Stockhouse Movers & Shakers: Solving the Klondike gold mystery

Peter Kennedy Peter Kennedy, Stockhouse
0 Comments| October 4, 2012


It remains one of the gold industry’s great unanswered questions. Since the original Klondike discoveries triggered a massive gold rush in 1896, prospectors have been baffled by their inability to find the bedrock source of all the placer gold which has been extracted from the streams and tributaries around Dawson City in the Canadian Yukon.

It is widely thought by industry and government officials that the Klondike gold fields may have produced as much as 20 million ounces of gold from placer mining (river bed) operations.

Yet that same area has yielded only 1,200 ounces of bed rock gold, most of it produced from the Lone Star mine prior to the start of the First World War in 1914, and a handful of exploration projects nearby.

“There is a complete mismatch,’’ said Jim Mortensen, a 58-year-old University of British Columbia geology professor who has spent much of his career trying to understand why this discrepancy exists.

Based on research by Mortensen and other academics in the last 30 years, he now believes he is closer to solving the mystery and determining how that information might help mineral exploration companies in the future.

If he is right, it may be good news for a handful of mining companies who have been funding his efforts in a bid to gain a better a better understanding of the Yukon’s notoriously complex geology. They include Klondike Gold Corp. (TSX: V.KG, Stock Forum), a Vancouver junior, which has assembled a large property position in the Klondike gold fields south of Dawson City.

Mortensen is also leading the Mineral Deposit Research Unit, a UBC-based entity that is being funded by the Natural Sciences and Engineering Research Council of Canada (NSERC) and a group of companies which are currently active in the White Gold District, a hot area for gold exploration, located 90 kilometres south of Dawson City.

They include Kinross Gold Corp. (TSX.T.K, Stock Forum), Barrick Gold Corp. (TSX: T.ABX, Stock Forum), Independence Gold Corp. (TSX: V.IGO, Stock Forum), Taku Gold Corp. (TSX: V.TAK, Stock Forum), Aldrin Resources Corp. (TSX: V.ALN, Stock Forum), Full Metal Minerals Ltd. (TSX: V.FMM, Stock Forum), Teck Resources Ltd. (TSX: T.TCK.A, Stock Forum) (TSX: T.TCK.B, Stock Forum), Northern Freegold Resources Ltd. (TSX: V.NFR, Stock Forum), Radius Gold Inc. (TSX: V.RDU, Stock Forum).

After spending $1.7 million on research, the consortium is expected to release its findings ahead of the annual Mineral Exploration Roundup mining conference in Vancouver in January, 2013.

“In most areas of the world where there is a lot of placer gold, you can also look around and find obvious hard rock sources,’’ said Mortensen. “There are gold-bearing veins nearby that you can point to.’’

But the Klondike district was not affected by glaciation and the virtual absence of bedrock gold production in the area has led to all sorts of wild-eyed speculation over the years about a motherlode which has been completely eroded.

“Getting a handle on the geology of the Klondike is a real challenge because there is not very much exposure and if you don’t have the rocks to look at, it’s hard to figure out what’s going on,’’ he said.

However, Mortensen says he and his fellow researchers have concluded that there are enough gold-bearing veins in the Klondike to suggest that the placer gold comes from local sources. “If you look at any stream that has placer gold in it and work your way back up to the head of that stream, you find that there are gold-bearing veins in the bedrock.’’

“So for us there is no mystery at all. We think we understand where the gold is coming from and we have published fairly extensively on that view [in a series of academic papers].

Still, he estimates that at least 25 companies have passed through the Klondike in the past 25 years looking for the bedrock source of the placer gold and have walked away shaking their heads, saying the gold was either put there by magic or it has all been eroded.

That appears to have opened the door to Klondike Gold, a company headed by 67-year-old placer mining expert Erich Rauguth, and funded by Vancouver-based resource financier Frank Giustra.

Holding interests in 1,110 claims over 200 square kilometers at the centre of the Klondike Gold fields, the company is focusing its exploration efforts in the vicinity of the former Lone Star mine in the belief that up to half of the Klondike’s gold production may have come from that area.

On September 21, 2012, the stock jumped 50% on heavy trading when the company announced that grab sample results on its Lone Star claim block returned assays of 41.25 grams per tonne gold and 524 grams silver. It has since fallen back to trade at 6 cents on Thursday, leaving the company with a market cap of $4.9 million, based on 81.7 million shares outstanding.

While the company is still a long way from finding an economically viable deposit, it said exploration this summer was successful in advancing confidence at Lone Star to a level where solid drill targets are ready for the 2013 exploration season.

Meanwhile Mortensen has been working with Rauguth and his team to help them to determine where they should be exploring. “It’s a slow process, there are no eureka moments’’ he said.

“We have made some important conceptual breakthroughs in the past year or so and that has changed the approach that they are taking, as well as their understanding about how the gold occurs,’’ he said.

“Obviously that is proprietary information that we can’t talk about.’’

What he will say is that local placer gold deposits are derived from a class of orogenic gold vein systems that he and his academic team do not understand very well. “We don’t understand how these orogenic gold veins form, but we are working away on it.”

He believes the potential exists for a one million plus ounce deposit to be found in the vicinity of Lone Star and that there may be the potential for economic bedrock deposits to be found elsewhere in the Klondike area.

“The Lone Star area has the highest potential right now for a variety of reasons,” he said. “Over the next year or so, hopefully we will be able to sort that out.”

Elsewhere in the Yukon, the pace of exploration has slowed in the White Gold district. Lee Pigage, the head of mineral services with the Yukon Geological Survey in Whitehorse, attributed the drop in activity to the fact that it has become more difficult for mineral companies to raise money for exploration.

However, he said Yukon officials are pleased that Kaminak Gold Corp. (TSX: V.KAM, Stock Forum) has been having some success on its Coffee project. “They have found a connection between zones that they had previously defined,’’ Pigage said.

“Other players are not so far along.’’

Readers please note that the pictures in this story feature Eric Rauguth (top), geologists Kate Dodd and Iain Mitchell (middle).


Tags: INDUSTRIAL METALS & MINERALS GOLD SILVER SHARES OUTSTANDING

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