Coffee emerges as district-scale project

With nearly five exploration seasons under its belt, Kaminak Gold Corp.'s Coffee Gold Project appears to be on the road to delivering on its potential as an emerging district-scale mining opportunity.

Located in the White Gold district of west-central Yukon Territory, Coffee was optioned by Kaminak in 2009 from Yukon prospector Shawn Ryan. The company has explored the property every year since, and reported discovery of at least 11 gold zones.

Kaminak CEO Eira Thomas said the fine-grained gold mineralization found at Coffee, so far, is proving to be unlike the other gold mines and deposits found in the Tintina Gold Belt, where more than 200 million ounces of gold has been mined.

Thomas, who until recently was exploring for diamonds in northeastern Canada, joined Kaminak in March, replacing President and CEO Rob Carpenter who left the project to pursue personal interests.

"Most projects have porphyry copper-gold mineralization, while Coffee has a structurally controlled hydrothermal gold-only system and is generally much higher grade than the other deposits that we see in the area," she explained at a media briefing in early August.

The Coffee property is generally unglaciated, which means gold found in the area's topsoil likely reflects the presence of mineralization in the underlying bedrock. This characteristic has made in situ soil sampling an especially effective and low-cost exploration tool for Kaminak.

Gold deposits identified, so far, at Coffee indicate that high-grade and extensive oxide mineralization is present in all zones; all zones begin at surface and remain open in all directions; exploration has delivered consistent, repeatable assay results (no nugget effect); the gold is evenly distributed within mineralized zones; the deposits resulted from a structurally late gold mineralizing event; and the gold is hosted in multiple structural trends.

With less than 20 percent of the 60,704-hectare (150,000 acres) property having been systematically grid soil sampled, there are more than 20 kilometers (12.4 miles) of untested soil anomalies on the property that warrant drill testing.

Kaminak geologists acknowledge that they have much more to learn about the growing number and variety of gold zones and deposits they have discovered on the Coffee property.

"The meat and potatoes of it is a metamorphic, orogenic story," said Kaminak Chief Geologist Craig Finnigan, who acknowledges that the company's exploration team has much more to learn about the Coffee property.

"When we see quartz veins cutting across mineralization, for some reason the gold grade kicks up," he said.

Gold mineralization at Supremo "is brittle material in north-south structures with breccias and the breccia seems to carry the grade. The difference between the Latte and Supremo structures is felsic gneiss versus mafic schist," Finnigan continued.

Yet ongoing drilling has revealed that new parallel structures between the T1 and T2 structures at Supremo connect with Latte and in Supremo's T4 and T5 structures, oxidized mineralization extends to a depth of 350 meters.

"Eventually, this will be an area that will be mined for a very long time," predicted Thomas.

To gain greater insight, Kaminak ran a dozen lines of an induced polarization survey on the T structures and down in the gullies between them. But the jury is still out on whether the technique will work at Coffee, Thomas said. "At the moment, magnetics appears to be a better tool for us," she said.

At Americano-Kona, Finnigan said, low-angle, shallow fabric biotite granites have structures where fluids at one time replaced the biotite running through the granites with gold-bearing iron. He said the alteration in Americano is easy to mill and to blast for open-pit purposes.

At Double Double, he said the structures have skinnier but higher grade mineralization.

Reigning in costs

Kaminak wisely invested in infrastructure early in the project to significantly lower its exploration costs and is considering additional cost-saving upgrades.

The company built a permanent camp and barge dock on the banks of the Yukon River to take advantage of a low-cost commercial barge route for transporting its fuel, equipment and bulk supplies from Whitehorse.

This also allows Kaminak to conduct exploration programs from February to freeze up, its officials say.

The project Coffee is surrounded by a network of roads and power lines, and one winter road comes to within 30 kilometers of the property boundary.

While it plans to consider the feasibility of upgrading the winter road to a permanent artery within the next six to 12 months, Kaminak has moved ahead with construction of a 23-kilometer (15 miles) access road on the property that runs from the barge docking site to the main drill site.

Thomas said the $1.2 million road has helped to cut Kaminak's overall per-meter drilling costs from C$500 to C$280. This move also eliminated the need for helicopters to move its drill rigs. Instead the explorer mounted the drill rigs on tracks and moves them via the access road.

"We've been able to get our finding costs down to C$15-C$20 per ounce, which makes us very competitive with other exploration projects around the world," Thomas said.

New gold discoveries

In December Kaminak posted a NI 43-101 inferred mineral resource, totaling of 3.2 million ounces in 64 million metric tons, grading 1.56 grams per metric ton gold at a base case cut-off of 0.5 g/t gold for nearly 2.9 million ounces of gold in oxide and transitional material and a 1 g/t gold cut-off for 337,000 ounces of sulphide material.

The company then charged into 2013 with a C$11 million budget and plans for more exploratory drilling, soil sampling and metallurgical testing at Coffee.

After churning out more than 50,000 meters of drill core since March 1 in an ongoing program, Kaminak reported a new gold discovery in October and boosted its 2013 exploration budget to C$14 million. The company currently has about C$16 million in cash and no debt.

Concentrating on exploration in and around the main cluster of gold deposits at Coffee and scooping up another 5,026 soil samples in a wider-ranging regional program, the company also extended several major zones of mineralization.

The new oxide gold zone, called "Sumatra," is associated with a northeasterly trending gold-in-soil anomaly (>1 kilometer or 0.62 mile in length) and an aeromagnetic lineament (>2 kilometers or 1.24 miles in length) interpreted to connect to the western extension of the Latte Zone and the western edge of the Supremo Zone.

Drilling targeted a 1.2-kilometer (0.8 mile) northeast striking +25 parts-per-billion gold-in-soil anomaly located about a half-kilometer (0.31 mile) north of Latte and west of Supremo, and intersected two separate shallow, oxidized gold-bearing structures over at least 500 meters of mineralized strike.

One structure is northeast-southwest striking parallel with the aeromagnetic lineament, dipping steep to moderate to the northwest. Its highlight drill intercepts to date include 0.99 g/t over 30.48 meters from 135.64 meters depth in CFR0499, which is interpreted to have drilled obliquely down the structure, and 1.54 g/t gold over 16.77 meters from 4.57 meters in CFR0514. Mineralization remains open along strike to the southwest beneath undrilled gold-in-soil anomalies. To the northeast, it merges into the Supremo T1 Zone.

The second structure is east-west striking, dipping steeply to the south.

Its highlight drill intercepts to date include: 15.78g/t gold over 3.05 meters from 1.52 meters depth, 5.26g/t gold over 9.14 meters from 22.86 meters, and 6.78g/t gold over 4.57 meters from 51.82 meters in CFR0513, which is interpreted to have drilled obliquely down the structure; 5.72 g/t over 4 meters from 75 meters depth in CFD0331; and 3.86 g/t gold over 6.09 meters from 132.59 meters.

Mineralization is interpreted to extend over at least 600 meters strike length and remains open along strike to the west beneath the undrilled portion of the gold-in-soil anomaly.

To the east, it intersects with the Supremo T2 Zone.

About half of the 1.2-kilometer (0.8 mile) Sumatra gold-in soil anomaly remains undrilled.

Both structures are open to the west beneath strongly anomalous gold-in-soils, which extend more than 600 meters along trend, and then terminate at a zone of permafrost, which renders soil sampling ineffective.

Interpretation of the magnetic data suggests the underlying bedrock structure continues for an additional 800 meters to the southwest before merging with or intersecting the Latte Structure, and therefore, represents a high-priority exploration target.

"The Sumatra discovery demonstrates continued success in drilling gold-in-soil anomalies on the Coffee property and highlights the prospectivity of more than 25 kilometers of untested, priority gold-in-soil anomalies that remain throughout the property," Thomas said Oct. 10.

Kaminak plans to update its 3.2 million-ounce mineral resource estimate for the Coffee project at year's end.

"We have good visibility to 5 million ounces over Supremo-Latte-Double Double," Thomas observed in August.

1 kilometer or 0.62 mile in length) and an aeromagnetic lineament (>2 kilometers or 1.24 miles in length) interpreted to connect to the western extension of the Latte Zone and the western edge of the Supremo Zone.

Drilling targeted a 1.2-kilometer (0.8 mile) northeast striking +25 parts-per-billion gold-in-soil anomaly located about a half-kilometer (0.31 mile) north of Latte and west of Supremo, and intersected two separate shallow, oxidized gold-bearing structures over at least 500 meters of mineralized strike.

One structure is northeast-southwest striking parallel with the aeromagnetic lineament, dipping steep to moderate to the northwest. Its highlight drill intercepts to date include 0.99 g/t over 30.48 meters from 135.64 meters depth in CFR0499, which is interpreted to have drilled obliquely down the structure, and 1.54 g/t gold over 16.77 meters from 4.57 meters in CFR0514. Mineralization remains open along strike to the southwest beneath undrilled gold-in-soil anomalies. To the northeast, it merges into the Supremo T1 Zone.

The second structure is east-west striking, dipping steeply to the south.

Its highlight drill intercepts to date include: 15.78g/t gold over 3.05 meters from 1.52 meters depth, 5.26g/t gold over 9.14 meters from 22.86 meters, and 6.78g/t gold over 4.57 meters from 51.82 meters in CFR0513, which is interpreted to have drilled obliquely down the structure; 5.72 g/t over 4 meters from 75 meters depth in CFD0331; and 3.86 g/t gold over 6.09 meters from 132.59 meters.

Mineralization is interpreted to extend over at least 600 meters strike length and remains open along strike to the west beneath the undrilled portion of the gold-in-soil anomaly.

To the east, it intersects with the Supremo T2 Zone.

About half of the 1.2-kilometer (0.8 mile) Sumatra gold-in soil anomaly remains undrilled.

Both structures are open to the west beneath strongly anomalous gold-in-soils, which extend more than 600 meters along trend, and then terminate at a zone of permafrost, which renders soil sampling ineffective.

Interpretation of the magnetic data suggests the underlying bedrock structure continues for an additional 800 meters to the southwest before merging with or intersecting the Latte Structure, and therefore, represents a high-priority exploration target.

"The Sumatra discovery demonstrates continued success in drilling gold-in-soil anomalies on the Coffee property and highlights the prospectivity of more than 25 kilometers of untested, priority gold-in-soil anomalies that remain throughout the property," Thomas said Oct. 10.

Kaminak plans to update its 3.2 million-ounce mineral resource estimate for the Coffee project at year's end.

"We have good visibility to 5 million ounces over Supremo-Latte-Double Double," Thomas observed in August.

2 kilometers or 1.24 miles in length) interpreted to connect to the western extension of the Latte Zone and the western edge of the Supremo Zone.

Drilling targeted a 1.2-kilometer (0.8 mile) northeast striking +25 parts-per-billion gold-in-soil anomaly located about a half-kilometer (0.31 mile) north of Latte and west of Supremo, and intersected two separate shallow, oxidized gold-bearing structures over at least 500 meters of mineralized strike.

One structure is northeast-southwest striking parallel with the aeromagnetic lineament, dipping steep to moderate to the northwest. Its highlight drill intercepts to date include 0.99 g/t over 30.48 meters from 135.64 meters depth in CFR0499, which is interpreted to have drilled obliquely down the structure, and 1.54 g/t gold over 16.77 meters from 4.57 meters in CFR0514. Mineralization remains open along strike to the southwest beneath undrilled gold-in-soil anomalies. To the northeast, it merges into the Supremo T1 Zone.

The second structure is east-west striking, dipping steeply to the south.

Its highlight drill intercepts to date include: 15.78g/t gold over 3.05 meters from 1.52 meters depth, 5.26g/t gold over 9.14 meters from 22.86 meters, and 6.78g/t gold over 4.57 meters from 51.82 meters in CFR0513, which is interpreted to have drilled obliquely down the structure; 5.72 g/t over 4 meters from 75 meters depth in CFD0331; and 3.86 g/t gold over 6.09 meters from 132.59 meters.

Mineralization is interpreted to extend over at least 600 meters strike length and remains open along strike to the west beneath the undrilled portion of the gold-in-soil anomaly.

To the east, it intersects with the Supremo T2 Zone.

About half of the 1.2-kilometer (0.8 mile) Sumatra gold-in soil anomaly remains undrilled.

Both structures are open to the west beneath strongly anomalous gold-in-soils, which extend more than 600 meters along trend, and then terminate at a zone of permafrost, which renders soil sampling ineffective.

Interpretation of the magnetic data suggests the underlying bedrock structure continues for an additional 800 meters to the southwest before merging with or intersecting the Latte Structure, and therefore, represents a high-priority exploration target.

"The Sumatra discovery demonstrates continued success in drilling gold-in-soil anomalies on the Coffee property and highlights the prospectivity of more than 25 kilometers of untested, priority gold-in-soil anomalies that remain throughout the property," Thomas said Oct. 10.

Kaminak plans to update its 3.2 million-ounce mineral resource estimate for the Coffee project at year's end.

"We have good visibility to 5 million ounces over Supremo-Latte-Double Double," Thomas observed in August.

Exploration-stage project

Despite its multi-season, early record of gold discoveries, Coffee is still very much an exploration-stage project.

"We're not at the point where we're trying to drill out the project to get indicated resources," Thomas said.

The company focused the 2013 program, instead, on systematically drilling out the known deposits and stepping out to the west toward Kona, which is located six kilometers (3.74 miles) from the Latte-Supremo-Double Double cluster of deposits.

"Ninety percent of the time, when we get a soil anomaly, we get mineralization in the bedrock," Thomas said. "We've got close to 10 kilometers of mineralization, and now we believe it's all one deposit. We haven't limited it in any way. It's open along strike in every direction and to depth."

The 2013 exploration program has yielded a string of results reported in April, June and August in which drilling successfully identified more oxidized gold-bearing structures within the Supremo-Latte-Double Double area and discovery of a Connector Zone at the intersection of Supremo and Latte. The drilling has extended known zones of mineralization along strike, across strike and to depth.

Among recent highlights of the work:

Supremo 'T' Structures: Drilling continued to successfully extend additional, near-surface oxide gold mineralization in the 'T' structures. The results include 3.53 g/t gold over 18.28 meters from 158.50 meters downhole in T2; 9.84 g/t gold over 6.10 meters from 134.11 meters in T5; 8.68 g/t gold over 4.57 meters from 35.05 meters in T3; 2.06 g/t gold over 6.10 meters from 68.58 meters in T7; and 2.69 g/t gold over 44 meters from 6 meters in T1.5 (drilled obliquely down-dip).

Supremo-Latte Connector: Multiple oxide gold-bearing structures intersected within this complex fracture zone marking the intersection point between the Supremo and Latte mineralized structures. The results include 5.67 g/t gold over 16 meters from 95 meters.

Latte: Step-out drilling west along strike beyond the existing Latte zone extended the Latte mineralized structure for an additional 300 meters. The total strike length of Latte is now in excess of 2 kilometers (1.24 miles) and still open. The results include 2.91 g/t gold over 6 meters from 95 meters.

"Kaminak is nearing the end of a well-executed, successful drilling campaign that has focused on delineating near-surface oxide gold mineralization in the Supremo-Latte-Double Double areas at Coffee in support of our first preliminary economic analysis, set to commence in early 2014," Thomas said. "While we have yet to define the limits of this extensive, structurally controlled, hydrothermal gold system … drilling this year has so far demonstrated good continuity and connectivity between the deposits."

Heap leach opportunity

Early metallurgical testing of mineralization at Coffee indicated that it is very conducive to leaching because of the gold is so fine.

"Mother Nature has done our work for us. The gold at Coffee is in every type of host rock but it's the same system and the same type of gold," Finnigan said.

A composite oxide sample from the Supremo and Latte deposits yielded gold recoveries of 90.4 percent in 80 days, including 83.2 percent gold recovery in just 15 days.

Thomas said in August that most of the oxide material at Coffee will leach "very, very well, and we even have confidence in the transitional material. We'll have a look at that rock later, but it's heavily oxidized as well."

The 3.2 million-oz resource includes some 1.5 million oz of oxide facies mineralization and a further 1.4 million oz of transitional facies mineralization. Transitional facies has been conservatively defined as mineralized drill intercepts containing greater than 5 percent fresh, un-oxidized rock.

Kaminak conducted a more comprehensive metallurgical testing program in 2013 aimed at confirming the leachable characteristics of the ore body laterally and to depth in the transitional mineralization.

"That will give us a good sense of how much of this material that we can put on a leach pad. Of course, the more we can put on a leach pad, the cheaper our cap-ex costs," Thomas said.

The primary objectives of the 2013 program, announced Sept. 19, are to test the potential for heap leach processing of oxide and transitional facies at Supremo and Latte at variable crush sizes (0.5", 1.0" and 6") and to establish representative gold recovery rates from cyanide leaching for oxide, transitional and sulphide facies mineralization at various depth profiles in Supremo, Latte and Double Double.

Kaminak said the results of the program will form an integral component of its upcoming Coffee Gold Project Preliminary Economic Assessment, scheduled to commence in the first quarter of 2014.

The company also reported that Fred H. Lightner, a highly respected metallurgical engineer specializing in heap leach design and operations, has agreed to act exclusively for Kaminak as an advisor, responsible for designing and overseeing the 2013 metallurgical program and the PEA.

The potential for using heap leach as a primary, low cost gold recovery method at Coffee is a tangible opportunity that would significantly de-risk the Coffee Project in the short-term," Thomas said Sept. 19.

She also observed that heap leach is not new to the North, citing the large and successful heap leach operation at Kinross Gold Corp's Fort Knox Mine near Fairbanks, which has been in production since 2009, and Victoria Gold Corp.'s 4.2 million-oz Eagle Deposit located 215 kilometers (133 miles) to the northeast of Coffee, which was recently permitted for 200,000-oz-per-year heap leach operation. Victoria aims to bring its Eagle Gold Project into production in 2016.

Assessing mining potential

When compared with other undeveloped gold properties, which are becoming increasingly rare around the globe, Coffee is very competitive, Thomas observed.

According to NRH Research figures, of 189 producing gold mines worldwide, the average grade in 2012 was 1.06 g/t gold, while the average grade was 0.66 g/t gold among the 250 undeveloped gold deposits worldwide, Kaminak said.

By comparison, the average grade at Coffee is 1.56 g/t gold.

Going forward, however, Kaminak is focused on another big advantage of the Coffee property, and that is the large amount of high-grade material within its global mineral resource.

"We believe this represents an early stage mining opportunity where we can keep our capital low and focus on a quick payback, and we can look to scale the project over time," Thomas said.

Kaminak has identified an area where the company "can start looking at strip ratios and start to seek what an economic mining opportunity might look like here. That's the direction we are focused on now," she continued.

"That's really important in the current economic climate where raising capital is difficult," she added.