Should Gold Mining Investors Consider Kilgore Minerals?
May 14, 2018
We wrote about Kilgore Minerals this past winter, because it holds prospective U.S. uranium properties. While studying the company, it became evident the companyís uranium would take a backseat to the companyís gold property in southern Idaho. We reviewed Robert Bishopís commentary in his self-published Gold Mining Stock Report. Mr. Bishop is highly regarded as an astute junior gold stock picker, and his analysis is quite thorough. There is little doubt Bishop holds high esteem for Kilgore Mineralsí Chief Executive Norman Burmeister.
More importantly, the very successful Pinetree Capital (Toronto: PNP) has made a significant investment in Kilgore. Respectively, the Chief Executive and CFO, Sheldon Inwentash and Larry Goldberg, of both Pinetree Capital and heavily touted Mega Uranium (TSX: MGA), have personally invested in Kilgore Minerals. A recent Forbes magazine article took a swipe at both Mega Uranium and Pinetree Capital. Actually, it was more of a head butt. Pinetree Capital is back to trading above C$17/share, up from a year ago when it traded for less than $3/share. So the Forbes article was a non-event for Pinetree Capital. And their holdings in Kilgore Minerals, which reportedly are estimated at between 10 and 20 percent of the company, were passed by without notice.
Kilgoreís Idaho gold property has been explored since the 1930ís, when a gold discovery was made by the Blue Ledge Co. Nearly 50 claims were staked in 1982 and leased to a Kennecott subsidiary in the mid 1980s. Seven holes were drilled. By 1990, Placer Dome acquired the property and drilled 39 holes, more than 21,000 feet of drilling. A Pegasus joint venture drilled another 23 holes, nearly 10,000 feet of drilling, by 1994. Echo Bay earned majority interest in the property, by 1996, after having spent $3.5 million drilling 122 holes for more than 82,000 feet. In 1997, with the falling price of gold and troubles in the mining sector brought on by the Indonesia stock fraud, Bre-X Minerals, Echo Bay dropped its exploration ambitions on Kilgore ñ and shelved all of its exploration projects. In 1998, Latitude Minerals continued a modest exploration of a little more than 4,000 feet.
Near the bottom of the gold bear market, Kilgore Gold (a wholly owned subsidiary of Kilgore Minerals) acquired 100 percent ownership of the property. A new round of preliminary exploration identified new gold targets. By 2004, Kilgore Gold expanded the companyís property holdings to 3,000 acres. Has this property been drilled like Swiss cheese or does Norman Burmeister know what he is doing? Itís had nearly 200 diamond and reverse circulation drill holes, totaling more than 126,000 feet of drilling.
In an earlier interview with Burmeister, he told us, ìIím very excited about this project. It was a property that was very high on Echo Bayís list.î Major companies have expended more than $8 million to define a modest, and possibly economic, resource. At least three different entities have established resource estimates on the Kilgore gold property. In 1996, Placer Dome reported 14.1 million tons, grading 0.04 ounces/ton and with a cut-off grade of 0.015, for a deposit of 561,000 ounces of gold. A year later, Echo Bay released a sectional estimate report showing 18.7 million tons, grading 0.029, for a total of 534,959 ounces of gold.
However, the only resource estimate approved by Canadian regulators (Kilgore trades on the Toronto Venture Exchange) is the Van Brunt/Rayner Technical Report, filed in October 2002, and which is compliant with National Instrument 43-101 (NI 43-101). This report showed about 7 million tons trading 0.031, with a 0.01 cut-off grade, for an indicated resource of 218,000 ounces of gold. The report showed an inferred resource, adding another 269,000 ounces of gold. This is close enough to the Placer Dome and Echo Bay estimates, but it is unlikely to be mineable unless Kilgore finds more gold.
During the 2004 drilling program, Norm Burmeister got the sniff of what might make this an attractive acquisition by a major gold company. ìWe are looking for a high grade feeder system,î Burmeister told us. In the previous drilling program, Burmeister got and encouraging intercept of 0.465 ounce per ton gold over 10 feet within a broader 170-foot zone of low-grade mineralization at 0.04 ounces per ton. On Tuesday, Kilgore Gold made its announcement it would commence its chase to find out if, indeed, there is an elephant discovery of gold on its property.
In an email to us, Norm Burmeister wrote, ìThe high-grade zone, called the ìElsa Zoneî, was intersected at a core depth of 410 feet. It is important to note that this hole was drilled in an area that had never been drilled some 4650 feet from the resource area.î The Elsa Zone is located within the Dog Bone Ridge target area. Burmeister also pointed out, ìThere are no known workings in the area, and there is no known gold mineralization at the surface, thus making the Elsa Zone a true ëblind discovery.í Kilgoreís blind discovery in the Elsa Zone proves there may be some prospects in the very large Dog Bone Ridge target area.
The purpose of the 2006 drilling program, Burmeister told us, is to determine ìthe true potential of the Dog Bone Ridge area target.î Niel Prenn, a professional engineer with Mine Development Associates of Reno, Nevada, completed a scoping level update of Echo Bayís 1996 assessment of the project. He wrote, ìThe project appears to have reasonably attractive economics if the ëpotentially mineable materialí can be doubled at $375/ounce gold price.î Prenn saw the Kilgore project as one with a ìlarge epithermal gold deposit.î This confirmed an earlier geological report by Stanton W. Caddey, who wrote in an October 2003 report, ìExploration potential at the Kilgore property for more than doubling the present gold resource with further exploration drilling is regarded as excellent.î
The encouraging drill hole in 2004 helped move this project to the current drilling program. ìWe believe the Dog Bone Ridge target area represents the core of the hydrothermal system that has generated the known low grade resource at Kilgore,î Burmeister speculated. Thatís why he is drilling the Dog Bone Ridge target area. The first holes will be offsets to the promising 2004 discovery hole. ìWe donít know the direction or dipping,î said Burmeister, asking ìWhich way does it go?î The first hole will help Burmeister orient the direction on the north side of the target. Burmeister told us, ìThe knowledge we hope to gain from the Elsa Zone offsets will be important in efficiently testing other Elsa ëlook-a-likeí definitive targets within the Dog Bone Ridge target area.î
A drill campaign tends to intensify expectations. Share prices tend to rally higher, depending upon market conditions, during a drill campaign. The company hopes to drill about twelve holes, down between 500 and 800 feet, in the target area. The first hole may be encouraging, but the results from that hole function as an identifier for where to place the next drill hole. ìThe best target has never been touched,î said Burmeister, referring to the north side of the Dog Bone Ridge. As with many promising properties, they donít always offer the easiest access. In this case, Burmeisterís expectant target on the north side of Dog Bone Ridge might only be accessed by helicopter, if thatís where he has to drill.
What happens if Burmeister is accurate in his assessment? If his favored Dog Bone Ridge target does represent the core of the hydrothermal system, then what will he have found? ìAs such, it represents an attractive high grade epithermal vein-type gold target,î Burmeister responded. ìThe successful interception of high grade gold during the 2004 program confirmed this interpretation.î
In 1980, Burmeister founded Bull Run Gold Mines, serving as Chief Executive and developing a successful Nevada gold mine. He arranged the IPO, which led to a NASDAQ National Market listing, and ran the company for eight years.
For thirteen years before that, he was the chief geologist for Silver Standard Resources. Burmeister discovered the Mill Creek orebody in Elko (Nevada), which moved that company forward. The property was subsequently sold to Freeport-McMoran. Burmeister also conceived for Silver Standard of a novel regional exploration program, covering 10,000 square miles in the Yukon over nearly unexplored territory. In a joint-venture with ASARCO, he helped discovery the Minto orebody in the Yukon. The copper-gold deposit is now going into production through Sherwood Copper.
After forty years in the mining industry, he hopes Dog Bone Ridge will add to his string of gold discoveries and corporate success stories.
Mining In Scandinavia
April 23, 2018
Sweden, Norway and Finland do not immediately come to mind when North American and UK investors are considering mining stocks to add to their portfolios.
If they do take a passing interest many will dismiss the region as being over taxed, too bureaucratic and having an excess of labor protectionism and welfare benefits that will affect their bottom lines and so be less desirable investments than others in the mining sector.
While not disputing that this perception of the region is inaccurate, there are other factors which merit a closer study.
For instance there are mines that have been in continuous production since as early as the sixteenth century, if not earlier.
This has led to a stable workforce that is amongst the most proficient in the business with a consequent benefit to productivity.
The long established mining companies have not stinted on investing in the latest technology and equipment making their operations amongst the most cost effective of any worldwide.
Long term growth prospects appear promising as all three countries are actively engaged in encouraging the development of mining.
Add to this is the fact that parts of the region are abundant in base and precious metal bearing ores and also coal makes it a worthwhile region for the investor to take more than a superficial interest in.
To get you started have a look at the websites of the following mining companies with operations in Scandinavia :-
Boliden AB (Quoted on Stockholm SE) http://www.boliden.com
Equinox Minerals Ltd (quoted in Canada & Australia) http://www.equinoxminerals.com
BHP Billiton (quoted London, New York & Australia) http://www.bhpbilliton.com
LKAB ( Luossavvaara-Kiiravaara AB-State owned) http://www.lkab.com
Alba Mineral Resources plc (London AIM Mkt) http://www.albamineralresources.com
European Diamonds plc (London AIM Mkt) http://www.europeandiamondsplc.com
Anglo American plc (quoted London &ors ) http://www.angloamerican.co.uk
How Did ISL Uranium Mining Begin?
January 21, 2018
It’s time to rewrite the history books. In Situ Leach Mining (ISL), or Solution Mining, was not first commercially started in Bruni, Texas in 1973 by Westinghouse, a consortium of oil companies and others. The birthplace of ISL was never South Texas, as some have claimed. It was begun in Wyoming, about 16 years before an ISL operation was started in Texas. Why there has been a whitewash over the true history of ISL is not our concern. This series is an in-depth investigation into how and why ISL mining came about, how it has been tested over a period of nearly 50 years, and why this type of uranium mining will play an important role in providing U.S. utilities with the raw fuel to power nuclear reactors for the next few decades.
In this modern era of uranium mining, extremely skilled engineers, hydrologists and geologists establish ISL mining operations. Most insiders compare an ISL operation to a water treatment plant. Itís really that simple to understand. However, as with every modern industrial operation, the roots of ISL mining came about in a less genteel or sophisticated manner. In 1958, Charles Don Snow, a uranium mining and exploration geologist employed by the Utah Construction Company, was investigating a Wyoming property for possible acquisition for his company. During the course of that visit, he discovered a new method of uranium mining and helped pioneer its development into the modern form of ISL.
Since 1957, R.T. Plum, president of Uranyl Research Company, had been experimenting with a leach solution on his property at the Lucky June uranium mine. ìThey mixed up the sulfuric acid solution and just dumped it on the ground, and soaked it through the material and collected it in a little trench at the end,î Charles Snow told StockInterview. It wasnít very scientific. Snow added, ìThey were just learning how, and I observed it and thought that the application could be made through some of the ore that we had in the Lucky Mc mine.î The company was mining uranium this way because it was below the grades miners were used to, when mining. As Snow noted, ìIt was not worth mining.î But it was practically at the surface. He explained what they were doing at the Lucky June, ìThere was an area where uranium leached out to the surface in a small area, and it had a clay under-bed. These people put solutions onto the surface, collected the solution, and ran it by resin beads to absorb the uranium.î
While they only recovered about $3600 worth of uranium, roughly 600 pounds, Snow was impressed. He later wrote an inter-office memorandum in July 1959, with the subject header: ìRecovery of Uranium from Low Grade Mineralization using a leach in place process.î In his conclusion, Snow recommended, ìFrom the preliminary information available, it appears that it will be possible to treat very low grade mineralization for recovery of uranium at a large net profit.î He explained the process to his bosses, encouraging them to consider this as an option:
ìIn brief, the process introduces a leach solution onto the surface of the ground and allows the solution to percolate down through the area to be leached. The solution is then recovered from wells and circulated through an ion exchange circuit with the barren solution being returned to the leach area. Recovery of the uranium is made by stripping from the ion exchange medium.î
He wanted the Utah Construction Company to try this method of mining where there was low grade mineralization. Snow succeeded in convincing his bosses. That began yet another innovation for Utah Construction Company, the same company which helped construct the Hoover Dam, decades earlier, before it got into the uranium mining business.
Utah Construction Becomes the
First Commercial ISL Miner
Newspaper reports, through the 1960s, illustrate that ISL mining was in full bloom more than a decade before anyone in Texas began a commercial ISL operation. On June 18, 1964, the Riverton Ranger newspaper reported, ìThe Shirley Basin mine is on a standby basis. The timbers are being maintained and the water pumped out. Total production comes from solution mining.î Between 1962 and 1969, ISL was the only method producing uranium at Utahís Shirley Basin Wyoming. Later in that same article, under the section entitled, ìGas Hills Solution Mining,î it was reported, ìThe Four Corners area is ëminedí by solution mining techniques similar to those employed at Shirley Basin.î Credit for this new mining method is also reported in that same article, ìLucky Mc introduced the heap leach process of recovering values from low grade ores in 1960.î
Charles Snow explained how his company made the transition from underground mining to solution mining, ìThe underground mining at Shirley Basin was very expensive, and we were having a lot of heavy ground problems.î The sandstone aquifers containing the uranium were uncemented and brittle, supported with timbers. ìIn some places, it was too heavy to hold with timbers,î said Snow. ìWe had to use steel sets underground, and it was even mashing the steel sets. So the expenses were getting very high.î
Water was flowing into the open drifts at prodigious rates. Snow recalled, ìBarney Greenly said, ëLetís try solution mining over here.í They did a test, and it did operate quite well. They got some pretty good results. So the underground mine was shut down, and they went to a solution-mining program to produce the allocated pounds in the Shirley Basin area.î The procedure was tested for a few years before a full-scale commercial production began. This fulfilled 100 percent of Utahís Shirley Basin uranium production allotment from the AEC.
There were problems at first. ìWe started out initially using sulfuric acid, and we had some reaction with carbonates in the formation.î Sulfuric acid plus calcium carbonate produces calcium sulfate, and this plugged up the formation. Calcium sulfate is gypsum, which was insoluble in the leach solution. ìIt tended to plug up the formation and reduce the transmissivity of the fluid from the input hole to the output recovery hole.î
To prevent interference with the porosity of the formation, Snow switched to nitric acid, but admitted, ìWe were reluctant to use nitric acid because it was much more expensive than sulfuric.î But they did, because the nitric acid solution did not form gypsum. Unlike present-day ISL methods used in Texas, Nebraska and Wyoming, Utah Construction did not use a carbonated leaching solution in their solution mining. Nitric solution was used during the 1960s and continued until the Lucky Mc switched over to open pit mining.
It all started as a heap leach experiment. ìWe had quite a bit of low grade in Lucky Mc,î Snow told us, ìso we thought we would try a heap leach experiment.î Results were good on the test, and Utah pioneered ISL mining. Snow wrote in an August 2, 1960 memo, ìThe favorable results of the heap leach project and other research indicate that the process can be successfully applied in many of the low-grade areas to recover much of the mineralization.î Later in his report, Snow calculated reserves from random samples obtained from previous drilling at Lucky Mc, ìThe estimated reserve for the block is 147,000 tons @ 0.0361 percent U3O8, or 106,616 pounds of U3O8.î He estimated the program would cost $111,471. Using a value of $6/pound for U3O8, the anticipated returns were calculated as follows:
50 percent recovery: 53,318 pounds: $208,377
25 percent recovery: 26,654 pounds: $ 48,453
That was just the start. By the end of the decade, Shirley Basinís solution mining operation was producing U3O8 at comparable levels to present day production at any of the major U.S. ISL facilities. In a paper presented by Ian Ritchie and John S. Anderson, entitled ìSolution Mining in the Shirley Basin,î on September 11, 1967, at the American Mining Congress in Denver, Colorado, these Utah International executives explained the success of the Shirley Basin solution mining operation. In a summary explaining the companyís activities, we discovered the Shirley Basin operation not only filled the Atomic Energy Commission (AEC) allocation requirements from 1962 through 1969 but we learned of the sizeable commitments into the future Shirley Basin was to fill:
ìIn 1968 sales of uranium concentrate were made to purchases other than the AEC. One of the first sales was to Sacramento Municipal Utility District with a minimum of 950,000 pounds to a maximum of 1,100,000 pounds of uranium concentrate in 1971. Additional contracts were signed with General Electric Company and with Nordostschwerzerische Kraftwerke A.G. (Baden, Switzerland). The contracts called for delivery of 8,000,000 pounds of concentrate to GE between 1968 and 1975, and 500,000 pounds of concentrate to NOK commencing in July 1969.î
The single reason solution mining stopped, well before the first ìcommercialî ISL operation began in Bruni, Texas in 1973, was because of the improved market forecast for uranium in the 1970s. Utah Construction switched to open pit mining because they needed to produce a lot more uranium. The nuclear renaissance of the 1970s demanded massive quantities of uranium to fuel the rapidly growing nuclear power industry.
Don Snowís initial field tests, begun in the late 1950s, resulted in continuous production achieved by late 1962. Subsequently, production in the underground uranium mine was shut down by May 1962. The underground mine was maintained in a standby condition until 1965, when all underground operations were written off. Millions of pounds were mined by Utah Construction through its ISL operations in Shirley Basin. It wasnít heap leaching.
Sufficient evidence confirms that Wyoming, not Texas, first pioneered commercial ISL mining. Not only were well fields designed as early as 1960, but the entire concept of an ISL ìwater treatmentî plant can trace its roots to Utah Constructionís pioneer work. Everything from injection wells to production wells were pioneered in the early 1960s. We challenged Charles Don Snow that some have claimed it was heap leaching, not ISL mining. Snow shot back, ìNo, we drilled holes in the ground and the material had never been mined. We got our ideas, certainly, from heap leaching, which came from the copper industry.î Snow explained that after the solution mining experiment was successful, ìA recovery plant was designed and put into the hoist house, where they had had the underground mine. That was designed by Robert Carr Porter and Ian Ritchie.î Snow added, ìIn fact, Ian Ritchie and J.S. Anderson have a U.S. Patent on the well completion procedures that we used at Shirley Basin.î
Snow pondered if his friend Jack Bailey may have exported the ISL technology to Texas. ìJack Bailey was the Shirley Basin project manager for the underground mine when we switched over to solution mining,î Snow said. ìHe later went to work for Chevron, and Chevron had operations in Texas. I believe they even experimented with solution mining. Now, whether or not Jack was directly involved, I donít know.î As it is with history, many of the old-timers are gone. We were told Jack Bailey had had a stroke a number of years back, and did not trace this further. There may have been others. ìSome of the people from that area (Shirley Basin) had gone to Texas,î Snow recalled. ìThere is documentation, it was published information, and a lot of people who went to Texas, came from the Wyoming area. So, Iím sure there wasnít a paucity of information being transferred.î Ironically, the Westinghouse-led consortium, which included U.S. Steel and Union Carbide, among others, was called Wyoming Minerals. Now we know exactly why they chose that name.
While there have been a number of ISL operations built and operated in Texas, there may be little future for uranium mining in that state, unless there are new discoveries. By a few, Texas has been inaccurately called the ìhome of ISL mining.î Perhaps that came about because ISL operations continued, during the uranium depression of the past two decades, with small amounts of production occurring in Texas. According to Energy Information Administration figures published in June 2004, uranium reserves in Texas stand at 23 million pounds of U3O8 based upon $50/pound uranium. By comparison, Wyoming and New Mexico reserves, using that same benchmark, reach as high as 363 million and 341 million pounds, respectively.
This may explain the rush by junior exploration companies, such as Strathmore Minerals (TSX: STM; Other OTC: STHJF), Energy Metals Corporation (TSX: EMC), UR-Energy (TSX: URE), Uranerz Energy (OTC BB: URNZ), Kilgore Minerals (TSX: KAU) and others, to Wyoming. The large quantities of pounds are in Wyoming, not Texas. It may also explain why Uranium Resources (OTC BB: URRE) has looked beyond Texas into New Mexico to develop its ISL operation, and Strathmore Minerals has quickly been advancing through its permitting stage on one of its properties in that state. It is fitting that the big past uranium producing states may again become tomorrowís leading U.S. producers. In any event, the entire world of ISL mining owes a debt of gratitude to Charles Don Snow for his pioneering efforts in bringing a heap leach experiment into full fruition as modern-day in-situ mining.