Barkerville Gold Mines’ (BGM-V) share price climbed more than 50% after the company put out a 10.6-million-oz.-gold resource estimate for its Cow Mountain deposit in central B.C., but questions have been raised about the accuracy of the estimate.
The resource estimate in question, compiled by Geoex president Peter George, establishes 62.6 million indicated tonnes grading 5.28 grams gold per tonne using a 0.86-gram lower cut-off grade.
On the day Barkerville released the news, its share price almost doubled at one point, climbing 79¢ to a high of $1.60 before closing up 40¢, or 49% at $1.21 with 7.2 million shares traded.
On July 3, the second day of trading following the news, the company’s share price again spiked as high as $1.67 before enthusiasm waned and shares closed up a penny at $1.22, with 11.3 million shares traded.
The new resource follows up on a 2006 estimate on the project by G. H. Giroux of Giroux Consultants that estimated Cow Mountain contained 6 million indicated tonnes grading 2.23 grams gold for 431,000 oz. gold, plus an inferred resource of 1.5 million tonnes grading 1.85 grams gold for a further 91,000 oz. gold, all using a 0.68-gram gold cut-off.
The huge jump in tonnage and grade has raised some suspicions.
“It can’t go from half a million oz. at half the grade to 10 million oz. at twice the grade, you can’t do that. It doesn’t happen in reality,” geologist and analyst Brent Cook says in an interview. Cook adds that his initial reaction to the news was disbelief.
“It got me to pull out my copy of ‘Gold Today, Gone Tomorrow,’” Cook says, referencing The Northern Miner’s book about the Bre-X Minerals scandal.
Quinton Hennigh, writing for Cook’s Exploration Insights newsletter, raises numerous questions about the estimate. To give a visualization of what the deposit would look like, he writes:
“It is an order of magnitude richer per cubic metre than the Timmins camp in Ontario. To support such a resource, the 1,000-by-300-by-300-metre block of ground at Barkerville’s Cow Mountain would have to host 39 km of motherlode-type veins at a density of one 2-metre-wide vein spaced every 8 metres. This assumes each and every vein is consistently grading 5.28 grams per tonne gold along a 300-metre strike and 300-metre depth.”
Along with scratching his head at the incredible “quantum leap in size and grade” of the resource compared with the previous one, Hennigh points to other factors that may cause one to press the “pause” button: the whole resource qualifying as indicated category with no inferred; a single drill hole in a 30-metre horizontal by 15-metre vertical ellipse qualifying the block as “ore”; the company employing “extreme grade smearing”; and paucity of data that the company released overall.
The 2006 resource, for instance, was based on 366 diamond and percussion drill holes completed between 1980 and 1998, and the company looks to have drilled 238 drill holes between 2007 and 2011. But Barkerville states that 2,638 drill holes have been drilled on Cow Mountain totalling 145,600 metres of drilling, without providing the source of all those drill holes and the assay results.
Looking beyond the Cow Mountain resource, the Geoex study took the unusual step of putting out the “geological potential” of the 6.4-km-long trend on which Cow Mountain falls. Based on 10% of the company’s tenure, including the Cow Mountain, Island Mountain and Barkerville Mountain areas, the Geoex report states there could be between 367 million tonnes and 621 million tonnes grading 4.11 grams gold to 5.49 grams gold. This means the company could be sitting on between 65 million and 90 million oz. gold.
“It’s impossible, period,” Cook says about the 90-million-oz. figure. Even for the Cow Mountain resource itself, Cook points out the challenge of achieving such high numbers. “This is a narrow, high-grade vein district. From the cross-sections we’ve seen, you have a real hard time connecting the veins. Continuity is a problem there.”
Geologically the project is underlain by the Barkerville terrane, which is part of the Omineca belt of the Canadian Cordillera. Barkerville reports that gold mineralization occurs in quartz veins in shear- and tension-type fractures, in lithologies more brittle than surrounding lithologies, and as disseminated sulphide zones located in the nose of secondary local fold structures that have the same northwesterly plunge as the regional, orogeny-related, asymmetrical, overturned and isoclinal fold structures.
Peter George has been rebuked before for holding an overly optimistic resource estimate, with the British Columbia Securities Commission forcing Rubicon Minerals (RMX-T, RBY-X) in March 2011 to restate an estimate prepared by George.
Following the well-publicized skepticism of the Barkerville resource, the company’s share price slipped to as low as 90¢ on July 11.