Goldrich, Nyac join forces at Chandalar
Lifelong Alaskan contributes placer mining expertise, US$8.5 million to JV; junior brings gold-rich alluvial deposits to venture
Last updated 4/29/2012 at Noon
NyacAU LLC and Goldrich Mining Co. inked a deal in early April to create a joint-venture company to mine rich alluvial gold deposits that blanket the valleys of the vast Chandalar land package some 200 miles (320 kilometers) north of Fairbanks, Alaska.
Goldrich brings to the newly formed partnership the placer potential of the 22,840-acre Chandalar Mining District, including a quarter-million-ounce drill-tested alluvial gold deposit on Little Squaw Creek and a multitude of undefined gold-rich streams with the potential to increase the resource several times over.
Nyac, a private mining company owned by Anchorage-based physician and fourth generation Alaskan Dr. J. Michael James, is offering more than two decades of placer mining experience and some US$7.2 million in capital to get the new placer mining venture into production.
Some US$3.6 million of the funds will go toward start-up costs, another US$2.4 million is being spent on capital expenditures for mining equipment and US$1.2 million is allocated for lease-purchase payments of mining equipment to Goldrich. The loan Nyac is making to the joint venture will earn interest at the applicable short-term federal rate, currently 0.25 percent, but is effectively a non-interest bearing loan as Goldrich will receive a special payment from the JV equal to the interest paid to NyacAU on the advanced funds.
"At current gold prices and production costs the joint venture provides almost three times the standard ten to twelve percent royalty on gross revenue normally paid to owners of placer mines in Alaska," said Goldrich CEO Bill Schara.
While attorneys were hammering out the details on the partnership pact, the awaited joint venture was staging equipment at Coldfoot in anticipation of making a 55-mile (34 miles) trek eastward along a winter trail from the Dalton Highway to the Chandalar property.
The company will use a 250-yard-per-hour gravity recovery plant that Goldrich briefly operated on the upper portions of Little Squaw Creek in 2009 and 2010.
Dr. James told Mining News April 13 that he is targeting an initial commissioning run of the wash-plant in early August, giving the company around six weeks of gold production before Arctic conditions freeze the water vital to placer production. Chandalar is situated about 35 miles (56.5 kilometers) north of the Arctic Circle.
"At the end of the season we should have a good idea on how to manage this material and next summer we plan on building a larger plant so that we could run somewhere around 600 to 800 yards an hour," he explained.
Once the larger plant is in full production, the partners anticipate the operation at Chandalar will rank amongst the top placer operations in Alaska.
According to an independent study commissioned by Goldrich in 2008, "Evaluation of the Chandalar, Alaska Mining Property," drilling has outlined nearly 10 million cubic yards of alluvial gravels with an average grade of 0.0243 ounces of gold per yard, or about 243,600 ounces of the precious metal in the valley of Little Squaw Creek at Chandalar.
"The exact limits of this placer at Chandalar are not known. I think there is going to be a lot more drilling necessary to establish the limits of the reserves," said the Nyac owner.
Two-stage mining plan
Dr. James first became familiar with Chandalar during a chance meeting with geologist Jim Barker, who was involved with drilling the placer deposit on Little Squaw Creek and co-authored the 2008 Chandalar technical report.
"They had blocked out a quarter-of-a-million ounces up there so I thought it was something worth to go up there and look at," he told Mining News.
This US$389 million placer deposit, at US$1,600 per ounce gold, is divided into two distinctive zones.
A narrow canyon section of upper Little Squaw Creek contains nearly 2.7 million cubic yards of material averaging 0.0263 ounces of gold per yard, or about 70,000 ounces of gold. Where the creek valley widens into a fluvial fan lies another 7.3 million yards of pay material averaging around 0.0235 ounces of gold per yard, or about 173,000 ounces of the precious metal.
Aside from being slightly higher grade, the canyon section has the advantages of not being permanently frozen and having less overburden material to strip off of a thick pay-streak.
The pay-zone in the canyon averages about 86.7 feet (26.4 meters) thick and lie under about 41 feet (12.5 meters) of overburden.
After poring over the technical report and visiting the property in 2011, Dr. James worked out an approach to mining the deep, gold-rich placer deposit.
"I think it has to be attacked in two stages: the first being the upper portion of it, which is not a permafrost-laden system; and the lower portion, where the majority of the gold is, the overburden is all permafrost so you are going to have to credibly remove that in a way that environmental concerns can be met," explained the placer miner.
"One of the themes that threads through all of our operations is that we are environmentally credible," he added.
Dr. James said the joint venture will begin mining the richer and easier to manage canyon area in the upper portion of the deposit, giving the partners time to further test and evaluate the best approach to recovering the larger, deeper and frozen resource in the valley below.
"We want to take a year or two to establish success in the upper part and be able to drill out the lower part and find out the extent of the placer and the materials we are going to be dealing with," the placer mining physician explained.
While James wants to further delineate the extent of the alluvial deposit that fans out from the canyon, he already has an idea of the scope of the preliminary work needed to get through the frozen overburden to the gold bearing gravels below.
"You are going to have to strip off about a million-and-a-half yards of material to get at the pay zone," he said.
80,000-ounce gold resource
Nyac is not unfamiliar with overcoming unique challenges. At its operation on Shamrock Creek in the Nyac region of Southwest Alaska, the placer miner found that the gold was locked into an eight-foot-thick stratum containing a high percentage of clay.
"Shamrock Creek is a unique property because we found we had a lens of clay about 15 feet deep and the majority of the gold was in a matrix in the clay," Dr. James explained. This uncommon host for a gold-bearing placer deposit created a unique challenge for Nyac, prompting the miner to design a recovery system capable of breaking up the clay so that it would release the gold for recovery.
With the assistance of gravity gold recovery system designer Randy Clarkson, Nyac added some simple but effective modifications to a traditional tromell wash-plant designed to break up the tightly bound, fine-grained earth. Dr. James told Mining News that the specially designed 300-yard-per-hour plant has proven successful. The multi-stage process aimed at freeing the gold from its clay host had the added benefit of giving gravity more opportunity to tug on the heavy yellow metal, increasing the plant's recovery.
The Nyac Gold owner declined to say how much gold the specially designed plant at the Southwest Alaska operation captures annually, but the operation is considered among the top placer gold producers in the state.
"I can tell you what we are planning on recovering at Chandalar," Dr. James laughingly responded to a question about annual production at Shamrock Creek.
While Goldrich has targeted a 10,000-ounce-per-year operation, the Nyac owner hinted at expected annual recoveries topping 13,000 ounces of gold per year.
"There is probably about 80,000 ounces up there, so that is five or six years," he said when asked how many seasons the resource in the canyon section of Little Squaw Creek would last.
Focus on lode-source exploration
Relying on Nyac's expertise to monetize the placer deposits at Chandalar, Goldrich will focus on what its sees as a bigger prize on its district-scale land package - the lode sources of the gold-rich alluvial gravels about to be mined by the new joint venture.
The placer mining company has agreed to loan Goldrich US$950,000, at the greater of prime-plus-2 percent or 10 percent interest, for direct drilling costs with Blackrock Drilling, a company in which the owners of NyacAU have a majority interest. The balance of the funding package, US$350,000, is to be provided by an equity financing for the purchase of common stock from Goldrich. The price per share in the equity financing will be the 90-day weighted volume average price of Goldrich stock on the last business day proceeding the signing of the definitive documents for the joint venture agreement.
"This agreement allows us to monetize an idle secondary property, build a steady cash flow, and provide funding for our primary hard-rock exploration target at Chandalar," said Schara.
Goldrich said the drilling will explore a northeast trend of gold mineralization more than five miles (8 kilometers) long and 0.5 mile (800 meters) wide. Gold mineralization occurs where a series of northwest striking shear zones cut a northeast structural feature (folding).
Goldrich's 2012 exploration will follow-up on a 4,404-meter drill program completed last year. This drilling included 25 holes testing six prospect areas along a 4,000-meter long northeast trending belt of gold showings and cut 56 intervals of at least 0.5 grams per metric ton gold. These intercepts average 2.3 meters in length and have a weighted average grade of 1.66 g/t gold.
Two prospects located at the headwaters of Little Squaw Creek - Aurora and Rock Glacier - are of particular interest to Goldrich.
While building a road to the drill site at Aurora, two zones of shearing with sheeted and stockwork quartz veinlets were encountered near the prospect. Continuous chip sampling of these zones, yielded assays of 2.8 g/t gold across five meters and 2.1 g/t gold along 15 meters. Goldrich believes last year's drilling cut extension of these zones and that additional drilling could extend these zones even further.
LS11-0062 - the best of four holes drilled at Aurora last year - cut several gold-rich intercepts including: 0.9 meters averaging 5.32 g/t gold starting at a depth of 14.9 meters; 1.5 meters of 4.39 g/t gold starting at 106.7 meters; and 1.5 meters averaging 6.57 g/t gold starting at 144.8 meters.
LS11-0061 cut three meters averaging 3.41 g/t gold starting at a depth of 21.3 meters and 1.8 meters averaging 2.27 g/t gold starting at 51.2 meters; LS11-0063 cut 0.9 meters averaging 4.44 g/t gold starting at 17.1 meters; and cut 1.8 meters averaging 1.68 g/t gold starting at 56.1 meters and 1.5 meters of 2.83 g/t gold starting at 74.7 meters. All four holes at Aurora were collared from the same location.
Out of five holes drilled at Rock Glacier, three cut significant gold mineralization. LS11-0041 cut 4.3 meters averaging 3.29 g/t gold and 11.3 meters averaging 1.08 g/t gold starting at 136.9 meters; LS11-0042 cut 2.1 meters averaging 2.03 g/t gold starting at 84.4 meters; and LS11-0060 cut 1.5 meters averaging 3.28 g/t gold starting at 64 meters and 1.5 meters averaging 4.17 g/t gold starting at 144.8 meters.
Goldrich also cut native silver in hole 42, including 0.46 meters averaging more than 690 g/t silver with only a trace of gold. LS11-0040 a hole at Rock Glacier that did not return significant gold results cut 2.1 meters averaging 397 g/t silver. The company believes the silver represents a separate mineralizing event within a large and complex precious metals system.
"While the complex geology makes Chandalar a challenging project, we believe we have made good progress by encountering numerous significant gold intercepts in our initial core drilling program and materially increasing our geologic knowledge," Schara said of the 2011 results.
We look forward to building on this season's accomplishments as we plan the next stage of exploration drilling, which we expect to focus more sharply on the Rock Glacier/Aurora prospect area."
Search for deeper mineralization
While Goldrich considers itself a hard-rock explorer with alluvial deposits in the valleys bellow, Nyac thinks of itself as a placer miner with undiscovered lode deposits in the highlands. Dr. James' company is investigating prospective upland sources of the more than 700,000 ounces of gold recovered from the streams in the region.
"The thing about it is, there has been probably 700,000-800,000 ounces that has been taken out of the Nyac valley over the years, and there have been no real sources discovered," the Nyac owner said.
The company is planning some 4,500 to 6,000 meters of drilling at the Saddle Mountain prospect situated at the headwaters of Bear Creek, on of the richest placer producing streams in the district.
"It is a brecciated pipe of about seven or eight acres and the thought is that this may well represent the top of an intrusive," Dr. James explained.
Richard Flanders, the geologist in charge of the program told Mining News that Nyac plans to drill four to six deep holes in hopes of reaching this prospective intrusive body.
"It's got a good gold-silver epithermal signature at top, good visible gold in veins, and we want to see if there is anything better down deeper," said the geologist.
Dr. James believes the odds are good that this year's program will tap the gold mineralization the company seeks.
"We have a high probability of finding something there if we use the geologic information, good geologists and are selective on how we drill it," said the lifelong Alaskan.