KINSLEY MOUNTAIN, ELKO COUNTY, NEVADA
The Kinsley Mountain property (“Kinsley Mountain”) is located in eastern Nevada in Elko County between the towns of Ely and Wendover, Nevada. Nevada Sunrise LLC, a private company with a common director of NSGC, acquired Kinsley Mountain in 2000. NSGC’s original staking at Kinsley Mountain consisted of 141 unpatented lode mining claims covering an area of approximately 2,807 acres (1,136 ha.). Kinsley Mountain lies roughly 75 kilometres (45 miles) southeast of the Long Canyon property where the geologic team of Pilot Gold Inc. (“Pilot Gold”), as part of Fronteer Gold Inc., defined a significant gold resource in what is now recognized as an emerging gold district.
Gold mineralization was discovered on Kinsley Mountain in 1984. Subsequent exploration defined sediment-hosted gold mineralization concentrated in the Kinsley trend, and includes at least five distinct deposits hosted in strata ranging from middle-to-late Cambrian in age. Gold mineralization occurs within a stratigraphic section of Middle to Upper Cambrian-age sedimentary rock units including limestone, dolomite and shale. This mineralization exhibits characteristics similar to other sedimentary rock-hosted “Carlin-type” gold deposits in Nevada. Gold enrichments occur in both bedding-parallel and structurally-controlled zones of disseminated mineralization within altered sedimentary rocks.
Between 1994 and 1999, Alta Gold Co. (“Alta Gold”) produced approximately 138,000 ounces of gold at 1.4 grams/tonne gold from oxide ore in a heap leach operation at Kinsley Mountain. Mining by Alta Gold was restricted to a cluster of deposits aligned along a northwest-oriented fault zone. Exploration drilling has identified several other mineralized centers, which are yet to be developed. Alta Gold abandoned the mine and left an undetermined amount of ore in the ground at Kinsley Mountain during a period of low gold prices.
Gold mineralization at Kinsley Mountain consists both of shallow low-grade oxide ore, which was mined and produced by Alta Gold, and deeper higher-grade refractory mineralization. This deeper material was tested by a limited number of drill holes. Holes that did test this zone yielded grades that ranged from 0.235 ounce per ton gold on the east side of the range to 0.149 ounce per ton gold one mile to the northwest. By analogy to the better-explored gold deposits of the Carlin trend, the deeper zones of gold mineralization at Kinsley Mountain could contain many times the amount of oxide gold already mined at this deposit. NSGC has assembled a substantial technical archive for the Kinsley Mountain property, including records for 1,156 drill holes, with a total length of 244,900 feet (an average depth of only 212 feet).
On April 8, 2010, NSGC announced an option agreement with Animas Resources Ltd. (“Animas”) on Kinsley Mountain (the Kinsley Option”), which gave Animas the right to earn a 51% interest in Kinsley Mountain by spending US$1.5 million in exploration expenditures over three years. Animas agreed to spend US$200,000 in exploration expenditures during 2010 to maintain the Kinsley Option, and would act as operator of exploration at Kinsley Mountain.
NSGC and Animas agreed to form a joint venture upon Animas earning its 51% interest in Kinsley Mountain for further exploration work to be carried out on the property consistent with the form of the Rocky Mountain Mineral Law Foundation mining venture agreement. After earning its 51% interest in Kinsley Mountain, Animas had the right to earn an additional 14% interest by spending US$3.0 million in exploration expenditures within five years, which would bring its interest in Kinsley Mountain to 65%.
On September 21, 2011, NSGC and Pilot Gold announced the purchase by Pilot Gold of the Kinsley Option from Animas. In consideration for the purchase of the Kinsley Option, Animas would receive the following:
- US$350,000 cash and 50,000 common shares of Pilot Gold on the date hereof;
- 25,000 common shares on the first anniversary of the effective date;
- 25,000 common shares on the second anniversary of the effective date;
- 50,000 common shares upon Pilot Gold earning and vesting a 51% interest in the amended mining lease, summarized below, pursuant to the option agreement.
Pursuant to the amended terms of the Kinsley Option, Pilot Gold will have the exclusive right to earn:
- A 51% undivided interest, right and title in and to Kinsley Mountain through a 51% equity interest in a joint venture company to be formed at the time of such acquisition, by incurring US$1.18 million in exploration expenditures by March 30, 2013 (of which US$180,000 must be spent by May 31, 2012);
- An additional undivided 14% interest in Kinsley Mountain and in the joint venture by incurring an additional US$3.0 million in exploration expenditures within five years of meeting the initial earn-in.
On February 10, 2012, NSGC and Pilot Gold announced the initial 2011 drilling results at Kinsley Mountain, which returned impressive intervals of gold mineralization. Pilot Gold's first work program included 1,250 metres in 6 holes of diamond drilling designed to confirm mineralization in historical reverse circulation holes near the margins of open pits at the past-producing Kinsley Mountain mine.
Drill highlights from the 2011 program include (full results in table below):
- 5.91 grams per tonne gold over 18.4 metres, including 11.93 grams per tonne gold over 7.8 metres in hole PK-04;
- 6.75 grams per tonne gold over 7.5 metres, including 13.52 grams per tonne gold over 3.2 metres in PK-03;
- 6.23 grams per tonne gold over 8.7 metres, including 12.05 grams per tonne gold over three metres in hole PK-02.
NOTE: Primary drill composites were calculated using a cut-off of 0.30 gram per tonne gold, with variably higher cut-offs for the subintervals. Drill intersections are reported as drilled thicknesses. True widths of the mineralized intervals are interpreted to be between 60 to 100 per cent of the reported lengths.
The six holes drilled in 2011 are near-twins of existing holes in two locations, one to the north of the main pit and one located between two satellite pits to the southeast. These initial drill results provide confidence that historical drilling accurately quantified the gold endowment at Kinsley Mountain.
Pilot Gold further reported that Kinsley Mountain shares the same unique combination of rocks, stratigraphy, structure and mineralization as Long Canyon, the high-quality deposit its technical team defined and advanced to a multimillion-ounce gold resource prior to Fronteer Gold's acquisition by Newmont Mining Corp. in April, 2011.
As with Long Canyon, Pilot Gold plans on advancing Kinsley Mountain through detailed geological analysis, aggressive drilling and deposit modelling, and it anticipates earning its initial 51% interest in the project by the second quarter of 2012. Pilot Gold's planned 2012 work program includes:
- Deposit modelling: Creation of a three-dimensional model of geology and mineralization to aid in the selection of new drill targets, and further compilation of extensive historical databases;
- Drilling: 12,000 metres of drilling is planned;
- The first priority will be infill and step-out drilling on mineralized zones identified in historic drill programs;
- In addition to near-mine drilling and resource definition, a comprehensive effort to identify new targets will be undertaken, encompassing both the original 141 claims as well as the 128 claims staked by Pilot Gold to the north, a largely unexplored area;
- Resource estimation: Pilot Gold anticipates completing a first project resource by year-end 2012;
- Development activities: Preliminary metallurgical work, hydrological, environmental and baseline studies, and submission of a plan of operation to the U.S. federal government to allow for property-wide drilling.