Canadian Mining Journal


Yukon’s future

Two mine developers, William Sherriff, Chairman and CEO of Golden Predator Corp and John McConnell, President and CEO of Victoria Gold are working to bring Yukon’s next gold mines into production.

Two mine developers, William Sherriff, Chairman and CEO of Golden Predator Corp and John McConnell, President and CEO of Victoria Gold are working to bring Yukon’s next gold mines into production.

Golden Predator’s mandate is to be the next gold mine in the Yukon and is focused on cash flow through production and royalties. First into production will be their 181 km2 Brewery Creek project located outside of Dawson City. Brewery Creek is a former open pit heap leach mine that was operated from 1996 until 2002, under Viceroy. It produced 278,000 ounces until low gold prices forced a closure of the mine leaving unmined ounces and an unfinished mining plan ready for a restart.

The Brewery Creek project was a successful sub arctic heap leach operation which was reclaimed to high standards with some infrastructure left for a future operator. To further this, Golden Predator recently announced it secured a $35 million line of credit to fund its acquisition of 100% of the project and to help fund the mine development and capital costs. With funding in place the Company is focused on construction in 2013, and initial production in 2014, subject to license amendments. Initial production from Brewery Creek is projected to be at a production rate of 7,000 tpd mined on a seasonal basis meaning initial production of 30,000 to 40,000 ounces per annum.

The project has both a Quartz Mining License and Water License, both subject to amendment and in 2012 the Company updated its Socio Economic Accord with the Tr’ondek Hwech’in First Nation. Engineering studies are in progress as a first step to finish the original mine plan and mine ore from a series of open pits. Processing will use a traditional heap leaching process.

In 2012, Golden Predator drilled 32,000 meters with the goal of expanding and upgrading current oxide resources, and completing metallurgical testing and geotechnical evaluation. 2011 discoveries including the Classic, Sleeman and Schooner Zones along with the 2012 Lone Star Zone adding further upside for the project’s long term potential.

Brewery Creek hosts a NI 43-101 compliant mineral resource estimate of 13.9 million tonnes in the Indicated category grading 0.70 g/t of gold (or 313,000 ounces) and 7.3 million tonnes in the Inferred category grading 0.47 g/t of gold (or 111,000 ounces). In addition, there are sulphide resources of 6.4 million tonnes in the Indicated category grading 1.29 g/t of gold and sulphide resources of 5.6 million tonnes in the Inferred category grading 1.29 g/t of gold. An updated resource estimate is planned for Q1, 2013.

The small scale start up is just a beginning for the new Brewery Creek and a way to generate cash flow to expand production without significant equity financings. Equally important to the Golden Predator business model for internal cash flow is a Nevada-based royalty portfolio. Golden Predator Corp. controls a royalty package of 32 North America properties including several deeded royalties totaling over 100,000 acres in Nevada, Wyoming, Oregon and Mexico including Midway Gold Corp.’s Pan and Gold Rock deposits and portions of Barrick’s Bald Mountain project. These properties are predominantly leased out to mineral production, development and exploration companies to provide royalty revenue to Golden Predator Corp.

In 2012, the royalty packages generated $799,762 in revenue with the bulk of the current revenue due annually each January. Subsequent royalty revenue is anticipated to experience acceleration as early as 2014 as several of these projects begin to advance. Golden Predator Corp.’s royalty portfolio remains unique in the mineral development industry which allow it further internal revenue to expand Brewery Creek’s production and potential.

Victoria Gold’s project has a long history dating back to 1895, when placer gold mining was done in Dublin Gulch of the Eagle project near Mayo, Yukon. From 1916, until 1977, there was exploration work for gold and tungsten until discovery of the Eagle Gold deposit was made in 1977.

In March 2011, Victoria announced a new  NI 43-101 mineral resource estimate containing  222 million tonnes of Indicated resource grading 0.68 g/t of gold (4.8 million ounces) and 77 million tonnes of Inferred Resources grading 0.59 g/t(1.5 million ounces).

An NI 43-101 Feasibility Study was announced  Feb  2012, which demonstrated a Probable Reserve of  91.6 million tonnes, grading 0.78 g/t of gold (2.3 million ounces). The initial capital cost of $383 million would produce 192,000 ounces gold per year over life of mine at an estimated operating cost of $USD 614 per ounce.

The project would have IRR of 24% at $USD 1,325 per ounce gold.

Victoria Gold has completed this year, drilling of 17,878 m, in 59 holes as of July 30, 2012.  

McConnell points out the largest shareholder, Kinross Gold with 16% of Victoria shares, has provided access to operating data from Fort Knox, a very large low grade heap leach operation in Alaska that would have similar operating conditions.

Rothschild, a leading global financial advisor acting for Victoria,  have determined that of the total $430 million funding required to build  Eagle Gold , conventional project finance could be obtained for about $225 million with a possibility of obtaining more.

An additional $40 million financing for mobile equipment could be available.  With approximately $60 million in working capital and and receivables, the remaining $105 million will have to be provided by royalty financing, forward gold sales, alternative debt or a joint venture partner.

McConnell hopes to have financing in place shortly, with permits in place in the spring of 2013. Victoria Gold has made an unusual decision for a junior mine developer by hiring its own environmental team with specialized experience working with a well-known consulting firm.  This is expected to result in a smoother and faster permitting process.   Construction is expected to take about 18 months, with full production possible starting in 2015.

With a firm foundation in mining and exploration, Yukon’s mining industry is poised to grow.