Loki goes it alone at Brewery Creek

Junior Loki Gold (VSE) continues to work towards a Jan. 1, 1994, deadline for deciding whether it will initiate a feasibility study for its Brewery Creek gold project, 57 km east of Dawson City, Y.T.

Pre-feasibility work is progressing on the site, supplementing an earlier scoping study carried out by Cominco Engineering.

Rupert Allen, project manager, says phase one of the pre-feasibility work, which started in mid-August and is expected to be complete by the end of September, consists of 5,000 metres of reverse circulation drilling. By Aug. 26, 850 metres had been drilled of “mainly shallow holes,” says Allen, explaining that “this exploration is focused on the oxide portion of the deposit.”

The property contains both oxide and sulphide reserves; the oxide portion is being targeted first for heap leaching. The sulphide reserves are not heap-leachable and are therefore targeted for exploration work later in 1994. The Brewery Creek deposit consists of nine zones over a strike length of 12 km. Allen says work on all nine zones (some are south-dipping on the north side, making them suitable for an open-pit operation) is designed to define the outer limits of each zone.

No information is available on which zones show the greatest potential as yet, although “already we have some samples in the lab,” Allen says. Once more drill results from the extension drilling are known, the project manager says all the nine zones will be graded in terms of priority. Allen says the results will be available for an executive meeting this month aimed at making recommendations regarding the priority of the zones to be worked first. The drill program differs in each zone as some of the current work is repetitive, some is down-dip extension and some is looking at strike extension, says Allen.

The second phase of the program will look at completing the company’s environmental baseline study. “That won’t be finished until the end of October,” Allen says. “We also intend to start infill drilling, and geotechnical work will start at the beginning of October.”

The programs are expected to overlap, and some geotechnical work may not be finished until early November. A socio-economic impact study will also be carried out at this time.

Allen says one of the socio-economic impacts of the proposed mine is that it is a “drive-in, drive-out” operation from Dawson City. If the mine proceeds, there will be a significant impact on the small community where services are already stretched.

“There are no available school facilities, no extra housing, and aside from the tourism sector which has been slow this year, most businesses are running near capacity. So even a small operation like ours will have quite an impact,” says Allen, adding that the mine hopes to give the local and area governments enough lead time to prepare to deal with the increased activity which will result.

Loki Gold is anticipating that data obtained from the first and second phases of the work will lead to a feasibility study announcement, slated for the new year. Phase three of the project, to start in early 1994, will include more geotechnical and detailed engineering, and will look at providing detailed engineering for any deficiencies that were noted in the prefeasibility stage. Also, says Allen, there will be ongoing work on the sulphide reserves. The budget allocation for the work this fiscal year (ending March, 1994) is $1.7 million, which includes the cost of the feasibility study. Allen says the company is taking a different philosophical view than that of project partner Hemlo Gold Mines (TSE), and is moving faster on the permitting stage.

Allen says he hopes to have the permit applications to the Department of Indian and Northern Affairs (the claim is adjacent to Dawson First Nation land-claim area), the federal government and Yukon territory government shortly.

“I’m really sticking my neck out, but I’m hoping to be permitted by October of 1994,” says Allen.

Robert Evans, Loki’s secretary-treasurer, says the company has now received regulatory approval to enter into a private placement with Solomon Resources (VSE) consisting of 1.8 million units (share and warrants) at $1.10 per unit. The proceeds will be used to close the purchase of 51% of the Brewery Creek project from Hemlo Gold, and for general working capital.

The terms of the acquisition agreement reached June 25 of this year require Loki to deliver to Hemlo two million shares of Loki, and $2 million within 90 days. Also, Loki will pay a royalty to Hemlo on the first 300,000 oz. of gold. Loki will also assume responsibility for the 5% net profits interest payable to a third party (Vancouver-based Energold Minerals), which will give Loki 100% of the Brewery Creek property.

— The author is a freelance writer who resides in Vancouver.