Contango Oil & Gas Co., an exploration and production company focused primarily on petroleum resources in the shallow waters of the Gulf of Mexico, has turned one eye toward Alaska. Acquiring a large land package that is prospective for gold in the eastern Interior as well as six rare earth element prospects across the state, the Houston-based independent has spun out Contango ORE Inc., or Core, to explore its northern mineral assets.

"Core has leased or filed mining claims on 759,800 acres in Alaska, with about 650,000 acres focused on gold and related mineral exploration and approximately 100,000 acres focused on rare earth element exploration," Core Chairman and CEO Kenneth Peak said when the mineral exploration company went public in December.

Though Contango Oil & Gas is a relatively small natural gas company, it has earned a reputation for creating strong shareholder value by not carrying debt on its balance sheet and keeping its overhead low.

Peak, who also is the founder and president of Contango Oil & Gas, is applying the same low-overhead principle to the Alaska venture.

"While we have not finalized our 2011 exploration program, we anticipate a capital expenditure budget of US$2.75 million for 2011, with approximately US$2.25 million for gold and related mineral exploration and US$500,000 for rare-earth-element exploration. Our budget for G&A expenses is less than US$100,000 for the year," he said.

Enormous gold prospect

Core's primary focus in 2011 will be on investigating the gold potential of its enormous Tetlin project, which covers 659,000 acres, or 266,801 hectares, south and east of Tok.

Juneau Exploration L.P., a private company that seeks out natural gas prospects for Contango, leased the property from the Tetlin Village Council, an Alaska Native Village in Alaska's Eastern Interior, in 2008.

"We went up there looking for any kind of minerals and since we are oil and gas people that was our first thought. But we do not think the property is prospective for oil or gas," Peak told Mining News.

The Core president said it was not a large leap for the company to investigate the property for gold.

"It is 650,000 acres, and everybody knows there 'is gold in them thar hills' in Alaska," he quipped.

Recognizing the gold-copper potential of the Tetlin property, Juneau Exploration tapped the mineral exploration expertise of Avalon Development Corp., a Fairbanks-based geological consulting firm.

Avalon has been conducting early-stage prospecting of the property over the past two years and will continue to carry out the exploration at Tetlin as well as Core's six REE projects in Alaska.

Core reports that more than 40 percent of the 2,980 rock, soil, pan concentrate and stream silt samples collected from the expansive property during the 2009 and 2010 field seasons contain measurable amounts of gold and 84 returned assay results of more than 500 parts per billion. In addition to the geochemical work and mapping, the geologists conducted ground-based induced polarization surveys to help define the targets.

Core plans to kick off the 2011 exploration season at Tetlin with airborne magnetic, electromagnetic and radiometric surveys over the most promising gold and copper targets identified by the previous prospecting. Utilizing the data gathered with the early-season geophysical survey in conjunction with the geological work conducted over the past two years, the company will prioritize exploration drill targets for follow-up in the summer and fall of 2011.

Six REE properties

Increasing demand for products that require the unique properties of REEs is what sparked Core's interest in these technology-driven metals. The company plans first-pass reconnaissance exploration in 2011 on its six REE properties.

"Our decision to explore for REEs is based on our belief that REEs will become increasingly valuable as the world moves to embrace alternative 'green' forms of energy such as wind turbines and advanced batteries, which require REEs for component parts," the company wrote.

Based upon preliminary surveys conducted by the United States Geological Survey and subsequently reviewed and analyzed by Avalon, Contango and Juneau Exploration staked 100,800 acres of state and federal mining claims on six REE projects in Alaska.

Two of the REE prospects, Salmon Bay and Stone Rock Bay, are located on opposite ends of Prince of Wales Island in Southeast Alaska.

The 980-acre Stone Rock Bay property is located about 12 miles, or 19 kilometers, south of Ucore Rare Metals Inc.'s heavy rare earth element-enriched Bokan Mountain project and 2,540-acre Salmon Bay is located on the northern shores of the island.

Core's four remaining REE properties - Swift, Wolf, Spooky and Alatna - total 97,280 acres and are spread out across Alaska's Interior region.

Avalon's geological team will conduct geologic mapping, geochemical sampling and other tasks designed to determine the presence and magnitude of rare earth element mineralization on the properties.

Peak said Contango does not typically do much in the way of public relations; however, a presentation posted on the company's website provides a sense of the explorer's uniqueness: "It would be truly exciting if Core owned gold or REEs - we sadly do not - we are an exploration company … i.e. a pure and simple speculation. In a speculation, one should be prepared - indeed expect - both financially and mentally, to lose it all."

Author Bio

Shane Lasley, Publisher

Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.

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