The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Royal Gold agrees to invest up to $30M to earn 40 percent interest in JV focused on advancing East Interior roadside gold project
Royal Gold and Contango Ore have forged an alliance that promises to invest as much as US$30 million in furthering the exploration and potential development of the Tetlin gold properties situated along the Alaska Highway near the crossroads community of Tok in eastern Alaska.
Contango Ore shareholders ratified a joint venture agreement Jan. 8 that the Denver-based gold royalty firm and Houston-domiciled mineral exploration company struck tentatively on the project in September.
Thus Peak Gold, the newly created limited liability JV, will hold the extensive package of gold-rich properties in eastern Alaska that Contango Ore brings to the partnership, and the venture will be co-managed by representatives of both companies.
Royal Gold has the opportunity to earn up to 40 percent interest in the JV by investing US$30 million in the Tetlin properties by October 2018 - an average seasonal investment of about US$7.5 million. To get the ball rolling in 2015, Royal Gold has deposited an initial US$5 million in Peak Gold's bank account.
"We are excited that Royal Gold has agreed to join our effort to expand upon the promising exploration work we have initiated on the Tetlin lease and neighboring claims covering over 750,000 acres," Contango Ore President and CEO Brad Juneau said upon shareholder approval of the joint venture.
At its Peak
Contango Ore's contribution to the JV includes 676,200 acres of Native owned lands leased from the Tetlin Village Council and some 83,720 acres of state of Alaska mining claims adjacent to the Tetlin lease - a package the partners have valued at $45.7 million.
While this extensive land package blankets numerous precious and base metal targets ripe for exploration, the Peak zone, a gold-rich skarn deposit located on the Tetlin lease, is currently considered the property's most promising asset.
Skarn deposits are formed when metal-laden magmatic waters hit reactive rocks, usually carbonates but sometimes shales, causing the metals to quickly drop out. This process often results in formation of high concentrations of these metals.
Such is the case in the Peak zone, which currently boasts indicated resources of 6 million metric tons averaging 3.46 grams-per-metric-ton gold, 11 g/t silver and 0.25 percent copper for 783,115 gold-equivalent ounces. Additionally, the skarn deposit has an inferred resource of 3.9 million metric tons averaging 2.07 g/t gold, 14.28 g/t silver, 0.23 percent copper for 332,969 gold-equivalent ounces.
This 1.2 million ounce gold-equivalent resource, reported by Contango Ore in January 2014, is the result of only a few months of drilling since the 2012 discovery of the Peak zone.
Peak, itself, is ripe for expansion and a 13-square-mile area surrounding the zone is considered a highly prospective area for turning up similar deposits. Farther afield, there are at least 10 targets ranging from early geochemical finds to drill-ready prospects.
Despite past success and future potential, Contango Ore did not enter 2014 with its sights set on realizing this potential alone, opting instead to find a buyer or partner to help unlock the potential offered by the Tetlin properties.
Enter Royal Gold
Though Tetlin hosts one of the most exciting gold discoveries made in Alaska in recent years and shows the potential for further finds, 2014 failed to deliver a seller's market in the mining sector. This resulted in a number of potential buyers lowballing the value of the Peak deposit and giving little or no value to Tetlin's blue-sky potential.
When asked about putting a price on the 12-plus prospects identified on the Tetlin property, Juneau told Mining News in February, "I don't intend to give that away."
Royal Gold's willingness to consider the value of some of these promising outlying prospects, coupled with its mining sector savvy, led Contango Ore to choose the royalty company over other parties interested in Tetlin.
"Royal Gold has demonstrated experience and expertise that will be invaluable in expanding upon our Chief Danny prospect, including the previously announced Peak Zone discovery," Juneau said.
For its part, Royal Gold is ready to hit the ground running in 2015.
"The exploration success CORE has achieved to date is encouraging, and we look forward to providing the resources to continue developing the project in a methodical and success-based manner," said Royal Gold President and CEO Tony Jensen. "Our plans are being formulated for an active exploration program to be conducted this summer."
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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