2010 Mining Explorers: Junior delivers big projects to majors
Teck joins a growing list of global miners seeking projects generated by Millrock, while juniors also grab some of the action
Last updated 10/31/2010 at Noon
Since its inception in 2007, Millrock Resources Inc.'s modus operandi is to seek out early-stage mineral prospects in Alaska and Arizona, complete initial exploration and then joint venture the projects to other industry players. Utilizing this project generator model the junior has amassed a portfolio of 10 gold and copper projects, seven of which received partner-funded exploration in 2010.
Estelle, Millrock's flagship gold property in Alaska, had been the one caveat to the explorer's business model. That is, until Teck Resources Inc. agreed to finance exploration at the 32,511-acre Kahiltna Terrane property.
Teck joins a growing list of global miners - Vale Inco Ltd., Kinross Gold Corp. and Inmet Mining Corp. - that have partnered with the junior on its gold and copper projects in Alaska and Arizona.
"So far we have mostly done agreements with major mining companies, and that's good for us because it shows that our technical team can generate projects that are of interest to some of the world's biggest mining companies," Millrock President and CEO Greg Beischer told Mining News.
In addition to mining powerhouses, Millrock has aligned itself with successful project generator Altius Minerals Corp. and junior explorers Valdez Gold Corp. and Brixton Metals Corp. The company is currently courting other juniors to become partners on its expanding portfolio of projects.
"Part of our strategy going forward will be to take equity positions in these junior companies," Beischer explained.
In addition to about 10,000 meters of drilling completed on its Alaska and Arizona properties, Millrock advanced its early-stage projects with boots-on-the-ground geology.
The junior also generated new grassroots projects in 2010.
"We have got a lot of projects now but we can't sit idle. We will continue to generate more projects this year," Beischer said.
Teck funds Estelle exploration
When Teck Resources Inc. agreed to finance exploration at Estelle project, Millrock management was presented with the option of keeping sole ownership of the promising gold prospect or fully embracing the project generator model on which the company is built. After some deliberation, Vancouver B.C.-based junior chose to partner with the diversified miner.
Spending C$600,000 in early May to purchase a 2.8 percent stake in Millrock, Teck joined Kinross Gold and Altius Minerals in the growing queue of successful companies willing to pay a premium of the going price for shares of the project generator.
Beischer told Mining News that a majority of the funds invested by the Vancouver B.C.-based major was spent on "a well-funded, comprehensive, systematic exploration program" at Estelle, one of four properties the junior owns in the Kahiltna Terrane.
Millrock did not drill Estelle this year; instead its geologists investigated the massive property with the goal of identifying targets for a drill program in 2011. In addition to the private placement, Teck funded geophysical work at Oxide Ridge, one of the promising gold prospects identified by Millrock.
If Teck likes what it sees during this year's investigation, it will have the option to earn a 55 percent interest in Estelle by spending US$3.6 million in expenditures over two years. The major can earn an additional 10 percent interest in the Kahiltna Terrane property by funding another US$5 million and making optional cash payments to Millrock totaling US$400,000 by the end of 2014.
Exploring the Kahiltna Terrane
Estelle is not the only project Millrock is investigating in the Kahiltna Terrane, a region that also hosts Kiska Metal Corp.'s Whistler porphyry copper-gold property and the enormous Pebble copper-gold-molybdenum project. In 2009 Millrock crews combed this mineral-rich region of Southwest Alaska, staking three additional porphyry and intrusion-related gold occurrences.
"It is the same belt of rocks as Pebble, there are some great indications of mineralization all around this Kahiltna Terrane, and I think an area play could really break out here," Beischer said.
An investigation of this region was funded through a strategic alliance struck with Altius Minerals in June 2009. Altius, a project generator and royalty business, invested C$930,000 to acquire a nearly 11 percent stake in Millrock.
Utilizing these funds, Millrock staked three properties in the Kahiltna Terrane, an "area of interest" agreed upon between the two project generators. Altius selected the Monte Cristo gold prospect and the St. Eugene copper-gold property as "designated projects."
"After the reconnaissance is done, if we acquire claim blocks Altius can nominate them as designated projects," Beischer explained.
In July Brixton Metals, a newly formed junior, signed a letter of intent that gives the company the exclusive option to earn a 100 percent interest in the St. Eugene and Monte Cristo properties, now referred to as the Cristo claim group.
Millrock is the operator of the 2010 Cristo exploration program and will deliver an NI-43-101 exploration report to Brixton by the end of year, at which point it will hand the reins over to Brixton.
Revelation, the third Kahiltna Terrane property staked by Millrock in 2009, was not selected by Altius. This 5,760-acre gold target is positioned about 30 miles, or 48 kilometers, west of Millrock's Estelle property and about 3 miles, or 4.8 kilometers, northwest of International Tower Hill Mines' Terra gold property.
Kinross explores Council
Kinross joined Millrock in its exploration of the Council claim block located about 62 miles, or 100 kilometers northeast of Nome on Alaska's Seward Peninsula. The senior gold miner has agreed to spend up to US$6 million to earn a 75 percent interest in the property that covers a 900-square-mile tract that has historically produced nearly 500,000 ounces of placer gold.
"Big companies like big projects. They don't like little postage stamp claim blocks, they like whole districts. That was our strategy, put the whole district together and then go see a big company," Beischer explained.
Beischer said Kinross was at the top of its list when it sought a partner for the Council, Warm Creek and Albion claims that make up the Council area claim block.
"Kinross had already built a relationship with Millrock. They made a private placement in our company about 14 months ago, which was very timely and helpful in a bad market. Because they helped us out in the bad times, we will often bring them our prospects first. They are a great partner," Beischer told Mining News in May.
Millrock was the operator of a 2,500-meter reverse circulation drill program that began in July.
The headwaters of Albion Creek, an area where early prospectors hand dug gold-rich weathered bedrock, were one of the key targets of the 2010 drill program.
"We anticipate that the lode deposit is right there just beneath the surface," Beischer said.
Junior partner at Bluff
Millrock drills also were churning about 22 miles, or 35 kilometers south of Council at Millrock's Bluff gold property. Valdez Gold Corp., a Toronto-based junior, appropriated about C$1.1 million for the 5,000-meter program at Bluff.
The primary target of this year's drilling at Bluff was to confirm and expand on areas explored by BHP Billiton plc in the late 1980s.
During its investigation of Bluff, BHP drilled several significant intersections in the three zones including 5.48 g/t gold over 10.9 meters, 4.19 g/t gold over 4.5 meters, and 1.93 g/t gold over 16.3 meters.
In 2008 Millrock confirmed the presence of gold on the property with a modest drill program, but due to the fractured nature of the rock, core recovery was poor. This year's reverse circulation drilling helped to improve recoveries.
Valdez Gold can earn a 55 percent interest in the property by spending US$3 million at the project, by paying Millrock US$300,000 and issuing the project generator 900,000 Valdez Gold shares by the end of 2012. Upon completion of the initial program the junior has the option to up its stake to 75 percent
Tintina gold properties available
Millrock's portfolio also includes Fortymile and Uncle Sam, two gold properties in the heart of the Tintina Gold Belt, a prolific source of placer gold that arcs 1,200 miles, or 1,900 kilometers, from northern British Columbia to the west coast of Alaska.
The Fortymile property is in the Fortymile Mining District near the Yukon border, a historic mining region where more than 300,000 ounces of placer gold production has been recorded. Millrock said data acquired from Kennecott in 2009 points to a number of targets on the property that warrant drilling.
The Uncle Sam property, the most recent addition to Millrock's portfolio, was acquired from Kiska Metals earlier this year. The property lies about halfway between Kinross' Fort Knox Mine to the west and Sumitomo Metal Mining's Pogo Mine to the east. The company believes the mineralization at Uncle Sam more closely resembles the high-grade veins found at Pogo.
"We have had a fair bit of interest over the past several months from a variety of other junior companies, and I think we are close to making an agreement whereby they would essentially cover our payments and earn up to a 70 percent interest in the project," Beischer said.
The Millrock CEO anticipates that 2010 exploration at Uncle Sam will begin with a geochemical survey, possibly followed by a late-season drill program.
Seeking Arizona porphyries
Millrock has generated three porphyry copper-gold-molybdenum prospects in southeastern Arizona, a region known for its porphyry copper.
In March of last year, Vale Exploration Canada Inc. entered into a joint venture agreement on Millrock's Galiuro copper-gold-molybdenum project north of Tucson, Ariz.
With Millrock as operator, Vale agreed to a US$600,000 drill program that began in May.
While the drilling did not produce ore-grade intersections, porphyry copper mineralization was discovered beneath a thin cover of Tertiary volcanic rocks.
Encouraged by the results Vale approved an additional US$1 million of drilling for the balance of 2010 and Millrock nearly tripled its land position at Gailuro by staking 11,000 acres of additional claims adjacent to the project.
Millrock's other two Arizona copper properties, San Jose and Dry Mountain, are optioned to Inmet Mining. The Canada-based miner with operations in Turkey, Finland, Canada and Spain can earn up to a 70 percent interest in these properties by paying Millrock US$300,000 and spending US$4 million on exploration on the projects.
The partners started the 2010 field work with a US$500,000 spring program of geophysical surveys designed to refine drill targets, with drilling to follow.