By Rose Ragsdale
For Mining News 

Homestake attracts well-funded partner

Investment opens new vistas for longtime explorer in northwestern British Columbia, while Hecla Mining eyes neighboring project

 

Last updated 1/27/2013 at Noon



In today's difficult financing climate, Homestake Resources Corp. is living the dream of most junior mining companies. Agnico-Eagle Mines Ltd., an aggressive intermediate gold producer, has signed on to pay the bills at the Homestake Ridge project located in northwestern British Columbia in a deal where the gold producer could spending up to C$25.3 million and earn up to a 70 percent interest in the exploration and development venture.

Formerly Bravo Gold Corp., the junior changes its name to Homestake Resources in April.

Homestake Ridge currently has a 1-million-ounce gold-equivalent resource, but Homestake President Joseph Kizis said he believes Agnico-Eagle was attracted to the project because of its potential to deliver much more.

"They've been following us for quite a few years, and I think the grade and reasonable logistics for this part of the world has caught their attention. But really what they are looking at is the district-scale potential of many more millions of ounces than we've found at this time," he said.


Kizis said the types of deposits his company has uncovered on the 2,585-hectare (6,388 acres) Homestake Ridge property "are typically formed as clusters."

"We've found two at this time, but late last year we intersected a parallel structure that we call the South Reef deposit," he said.

The junior quickly drilled three holes that tested a 75-meter strike-length and intersected 3.1 meters averaging 30.8 grams per metric ton gold and 3.3 g/t silver within 8.7 meters of 11.3 g/t gold and 1.6 g/t silver in drill hole HR11-232.


"What I think brought Agnico-Eagle to the table, maybe sooner than later, is that we have been drilling offset holes around that this summer," Kizis observed in September when the deal was reported.

Hecla eyes neighbor

Adding to Homestake's strong prospects, Dolly Varden Silver Corp., a junior focused on exploration and development of the neighboring silver-rich Dolly Varden project, has attracted a C$3.2 million strategic investment from silver producer Hecla Mining Co. in exchange for a 19.9 percent equity interest in the company.

The Dolly Varden project, which has a historic resource of 15 million ounces of silver, is located directly southeast and adjacent to the Homestake Ridge property as well as directly west and abutting Homestake Resources' huge Kinskuch project.


When the deal with Hecla was announced in August, Dolly Varden Silver President and CEO Ron Nichols said Hecla's experience at its Greens Creek Mine in Southeast Alaska will be particularly valuable to the Dolly Varden Silver project because of the similar geological settings of the Greens Creek precious metal -rich VMS deposit and the precious metal-rich target that has been identified on the Dolly Varden property.

"Dolly Varden is pleased to be able to forge such a strong strategic partnership with Hecla. The combination brings together two accomplished technical teams that have a wealth of experience in operating and/or restarting mines in historical silver mining camps, as well as expertise in exploring for and developing precious metal-rich VMS deposits," Nichols added.


KSM gold-copper project, Golden Triangle British Columbia, Courageous Lake gold, Northwest Territories

"It's basically the same package of rocks, though with different mineralization. Dolly Varden is more silver-zinc-lead rich, while Homestake is more copper-gold-silver rich," Homestake President Joseph A Kizis Jr. told a reporter in September.

A decade of exploration

Homestake Resources' current enviable position follows a decade of hard work. In 2003, the Vancouver, B.C.-based junior began exploring Homestake Ridge, which is hosted within Eskay Creek-equivalent stratigraphy in British Columbia's historic Kitsault mining district.


The property is located 32 kilometers (about 20 miles) southeast of Stewart, B.C. at the southern extent of the Cambria ice field in one of the largest volcanic arc terranes in the Canadian Cordilleran.

It is bounded by Alice Arm to the south, the Coast Plutonic Complex to the southwest, the Iskut River to the north, and the Skeena fold belt to the east.

Within its boundaries is the "Golden Triangle", an area that is host to more than 200 mineral occurrences including the Eskay Creek, Silbak-Premier and Snip gold mines, as well as the Granduc, Dolly Varden-Torbrit and Anyox mines.

The area's dominant mineral occurrences are precious metal vein systems, with related skarn, porphyry, and massive sulphide occurrences (Knight and Macdonald, 2010).


Contango ORE is an Alaska gold exploration and mining company.

To date, the region has produced more than 7 million oz gold, 220 million oz silver and 3 billion pounds of copper and currently boasts NI 43-101-compliant resources/reserves exceeding 65 million oz gold and 25 billion lbs copper.

With prospecting and mining in the area dating back to the early 1900s, the Homestake Ridge property comprises two areas of historic exploration.

Homestake Resources followed up on limited modern exploration by several previous companies, and optioned the property from Teck Cominco - now Teck Resources Ltd. - before beginning exploration work in 2004.

Since then, the junior has completed 251 holes for a total of 70,533 meters in exploration and delineation drilling on the property and has identified NI 43-101-compliant indicated resources totaling 191,000 ounces gold and 1.35 million oz silver, plus 530,000 oz gold and 13.47 million oz silver inferred resources at a 3.0 g/t gold-equivalent cut-off in two separate deposits.


Constantine Metals Palmer copper VMS zinc silver gold Haines Southeast Alaska

Discoveries to date include the Main Homestake deposit in 2005 and the Homestake Silver deposits in 2009 as well as the South Reef deposit in 2011. Multiple exploration targets remain to be tested on the property.

Though access to the Homestake Ridge property is by fixed-wing aircraft or helicopter from Prince Rupert, B.C. or Stewart, the legacy of mining in the area has left a network of roads, utilities, right of ways, and historic camps near the property. Moreover, the property is located only six kilometers (about four miles) from a historic roadway and 32 kilometers (20 miles) north-northwest of tidewater at Alice Arm. Onsite power generation facility has been permitted and British Columbia's Northwest Transmission Line along with several proposed hydro-development projects in the area brings additional synergies to the project.


Mines and Money Miami

The junior said early metallurgical lab results indicate that expected recoveries from a combined gravity/flotation processing plant would be 85-90 percent gold, 80-9090 percent silver, and 85-90 percent copper.

Environmental testing indicates initial tailings sample has low potential for acid generation and base-line work has been initiated.

Homestake also says it has excellent relations with local First Nations and is involved in ongoing engagement and consultation.

More progress in 2012

Homestake completed five drill holes, totaling 1,248 meters in a C$700,000 first round of 2012 drilling at the South Reef target, which is located about 800 meters to the southwest of the Main Homestake deposits.

The company reported 4.0 meters averaging 11.4 g/t gold and 3.7 g/t silver from drill hole HR12-243; and a 2.9-meter interval averaging 5.9 g/t gold and 2.0 g/t silver, which includes a 0.5-meter interval averaging 16.3 g/t gold and 4.6 g/t silver from drill hole HR12-240. Estimated true thicknesses were not calculated for the reported intervals due to uncertainty in correlating mineral intercepts with surface exposures; however, it is likely that the mineralization is sub-vertical.

Homestake also completed another eight holes in a second round of drilling totaling 3,495 meters at South Reef that was funded by the gold producer to the tune of C$1.8 million.

Agnico-Eagle has an option to spend an additional C$8.5 million by Dec. 31, 2014 to earn a 51 percent interest in the Homestake Ridge project and a total of C$25.3 million by 2016 to earn a 65 percent interest in the project. The gold producer also can arrange 100 percent of capital expenditures needed to fund the project and earn an additional 5 percent for a total 70 percent working interest.

Agnico-Eagle also purchased 2 million common shares of Homestake Resources at C35 cents per share for proceeds of C$700,000, which was added to the junior's working capital.

Aggessive plans for 2013

In 2013, the junior and its new partner plan to spend C$3.5 million to extend the South Reef zone, target new gold up-slope from the Main Homestake deposit and possibly extend both the Main Homestake and Homestake Silver deposits.

Homestake Jan. 17 reported that it has completed a transition to the senior mining company assuming management of the Homestake Ridge project for the 2013 exploration season.

The junior also posted drill results from its second round of drilling at South Reef in 2012, which tested the structure over a 600-meter strike length, as well as drill results at three other targets on the property. Among drilling highlights: A 3.0-meter interval averaging 5.4 g/t gold, 3.2 g/t silver and 0.26 percent copper, including 0.8 meters averaging 14.4 g/t gold, 5.4 g/t silver and 0.42 percent copper from drill hole HR12-242; and 5.8 meters averaging 2.3 g/t gold, 7.4 g/t silver, 0.13 percent copper and 3.0 percent zinc, including 0.6 meters interval averaging 12.2 g/t gold , 22.0 g/t silver, 0.5 percent copper and 21.9 percent zinc from hole HR12-248.

The newly reported holes are offsets to holes previously reported from South Reef during the 2011 and 2012 exploration seasons. Estimated true thickness of the mineralized intervals is generally 70-85 percent of down-hole thickness.

Geological modeling indicates that drilling results in 2012 have increased the size of the high-grade mineralized zone to some 250 meters along strike and 250 meters down dip before ending in, or being offset by, a major fault structure.

Mineralization is open along strike to the northwest, where it projects beyond the extent of previous drilling in the Fox Reef zone. In addition, the modeling has identified several prospective targets to the southeast of the newly defined South Reef deposit.

Mineralization identified in the South Reef deposit has not yet been incorporated into Homestake's most-current mineral resource estimate for the project.

The South Reef deposit occurs along the eastern margin of a strong induced polarization geophysical anomaly that can be traced through much of the central part of the Homestake Ridge property.

High-grade gold-quartz veins occur within broad zones of strongly anomalous gold mineralization (e.g.

75.9 meters averaging 0.5 g/t gold in hole HR12-248) associated with disseminated pyrite and strongly chloritic host rocks that can be traced for the entire 600 meters of the tested strike-length.

Thick intervals of anomalous silver (e.g.

60.0 meters averaging 1.9 g/t silver in HR12-249 and 11.6 meters averaging 16.6 g /t silver in HR12-251) mineralization were identified in several holes that tested to the east of the Vanguard Fault.

These intervals appear to be closely associated with host rocks and styles of mineralization identified in the Homestake Silver deposits, indicating a potential proximity to additional gold/silver deposits or the extension of the Homestake Silver deposit to the southeast on the property.

New horizons at Kinskuch

Homestake, meanwhile, holds an option to acquire a 100 percent interest in the 623-square kilometer (240.5 square miles) Kinskuch project, located adjacent to, and to the southeast of, the Homestake Ridge project.

"Kinskuch covers about 20 times as much ground as Homestake Ridge," said Kizis. "We've barely gotten started at Kinskuch. About 60 percent of the property was covered in 2011 by an airborne geophysical survey."

Homestake reported that diamond drilling along the Illiance River trend on the Kinskuch property during 2011 was successful in intersecting high-grade silver/lead/zinc VMS mineralization in three of four holes.

In early December, the junior said surface soil and rock-chip sampling along the trend in 2012 extended known mineralization in the trend by an additional 750 meters to a 4.5-kilometer (three miles) strike length.

In addition, a second sub-parallel trend of elevated copper and gold anomalies has been identified to the west of the main trend, along a prominent geophysical conductivity anomaly.

The geologic setting is believed to be similar to the historic Dolly Varden VMS mine, the largest historic silver producer in the region.

The Illiance River trend is the first of several high-priority areas identified by Homestake in Kinskuch.

"Some of the best VMS deposits in the world occur within Jurassic-age Hazelton rocks, and include the past-producing Eskay Creek and nearby Dolly Varden deposits," said Homestake Vice President of Exploration Rob Macdonald in the Dec. 6 statement.

"Our drilling demonstrated that (silver-lead-zinc) mineralization occurs at very attractive grades, similar to grades at the Dolly Varden deposits.

Our rock and soil geochemical results, combined with our EM geophysical data, demonstrate that we have an extensive VMS horizon at Illiance River that could host several significant mineral deposits.

We will initially offset our successful prior drill holes because we feel there is a very good likelihood of developing an attractive resource there, but VMS deposits typically form in clusters so other deposits probably exist in this under-explored region."

High-grade precious and base metal assays were reported in samples from several locations along the mineralized trend and extending south of the 2011 drilling. Noteworthy samples include:

Massive sulphide float assaying 3,321 g/t silver, 1.9 g/t gold, 0.8 percent copper, 40.1 percent lead and 22.4 percent zinc (4,341 g/t silver-equivalent) from in the vicinity of previously drill holes HR11-003 and HR11-004;

Strongly elevated silver mineralization in a series of three select chip samples ranging from 14.5 g/t silver to 61.9g/t silver, located 350 meters to the south of the 2011 drilling; and 989 g/t silver, 1.1 percent copper, 0.4 percent lead and 20.3 percent zinc (1,621 g/t silver-equivalent) assay from chip sampling of outcrop located an additional 400 meters to the south.

Homestake said these surface results are similar to those from initial 2011 sampling where subsequent drilling identified a series of sub-vertical mineralized VMS horizons along a 500-meter strike length of the trend. Results from 2011 included a 2.8-meter interval averaging 318 g/t silver, 0.4 g/t gold, 2.2 percent lead and 6.5 percent zinc (552 g/t silver-equivalent) from drill hole KN11-02; and a 3.9-meter interval averaging 268 g/t silver, 0.2 g/t gold, 1.3 percent lead and 6.5 percent zinc (462 g/t silver-equivalent) drill hole KN11-03.

In addition, anomalous copper-gold values in rock and soil samples were identified west of the silver-lead-zinc VMS horizons within a large 1.5 kilometer by 0.5 kilometer EM geophysical anomaly, part of the company's 2011 airborne geophysical survey. Homestake geologists believe this mineralization may be more analogous to the discoveries at Homestake Ridge.

Results from the 2012 sampling include a select-chip sample of heavily disseminated sulphides in outcrop grading 6.4 percent copper; a series of select-chip samples along the new trend ranging from 0.1 percent copper to 0.5 percent copper; and a series of anomalous gold (10 to 115 parts per billion) and copper (60 to 277 parts per million) values in soil samples along the trend.

Mineralization along the entire 4.5-kilometer Illiance River trend remains open in all directions.

Homestake said it will aggressively explore this trend in 2013.

"We're pretty enthusiastic about adding ounces at Kinskuch with two major mining companies trying to produce a mine. It's a pretty low hurdle to become economic when there's a mine and mill already in the district," Kizis added.

 

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