VANCOUVER — Drilling at Banks Island Gold’s (TSXV: BOZ) Yellow Giant high-grade gold project in coastal B.C. is hitting gold along strike and beneath known mineralization, creating potential for a larger resource just as the company prepares to install a pilot plant to produce gold from the project’s veins.
Yellow Giant is on Banks Island on the eastern shore of the Hecate Strait, 110 km south of Prince Rupert.
The property is home to four deposits: Bob in the northwest; Tel 2 km southeast; and Disco and Kim, 2 km east of Tel. Together, these deposits host 78,000 measured and indicated tonnes grading 23 grams gold per tonne and 44 grams silver per tonne, plus 81,000 inferred tonnes averaging 13.7 grams gold and 33 grams silver.
The four deposits lie within
two parallel northwest-striking belts of sedimentary rocks that are cut by three major faults. Gold occurs in steeply dipping massive sulphide veins associated with these faults.
Falconbridge first identified gold at Yellow Giant in the 1970s. Over the next 30 years several companies explored the site, but no one pushed a drill bit deeper than 150 metres. The property was long divided amongst several landowners, which limited exploration until Selkirk Metals unified the land package in 2008.
After Imperial Metals (TSX: III; US-OTC: IPMLF) took over Selkirk, Banks Island signed a deal for Yellow Giant and debuted as a public company in 2011.
First the company focused on validating the historic data and proving up an initial resource. Now Banks Island is focused on the future: the company is probing for gold beneath and along strike from each deposit, while preparing to kick-start a small underground mine and basic processing plant.
But first the drilling. Banks Island’s work started at Kim, where the company just completed 3,300 metres of drilling. The first three holes produced high-grade hits: hole 10 returned 12.4 grams gold and 30 grams silver over 8.7 metres from 93 metres depth; hole 11 cut 8.5 metres grading 7.3 grams gold and 19 grams silver from 104 metres depth; and hole 9 returned 4 metres of 5.4 grams gold and 35 grams silver from 82 metres depth.
Banks Island moved its drill to the Bob zone, where it drilled 15 holes to determine the plunge of the main high-grade shoot and define the limits of mineralization near the planned mine workings. Hole 29 intersected the mineralized shoot 210 metres below surface, the deepest intercept from the zone to date and a hit 125 metres below the current resource. The company believes hole 29 — which returned 5 metres of 2.6 grams gold, 41 grams silver and 0.9% copper — grazed the periphery of the high-grade shoot.
Other drill results from the main Bob zone include 2.4 metres of 11.9 grams gold, 188 grams silver and 2.6% copper from 97 metres down hole 25, and 1.6 metres of 9.8 grams gold, 70 grams silver and 0.4% copper from 83 metres down hole 23.
Banks Island also drilled into mineralization in the Bob zone’s hangingwall, including 29.9 grams gold and 98 grams silver over 0.3 metre from 20 metres down hole 30, followed by 46.2 grams gold and 53 grams silver over 0.4 metre from 78 metres depth.
Banks Island has moved the drill back to the Kim zone, where it will work until moving to the Discovery zone in early August.
In the meantime the company is pushing to commission a small underground mining operation at the project. It’s small enough for the company to bypass a full environmental assessment process, but can still generate revenue and eliminate a nagging back-in right held by Imperial Metals.
“We’re drilling full-time to expand the resource we have now,” Banks Island president and CEO Ben Mossman says in an interview. “We’re about to bring in a dense media plant, which is the first part of the process plant. And we’ll start going underground on at least one of the deposits in the next couple of months.”
The goal is to sequentially develop small, underground mines at Bob, Tel and Disco, and process the mineralized rock through a dense media-separation (DMS) plant. As the name implies, DMS plants sort
material by density. The gold at Yellow Giant is associated with sulphide mineralization, which is heavy and can be separated from the lighter limestone and marble gangue materials.
The DMS plant will produce a gold-sulphide concentrate grading 77 grams gold, as well as a benign stream of reject material that can be used for road cover and construction. The coarse-crushed gravity concentrate will be shipped off-site for further processing, likely to China, where Banks Island is working to seal an off-take agreement.
Early next year Banks Island plans to expand the process plant by adding a ball mill and flotation cell. Both units are small enough to sit atop trailers, eliminating the need for permanent foundations. Once the flotation cell is working the mine will produce tailings, which Banks Island plans to filter press and use as underground backfill.
“You can only make a saleable concentrate from the highest-grade zones using the DMS plant alone,” Mossman says. “Once you bring in a flotation cell, you can mine any of the zones. In addition you make a concentrate with a much higher grade — more like 110 to 120 grams gold — so you’re adding value to your product.”
Mossman explains that the DMS-only operation will essentially be bulk sampling that is processed on-site. Once the mill and flotation cell are added, Yellow Giant will be in commercial production.
The company expects to mine and process 75,000 tonnes of ore a year over 25 months, starting in the next few months. A refurbished DMS plant is already en route to Yellow Giant and should arrive very soon.
Banks Island does not need B.C. Environmental Assessment authorization for Yellow Giant because the company only plans to process 200 tonnes a day. The operation requires a Mines Act permit and an environmental management permit, applications for which Banks Island submitted in January. Mossman says they are completing the final steps of these processes.
To support the operation, Banks Island spent the first few months of the year installing a dock and 35-
person floating barge camp at Yellow Giant, building 6.8 km of road and connecting the camp with all four deposits; prepping the area where the processing plant will be built; and developing mine portals at the Bob, Tel and Disco zones.
The technical report estimated a $6.8-million initial capital cost to get the pilot plant at Yellow Giant into production. Using a gold price of US$1,360 per oz. and an 8% discount rate, the operation carries a net present value of $26.4 million and should generate a 414% internal rate of return.
This return is a big reason Banks Island is pushing to reach production, even on a small scale.
“We’re getting into production because this project has really good grades — it’s not that big yet, but we know we can make money
mining it,” Mossman says. “We want to generate revenue so that we don’t have to keep going back to the market.”
This makes sense, but there is another reason behind the push to production: if Banks Island can get Yellow Giant into commercial production by August 2014, Imperial Metals will lose its right to back in for 51% ownership.
Banks signed on to earn into the project in a 2011 deal with Imperial. In late 2012 Banks Island fulfilled the terms of the ea
rn-in and gained 100% ownership. Imperial had three months to decide whether to exercise its right to back in for a 51% stake by spending 2.5 times the money invested in the site to date by Banks Island.
In February Imperial declined to back in, but the break is not yet clean. Instead, Imperial’s decline suspended its back-in right for 18 months. If Banks Island can get Yellow Giant into commercial production by August 2014, Imperial’s back-in will be extinguished. If the junior does not achieve commercial production by August, Imperial’s back-in will resurface until the project is in production.
Imperial also holds a 2% net smelter return royalty. Another company called Advanced Primary Minerals (TSXV: APD) also holds a 1.5% net smelter return royalty.
News of the latest drill results from Yellow Giant added 2¢ to Banks Island’s share price, bringing it to 55¢. The company has a 52-week share price range of 45¢ to 97¢ and 39 million shares outstanding, and 49 million fully diluted. Directors and officers of the company own 20% of the outstanding count. Seabridge Gold (TSX: SEA; NYSE: SEA) owns 10% and Imperial Metals owns 5%.