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

With its sights set on gold, Contango Ore Inc. raised US$8.8 million in March to fund a US$6.75 million exploration program on its Alaska projects during the 2012 field season - the bulk of which was spent on a second-year drill program at the Tetlin gold-copper project about 12 miles (19 kilometers) southeast of the crossroads town of Tok.

The Houston, Texas-based explorer, known as CORE, is an Alaska-focused mineral spinout from Contango Oil & Gas Co., an exploration and production company with petroleum resources primarily in the shallow waters of the Gulf of Mexico.

CORE Chairman and CEO Kenneth Peak is atypically frank about the pitfalls of investing in an exploration company.

"I have personally invested US$4 million in the company's US$8.8 million offering and am obviously enthused about our potential for success but also fully cognizant of the speculative nature of this investment and the likelihood that this entire investment may well be a 'dry hole,' " Peak said of the March financing.

In August, Peak announced he would be taking a six-month medical leave from CORE. Brad Juneau - owner of Juneau Exploration L.P. - has been appointed to fill the role of acting CEO during his absence.

Juneau Exploration, a private company that seeks out natural gas prospects for Contango, was instrumental in securing and negotiating the lease of the Interior Alaska copper-gold project with the Tetlin Village Council, an Alaska Native Village.

"The company is in the middle of its 2012 exploration program in Alaska, which has been previously laid out and approved by management. We will continue moving forward with this plan and do not expect any departures," Peak said.

Avalon Development Corp. - a Fairbanks-based geological consulting firm - is providing exploration services, furthering the continuity of the 2012 program.

During a Sep. 14 interview, Juneau told Mining News that due to the efficiency of the 2012 program, he expects more drilling than originally anticipated.

"We spent the budget we wanted to spend and by the time the season is over, I think it is fair to say, we will have drilled more holes than we thought we would," said the acting CEO.

While results from the 2012 exploration will not be released until the fourth quarter, Juneau said the company is encouraged by what it is seeing.

Chief gold-copper target

An 11-hole, 2,456-meter drill program carried out by CORE in 2011 centered on a gold-copper prospect at Tetlin known as Chief Danny.

Geophysical and geochemical surveys at this porphyry prospect have outlined a zoned hydrothermal system consisting of a gold-copper-iron-enriched core covering six square miles (15.5 square kilometers) at a zone known as Chief Danny South and a three-square-mile (7.8 square kilometers) arsenic-gold zone at Saddle.

The best holes of the 2011 drill program at Tetlin were tapped into Chief Danny South.

Drilled at the southern end of the prospect, hole TET1105 cut 3.7 meters averaging 3.1 grams per metric ton gold, 300.2 g/t silver and 0.26 percent copper. TET1107 - drilled about 100 meters north of hole 5 - cut 6.4 meters grading 7.4 g/t gold, 4.9 g/t silver and 0.15 percent copper. TET1110 - drilled about 1,300 meters further north - cut 9.8 meters grading 1.18 g/t gold, 3.1 g/t silver and 0.04 percent copper.

Three holes drilled in the Saddle zone - believed to be a northern fault-offset extension of Chief Danny - returned weak mineralization.

Encouraged by the results of the first round of drilling, Chief Danny was a primary target of the 2012 exploration season. Some US$3.6 million was originally budgeted for exploration at this porphyry target but Juneau hints at even more robust program at this project that remains open, particularly to the west and south.

"As opposed to more exploration we did more confirmation work," the acting CEO told Mining News.

Many leads

Though reluctant to provide details until exploration results are released, Juneau said Chief Danny was not the only area that warranted confirmation drilling.

In addition to the large porphyry copper-gold target, Contango has revealed five promising exploration leads across the 693,560-acre (280,680 hectares) Tetlin project.

MM, located some 5 kilometers (3 miles) southwest of Chief Danny South, is one such target.

Like Chief Danny, pan concentrate sampling lead to the discovery of MM in 2009. CORE said follow-up sampling carried out in 2010 turned up samples topping 0.1 g/t gold in several of the drainages in the area.

A magnetic airborne survey carried out in 2011 reveals a strong magnetic low at MM and refined the drill area for the 2012 drill program.

CORE is also exploring the area connecting MM and Chief Danny South with a soil auger grid survey.

Located some 14 miles (23 kilometers) south of Chief Danny, Copper Hill is another promising copper-gold lead CORE targeted in 2012.

Pan concentrates in two of the streams on the north side of Copper Hill returned assays of more than 23 g/t gold and another stream draining to the south turned up 4.9 g/t gold. Rock and soil sampling have shown that copper and gold mineralization is most prevalent along an east-west trending thrust fault that runs along the highland area dividing the gold-enriched drainages. This geochemical target was confirmed by coincident magnetic and resistivity highs.

Unlike many of the other prospects at Tetlin, it was geophysics that prompted Contango to investigate Taixtsalda, a drill target about 7 miles (11 kilometers) northeast of Copper Hill. Geophysical programs conducted in the 1970s and 2011 have outlined a distinctively round area of magnetic and resistivity highs indicative of a porphyry copper system. This geophysical anomaly is the target of a soil sample program being carried out this year.

Located about 20 miles (32 kilometers) northeast of Chief Danny, Triple Z is the only prospect with historical drilling. Unfortunately the results of the porphyry copper exploration completed by Cities Services Minerals Corp., in the early 1970s were never published.

Though the historical exploration may only provide limited clues to the potential of Triple Z, soil and rock sampling by CORE has yielded values as high as 9.07 g/t gold as well as anomalous copper, arsenic and bismuth.

Triple Z is a priority drill target of the 2012 exploration program.

REE on back burner

In addition to its gold-copper property at Tetlin, CORE's portfolio includes six Alaska rare earth element projects, totaling some 100,000 acres.

While CORE carried out limited work on its REE projects in 2012, a 2011 field investigation carried out by the Alaska Division of Geological and Geophysical Surveys has unearthed promising concentrations of REEs in the area of the company's Wolf project in Interior Alaska.

One pan-concentrate sample from the DGGS survey, 2011LF540A, stands out for its particularly high concentrations of REEs and strategic metals.

Collected from Wolf Creek - a drainage on the north side of Wolf Mountain where CORE's claims are located - LF540A returned 2.9 percent total REEs (365 ppm dysprosium, 70.7 ppm terbium, 6,020 ppm neodymium, 1,460 ppm yttrium, more than 1,000 ppm praseodymium, 7,950 ppm lanthanum, more than 10,000 ppm cerium, more than 1,000 ppm samarium, 607 ppm gadolinium, 129 ppm ytterbium, 154.5 ppm erbium, 62 ppm holmium, 18.4 ppm lutetium, 30 ppm scandium, 22 ppm thulium and 6.6 ppm europium).

In addition to rare earths, the sample contained a suite of metals considered critical: 10,400 ppm manganese, 8.82 percent titanium, 890 ppm tungsten, 144 ppm chromium, 60 ppm gallium and 147.5 ppm niobium.

Strong mineralization of a stream sediment sample collected at the same location corroborates the results of the pan concentrate.

Wolf and three other properties - Swift, Spooky and Alatna - account for 97,280 acres of CORE's initial REE land position.

The company's two remaining rare earth prospects, Stone Rock and Salmon Bay, are located on Prince of Wales Island in Southeast Alaska - home of Ucore Rare Metals' Bokan Mountain REE project.

CORE limited REE exploration in 2011 and 2012 has focused on its two projects in Southeast Alaska.

"We are considering abandoning our state claims consisting of the Alatna, Spooky, Wolf and Swift claims effective December 1, 2012 to devote more time and resources to our federal claims at Stone Rock and Salmon Bay and our gold properties," CORE reported in its June 30 SEC filing.

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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