VANCOUVER — Explorer Otis Gold (TSXV: OOO; US-OTC: OGLDF) has closed a $5-million investment from Canadian gold producer Agnico Eagle Mines (TSX: AEM; NYSE: AEM) on the back of exploration success at the junior’s wholly owned, royalty-free Kilgore gold property, 50 km northeast of the town of Dubois, Idaho.
Otis plans to spend the money advancing Kilgore toward a preliminary economic assessment (PEA) later this year.
The Kilgore property saw $8 million in expenditures through the late 1990s, including nearly 40,000 metres of drilling. The property hosts a National Instrument 43-101 compliant resource of 27.3 million indicated tonnes grading 0.59 gram gold per tonne for 520,000 contained oz., and 20.2 million inferred tonnes of 0.46 gram gold for 300,000 contained oz. gold.
Otis describes the volcanic-hosted epithermal gold deposit as related to a “zoned epithermal hot spring system in volcanic rocks of Miocene age. Mineralization is hosted within sericitized, silicified and quartz stockwork-veined lithic tuff, dyke and silicified clastic sedimentary rocks.
Otis acquired its interest in the property in 2008, but picked up its work pace over the past 12 months after finding a “new class of mineralization” within the Tertiary sill and Cretaceous Aspen formation that underlie the existing resources.
“Last year was a fantastic year for us on the heels of a small but successful drill program in an area we call ‘Crab Claw.’ We were up at the northern end of the Kilgore deposit and hit strong gold intercepts, which got things going for us,” president Craig Lindsay says during a phone interview.
“All those drill holes ended in mineralization in the Aspen sandstone formation. Everybody who had explored the property previously hadn’t paid much attention to Aspen because it’s underneath the main lithic unit and the heap-leach metallurgy isn’t quite as good, because it’s less oxidized than the lithic tuff,” he adds.
Otis hopes that the new 460-metre long by 120-metre wide Aspen corridor can increase the size and grade of the Kilgore resource.
The company completed a 43-hole, 10,000-metre drill program at the target in 2016, with highlights including: 30.5 metres grading 5.37 grams gold from 96 metres deep in hole 315; 120 metres of 1.55 grams gold from 93 metres deep in hole 318; 128 metres averaging 1.8 grams gold from 164 metres deep in hole 353; and 85 metres of 2.5 grams gold from 46 metres deep in hole 338.
Otis suspects the Aspen formation sediment-hosted gold mineralization that sits on the edge of the Kilgore volcanic caldera complex, is similar to the setting at Kinross Gold’s Round Mountain mine on the edge of another volcanic caldera complex in Nye County, Nevada.
“The interest in our story started picking up steam early last year after the original results from Crab Claw,” Lindsay says. “Then we began releasing assays from our 2016 program in September and things continued to heat up. There are definitely gold producers out there looking for opportunities in the U.S., and we’ve certainly seen a much higher level of interest in the past 12 months from strategic investors.”
That interest culminated in Agnico’s private placement in February, wherein the major acquired 14.4 million shares at 35¢ each. Agnico now holds a 9.95% interest in Otis and has a right to participate in future financings to keep its stake.
“Agnico’s Reno team are a top-notch exploration group and spent a lot of time on due diligence at Kilgore,” Lindsay says. “We have a really good relationship with them, and we hope to lean on them for advice and technical guidance. It’s the potential in the Aspen discovery that brought Agnico to the table, but we’ve also always talked about property-wide targets that have the same geologic signature we see at the Kilgore deposit.”
Otis has $5.6 million in its treasury and plans to spend the next four months finishing a resource update at Kilgore.
The company will then start a ground magnetic and soil sampling program, which may be followed by another 10,000-metre drill campaign.
Lindsay says most drilling will focus on the main Kilgore deposit to underpin a maiden PEA, though the company will also complete a first-pass program at the Goldridge target.
Otis has traded in a 52-week range of 12¢ to 42¢, and closed at 30¢ per share at press time. The company has 130.5 million shares outstanding for a $39.2-million market capitalization.