With 10 rigs active for most of last year and 157,000 metres of drilling, Barkerville Gold Mines (TSXV: BGM) says the program last year at its gold project in British Columbia was one of the biggest drill campaigns in the junior mining space.
The 2017 drilling at the property in the historic Cariboo mining district in southcentral B.C. built on the company’s 56,700-metre drill campaign in 2016, and will form the basis of a resource estimate to be calculated before year-end.
The new resource will be based on a 6 km portion of the project’s 67 km strike length and consist of Island Mountain (including the Shaft Zone and the Valley Zone), Cow Mountain and Mosquito Creek. It will also include the Bonanza Ledge deposit and the BC vein, a structurally controlled gold vein that subvertically crosscuts the replacement ore at Bonanza Ledge.
“The 157,000 metres of resource drilling in 2017 is helping us to work towards putting out a 43-101 resource estimate for a larger-scale project,” the company’s manager of new business and investor relations Jason Kosec says. “We know Barkerville has a tainted and troubled past, so we discredited everything and threw it all out.”
Kosec is referring to a 2012 resource estimate completed by previous management that claimed Cow Mountain alone contained 10.6 million oz. gold. That estimate resulted in the British Columbia Securities Commission slapping an 11-month cease-trade order on the company and calling on it to revise the estimate to meet National Instrument 43-101 standards.
The reason it’s taking the company so long to calculate the resource estimate, Kosec says, is that it is doing all the geological modelling in-house. “We have actually gone in and wire-framed 160 vein corridors that will be the base of the new resource,” he says. “We’re just doing proper geological work and going back to the fundamentals, and that means drawing wire frames by hand and then doing them in 3-D. Not many companies do that. Most throw it out to a third party. That being said, we are under watch because of all the dubious resource estimates in the past, so this one will be absolutely bulletproof.”
Barkerville’s plan is to do annual resource updates starting from this year right through 2020, and expects to drill 120,000 metres each year.
This year the company will have nine drills turning, one of which will be dedicated to regional exploration and a 30,000-metre program. Barkerville has developed 130 targets through the belt, 13 of which are drill ready. Of the 13 targets, Barkerville will probably test four in 2018.
The company hopes to finish a feasibility study for the project by 2019 and so far has two years of baseline environmental studies under its belt.
One of Barkerville’s goals in 2018 is to initiate commercial production from its Bonanza Ledge deposit, which will show that the company can mine profitably from underground.
Last year the company completed 470 metres of underground development at Bonanza Ledge, which was mined as an open pit between March 2014 and April 2015, and produced 91,234 tonnes of 8.66 grams gold per tonne for 24,000 oz. gold.
“We re-engineered it to go underground,” Kosec says. “The strip ratio for the second phase of the pit was just way too high. It was going to add a lot more of a surface disturbance and increase our bonding requirements and the overall impact, and the economics weren’t there to do it.” In addition, he says, permitting an open-pit mine in B.C. can take as long as a decade.
Bonanza Ledge has been re-permitted as an underground mine, moving from 74,000 tonnes under the Small Mines Act to 150,000 tonnes under the Regular Mines Act. Last year the company milled 7,000 tonnes from the deposit and poured 1,280 oz. gold. The company says it will start building a development drive and exploration decline in mid-2018.
Bonanza Ledge has a mine life estimated at three and a half years, based on an updated and geologically constrained resource estimate that was completed in April 2017 and includes the BC Vein. That resource delineated 684,900 measured and indicated tonnes grading 7.21 grams gold per tonne and 108,100 inferred tonnes of 5.34 grams gold.
The new resource that will be released later this year won’t increase the Bonanza Ledge and BC Vein estimate much, Kosec says. But the company can use Bonanza Ledge as a test mine to get a better understanding of the mechanics and ground support and to generate cash — $10 million in after-tax cash flow each year — to offset its exploration costs.
It will also train the local workforce, he says, as the area appears to have a shortage of experienced underground miners because many of them, he says, are working for Pretium Resources’ (TSX: PVG; NYSE: PVG) Brucejack gold mine.
In the meantime, Barkerville continues to release promising drill results. On Jan. 9, the company reported results from its Island Mountain asset and its Shaft Zone, where five rigs are operating. Hole 196 intersected 16.38 grams gold per tonne over 5.8 metres at a vertical depth of 380 metres below surface. Hole 202 cut 29.20 grams gold over 5.6 metres at a vertical depth of 85 metres from surface.
Drill results from the Shaft Zone released in November included hole 191, which intersected three vein systems grading 19.16 grams gold over 9.7 metres, 13.48 grams gold over 16.6 metres and 14.69 grams gold over 28.5 metres, at vertical depths ranging from 485 to 540 metres below surface.
Kosec notes that the company went back to fundamentals to understand the metal genesis of the area, put together a geological model by systematic exploration work, re-logged 56,000 metres of core and mapped underground.
“Drill success went from one in 10 holes in 2016 to basically that every hole hits now,” Kosec says, adding that the veins at Barkerville are mesothermal and have great depth extent.
“They’re very similar to what you see in the Abitibi, but obviously a lot younger,” he says. “Every 1 million oz. indicated resource will cost $25 million in drilling. Some people say they can do it cheaper in a vein-hosted system, but I think they’re lying. That’s the kind of cost it is.”
Fortunately, the company has a strong shareholder and institutional base, he says, including MMG (4%), Sentry (3%), JP Morgan (2%), Tocqueville (2%) and RBC (1%). Osisko Gold Royalties (TSX: OR; NYSE: OR) and Osisko Mining (TSX: OSK) own 33% and 16%, while board and management hold 3%.
“Internally we call ourselves ‘Osisko West,’” Kosec says, adding that the only reason why the company didn’t change its name is because ‘Barkerville’ has historic significance in the province.
Barkerville has attracted interest and investment since the famed Cariboo Gold Rush of 1861. Based on historic estimates, gold production in the Cariboo area totalled 3.2 million oz. from alluvial production and 1.3 million oz. from lode mines. The Aurum mine (now Island Mountain), was one of Newmont Mining’s (NYSE: NEM) first mines and JP Morgan’s first mine finance, Kosec says. (Newmont owned the mine from 1934 until 1967.)
Indeed, Barkerville “was one of the main reasons B.C. joined Canada,” Kosec says, “because with all the miners that came to B.C. from California in the 1860s, B.C. was afraid of getting annexed to the U.S., so they joined Canada, and that’s one of the reasons why we didn’t change the name.”
Barkerville operates in the town of Wells, 78 km from Quesnel, and as the crow flies, 440 km northeast of Vancouver.