunavut as the territory demonstrates that major gold companies see it as a safe place to invest and a land of great opportunity.

A year of deals

The transaction with AngloGold actually was the second of three agreements with majors related to the Baffin project on which Commander took action in 2009.

In May the junior exercised a right to accelerate its ownership interest to 100 percent in the Qimmiq Property from BHP Billiton Diamonds Inc. after the parties decided to waive a C$400,000 cash payment required under a 2008 agreement.

The Qimmiq property covers 23,600 hectares, or 58,000 acres, and about 80 linear kilometers of the Baffin project. Qimmiq encompasses the core of the Baffin Gold Project and is host to the main zones in the gold belt, including Malrok, Ridge Lake and the newly discovered Hébert zone.

In 2003 Commander optioned the property from BHP, which had discovered gold there earlier. The Australia-based major was looking for zinc and nickel and gold did not fit its corporate objectives. Though BHP discovered small occurrences of both base metals on the Baffin property, the grades and quantities were not sufficient to justify continued exploration.

The acceleration agreement eliminated all other earn-in requirements that were part of the original option agreement and entirely eliminated BHP Billiton Diamonds' back-in rights.

While Commander gained control of the sale and marketing of all gold produced from the Baffin property, BHP retained certain rights, including a right of first refusal to purchase all or any portion of the concentrates or other mineral products that may be produced from non-gold resources on the property.

The right of first refusal, however, applies to only half of any non-gold concentrates during the first four years of commercial production, while the other 50 percent of the non-gold concentrates remains available for Commander to support or facilitate mine financing terms and other project capitalization.

BHP Billiton Diamonds also retained a right of first refusal to match such financing terms.

Bravo earn-in pact completed

With AngloGold's assistance, Commander also completed the purchase of a 100 percent interest in the Bravo Lake Property in December from Xstrata Nickel, and thereby eliminated all remaining earn-in expenditure requirements and extinguished Xstrata's back-in rights to the property.

Commander had spent a total of C$2,443,415 on exploration at Bravo Lake at Dec. 31, 2008, which was sufficient to meet a minimum of C$2 million in aggregate exploration expenditures required under terms of its earn-in agreement with Xstrata. To complete the acquisition, Commander was required to spend additional sums in fiscal 2008 and 2009. AngloGold provided the junior with C$575,000 in cash to complete the purchase.

The Bravo property is part of the Baffin Island Gold Project and hosts several gold and base metal prospects, including the Durette gold prospect where previous drilling intersected up to 17 meters of gold-bearing iron formation and previously reported samples from surface outcrops contained up to 59 grams per metric ton gold in grab samples and up to 29.8 grams per metric ton gold over 2 meters in channel samples.

Though Commander has identified four different styles of gold mineralization, so far, much of the gold found so far on the Baffin property is in iron-rich formations where the iron content of the rock exceeds 20 percent, said Bernard Kahlert, Commander's vice president of exploration.

These deposits are similar in geology to those found at the Homestake Mine in South Dakota, which produced more than 40 million ounces of gold, Kahlert told Mining News Jan. 6.

Gold at Baffin is also found in shear zones, quartz veins, metasediments and metavolcanics, in what Commander describes as a truly "pregnant" system.

At the Hébert zone, discovered in 2008, gold appears in high-grade narrow veins with some adjacent gold outside the veins, Kahlert said.

He said the Hébert mineralization measures more than 1.5 miles long and up to 1,000 feet, or 307 meters, wide.

Encouraging exploration in 2009

Commander launched a four-week exploration program at Baffin in early August. The main objectives were to follow up its 2008 results from the newly discovered Hébert zone and to advance the target area to the drill stage. The work included detailed geological mapping, prospecting, channel sampling and geophysics.

Just before Christmas, the junior reported initial high-grade gold assay results from the Hébert Main zone and additional results from channel samples on the Hébert South Prospect. The samples, collected specifically from gold-bearing quartz veins, expand both the Hébert South prospect and the Hébert Main zone. At the Hébert Main zone, the results extend the known parallel gold-bearing veins and mineralized metasediments originally sampled in 2008 and revealed new areas of gold mineralization.

The results from gold-bearing quartz veins, reported Dec. 21, include numerous high-grade results such as 104.30 grams per metric ton gold over 0.40 meters, 74.40 g/t gold over 0.20 meters and 95.08 g/t gold over 0.20 meters. In conjunction with geophysical test surveys, a well-defined area is now ready for drill testing.

At the Hébert South prospect, detailed close-spaced channel samples along portions of two parallel quartz veins revealed high average gold grades over significant strike lengths.

The new results, which included 173.0 g/t gold over 0.25 meters and 26.34 g/t gold over 0.25 meters, combined with results reported in November, identify a vein (C-80) with an average grade of 70.88 g/t gold over a 20-meter vein length, based on 10 channel samples spaced between 1 and 2.5 meters apart; a second vein (C-90) averages 12.88 g/t gold over a 12-meter length, based on three equally spaced channel samples.

These two veins are only partially exposed and are about 20 meters apart. Their full extent is obscured by overburden.

"These results are the icing on the cake for us this year; we can hardly wait to get the drilling started in 2010," Leigh said.

Commander is awaiting a final batch of surface channel samples from the 2009 program that includes wall rock material adjacent to gold-bearing quartz veins in areas where favorable and receptive sulphide-bearing rock units are exposed at surface. These results should include wider composite results incorporating the vein and wall rock sample results.

Busy season ahead

While AngloGold is "incredibly" supportive of the project, Kahlert said the major also made it very clear that it would need several million ounces of gold outlined at Baffin before it could move forward with building a mine.

Toward that end, Commander's exploration team is currently engrossed in technical program planning for the 2010 spring and summer season.

Though the final details won't be complete until March, Kahlert said the junior now anticipates spending C$5 million-C$6 million on exploration at Baffin this year, including drilling more than 10,000 meters, or about 35,000 feet, along with geophysical surveys, prospecting and sampling.

"We're still looking for new areas of interest," he said.

At the Malrok zone, Commander hopes to start drilling in April in order to work on the ice and drill under a lake to trace the zone downdip, Kahlert said.

Project offers logistical advantages

Though raising enough funds to carry out its exploration programs during the past few years has been a struggle, Commander has enjoyed an important advantage. Its summer base camp is adjacent to a DEW line airstrip, one of two 4,000-foot-long airstrips on the Baffin property.

Rather than having to rent expensive helicopter time, the junior has hauled food, water, equipment and personnel to the camp with fixed-wing aircraft, using the airstrip, which is maintained by the Canadian and U.S. governments, Kahlert said.

In addition, he cited agreements in place with nearby Inuit communities and associations that will result in economic development, jobs and training for local residents.

The western edge of the Baffin Island property also sits at tidewater in an area that has an arid, desert environment with permafrost and low hills with gently rolling terrain. In investor presentations, Commander notes that the property's physical characteristic are good for roads, mine development and tailings disposal.

The junior also points to the property's numerous deep lakes, which do not freeze entirely in winter, as the critical factor in achieving year-round mine development.