Some gold deposits are like old soldiers — they don’t actually die but just fade away] This was certainly the case with the Consolidated Cinola deposit in the Queen Charlotte Islands which until recently was almost forgotten because of low gold prices. An Australian company has taken over the project with the intention of developing what could eventually become British Columbia’s largest primary gold producer.
Times change and so do metal prices and sometimes it’s cheaper to buy reserves in the ground then incur the cost and risk of exploring for them your self. That was one of the reasons why City Resources (Asia), bought a controlling interest in Cinola and its 2.4-million-oz Queen Charlotte gold deposit.
The company’s objective is to develop a major gold mining operation there with mine development beginning in the summer of 1988. City Resources holds a 15% interest in Elders Resources, a large Australian natural resource conglomerate. It in turn has an 8% interest in City’s parent.
The Cinola deal involves the issue of 2.5 million Cinola common shares to City Resources at $3.02 per share; that transaction provides Cinola with $7.5 million in new capital and a maximum of $8.1 million through the exercise of the attached warrants. Cinola President Reno Calabrigo says the funds will be used to retire our obligation to Energy Resources Group,” allowing Cinola to attain a 100% interest in the project. City Resources could ultimately control 44% of Cinola for $16 million.
City is part of an Australian group which has actively been involved in gold exploration and development throughout the Pacific Rim, says Mr Calabrigo. The company’s chief executive officer, John Bailey, will be taking on a similar position with Cinola and will reside in Canada. Mr Bailey told The Northern Miner that the City Resources group is involved in more than 90 mineral exploration projects and Cinola will also add another three reasonably advanced” properties to the list.
Why is the company interested in Canada when so many others are looking south, particularly to Australia? He says the Cinola deposit is similar to many classic epithermal gold deposits in the South Pacific. The company actually got started by looking for such deposits in Papua New Guinea and now claims to be the largest explorer in that country. It recently agreed to buy out Exxon’s position in a major exploration project there.
To get things moving on Cinola another 30,000 ft of drilling is planned for the Cinola deposit within the proposed pit boundaries and slightly outside. The angled holes are designed to increase confidence in the grade and tonnage of the deposit which now totals about 40 million tonnes at 0.06 oz gold. A bulk sample will be taken from the underground and more metallurgical test work completed. Past work has indicated recoveries of just over 80% for a grade of 0.05 oz but Mr Bailey claims the metallurgy has been refined somewhat since then, suggesting recoveries could be appreciably higher. He feels it’s an economically viable situation at today’s prices and admits he is very happy with the bottom line.”
The economics look particularly good in the early years of production with the grade averaging 0.1 oz gold and the strip ratio about 0.75 to one (waste to ore). The company is looking initially at a 6,000-7,000- ton-per-day mill rate and only a small amount of pre-production stripping would be required. Final capital costs will depend on what type of recovery process it chooses but Mr Bailey says it won’t be more than $90 million and that would be for a 16,000-ton-per-day operation. Energy Reserves, which used to be Cinola’s joint venture partner, will retain a small royalty interest in the project based on gold prices.