Kenai to begin
drilling Hope Butte at end of September
2010-09-21 20:16 ET - News
Release
Mr. Daniel Kunz reports
KENAI RESOURCES STARTS DRILLING AT HOPE BUTTE AND ALBISU SECURES KEY GOLD
PROJECT IN BRAZIL
Drilling at Kenai Resources Ltd.'s Hope Butte, Oregon, gold project located
just west of the Idaho border is scheduled to commence around the end of
September. Kenai's immediate drilling program of approximately 3,000 metres is
designed to replicate the results and the mining potential recorded at Hope
Butte in the 1996-to-2000 period by Chevron Resources and its joint venturers
and to advance Hope Butte to NI 43-101 status. To this end, four initial holes
are being drilled by twinning Chevron's prior results, including several very
high-grade intercepts. Assay results from the initial drilling at Hope Butte
will be released as soon as available.
Kenai also advises that, following the completion of the initial drilling at
Hope Butte, the rig will be remobilized for a planned 1,000-metre drilling
program at the Albisu farm-in exploration project in northern Nevada. This
program is currently anticipated to commence during November. The Albisu gold
project was drilled by Chevron Resources in 1979 and 1981, and Western Energy
Development Corp. followed up with four core holes in 2008 to twin Chevron's
AL-14 drill hole that reportedly intercepted 6.5 metres at 6.2 grams per tonne.
The WEDC holes confirmed the gold zone by intercepting 1.6 metres of 12.46
grams per tonne and eight metres of 1.94 gpt. To date, WEDC has drilled a total
of 3,729 metres of core at Albisu in 2008 and 2009. That drill program defined
a mineralized stockwork sulphide-quartz-calcite zone that is up to 73 metres
thick. Gold values range from 14.6 gpt over 1.8 metres to intervals between
three metres and 32 metres of 0.2 gpt to 0.5 gpt.
Kenai entry to Brazil through a strategic joint venture with Gold Anomaly on
its Sao Chico gold project
Kenai has executed an option agreement with Gold Anomaly Ltd. for Kenai to
acquire 50 per cent of the Sao Chico gold project in Brazil by financing
project exploration ahead of a possible decision to acquire equity in the
project, with key terms as follows:
- Kenai has an 18-month
option to acquire 50 per cent of Sao Chico following an advance to GOA of
$1-million (Australian), and, as the company commits to provide $2-million
(Australian) project funding, these funds will be in the form of a loan
from Kenai to GOA until exercise of the option. If Kenai does not exercise
the option, the loan funds advanced will be repaid to Kenai by GOA.
- Kenai has a further option
to acquire a further 25 per cent by payment to GOA of $1-million
(Australian) and committing to provide $1-million (Australian) project
funding.
- GOA has the right to
continue participation at a 25-per-cent level or can sell 25 per cent to
Kenai based on $30 (U.S.) per ounce for gold ounces of attributable
Canadian Institute of Mining, Metallurgy and Petroleum mineral resources
plus $60 (U.S.) per ounce for attributable gold ounces for CIM mineral
reserves at that time.
- Kenai will pay a
10-per-cent net-profits interest for five years to GOA over Kenai's
attributable interest, whether at 50 per cent or 75 per cent.
Kenai's objectives in this transaction are to undertake local and regional
exploration and development over the tenement area covering 1,416 hectares,
initially targeting one million gold ounces in the 56-hectare core area, the
site of extensive prior garimpeiro surface workings. Kenai's project funding is
to generate the necessary data to accelerate a mining lease application.
Kenai will assume the role of project manager, utilizing existing GOA
personnel, as well as its own personnel. The focus is on fast-tracking initial
gold production and defining an NI 43-101-compliant mineral resource. GOA has
been planning the commencement of production by the end of 2010 at the rate of
20,000 gold ounces per annum. Production is planned from an expected high-grade
gold deposit using a minimal capital cost, low-operating-cost gravity recovery
operation. On exercise of the option, Kenai's participation will be as an
incorporated joint venture with GOA, covering GOA's rights under contract with
the local garimpeiro landowner. This landowner has recently been granted a
12-month trial mining permit or GUIA, with a possible 12-month extension to the
permit, during which time a feasibility study for a full-scale project is
planned to be completed. As Greg Starr, president of Kenai is also a director
of Gold Anomaly, the intended transaction may be determined by the Toronto
Stock Exchange as a non-arm's-length acquisition.
About the Sao Chico gold project, Para state, Brazil
The Sao Chico project is located 340 kilometres southeast of the major city
of Manaus. It lies within a prominent northwest-to-southeast trend in Brazil's
Tapajos mineral field, exploited over only the past 30 years by a gold rush of
some 500,000 garimpeiros -- that is, artisanal alluvial miners, for the
production of unofficially estimated 20 million to 30 million ounces of gold.
With little underground mining expertise, the garimpeiros were urged by
government to consolidate their claims and joint venture with established
mining companies. The field has had little modern exploration undertaken.
San Chico is in a cleared low-grade farming land adjacent to the
Transgarimpeiro Highway, at a road distance of about 350 kilometres or eight
hours drive from the regional city of Itaituba to the northeast. Light aircraft
from Itaituba services Sao Chico through two local airstrips.
Extensive surface mining has been undertaken by garimpeiros at Sao Chico for
over 20 years, with minor underground workings in primary rock, which occur at
less than 20 metres depth. There are several subparallel gold-bearing
coarse-grained quartz/sulphide veins, with a strike length so far known of
1,000 metres.
Investigations by GOA to date have determined the following:
- Veins weathered up to
around 10 metres depth, free dug by excavator to the depth of oxidation;
- Underground sampling by GOA
along about 70 metres of drives from a 20-metre deep shaft in
free-standing primary rock, with average gold grades of 15 grams per
tonne, from over 100 samples;
- Good metallurgical
recoveries, both by gravity and cyanidation methods.
Current plans are for delivery during October of a
100-tonne-per-day-capacity, integrated gravity-processing plant, which will
allow commencement of the GUIA trial mining at the permit rate of 50,000 tonnes
per annum by year-end. There are abundant local water supplies and ample
tailings dam capacity.
From its due diligence investigations, Kenai considers there is excellent
potential at Sao Chico for delineation of NI 43-101 mineral resources of
sufficient tonnage and grade to support a substantial gold project operation.
An independent NI 43-101 report is currently being prepared for the project.
The Tapajos gold region is situated in the south-central part of the vast
Amazon Craton, which is divided into two, the Guyana Shield north of the Amazon
River and the Brazilian Shield, with its nucleus as the Archaean
greenstone-granitoid terrane, south of the Amazon. Sao Chico is in the same
geological unit, the intrusive Parauari suite, as the Tocantinzinho, Palito and
Sao Domingo projects. TZ is a major gold project acquired for $122-million in
July, 2010, by Eldorado Gold. In June, 2010, ELD acquired 26.8-per-cent equity
in Serabi Mining PLC, the Alternative Investment Market-listed company, which
owns 100 per cent of the Palito underground mine. From Sao Chico, the TZ
project is 54 kilometres northwest and Palito is 23 kilometres east-northeast.
Kenai chairman, Daniel Kunz, said: "Kenai is pleased to be joint
venturing with Gold Anomaly on the Sao Chico project. We are committed to
bringing the project into production in the short term and have expectations of
defining a significant resource at Sao Chico leading to a long-term mining
project. Kenai has negotiated a deal structure that over all is low risk in
terms of financial exposure in the event that our positive expectations for Sao
Chico are not realized during the option agreement period."
GOA non-executive director, Tom Fermanis, said: "We believe our
shareholders will view this agreement as favourable. The agreement with Kenai
injects funds into the Sao Chico project, fast-tracking production and
exploration, and, should a JORC or CIM NI 43-101-compliant resource be
developed at Sao Chico, both GOA and Kenai will share in the upside. Kenai are
targeting a potential million-ounce deposit, potentially enabling GOA to
benefit from a strong cash flow from the project. The agreement with Kenai will
enable GOA management to fully focus on developing its flagship Crater Mountain
project in PNG."
Kenai's current gold resources from the two Oregon projects, aggregating
approximately 500,000 contained gold ounces, are summarized in the attached
table.
CONTAINED GOLD OUNCES
Project Tonnes Grade Ounces Au
status/classification
Quartz Mountain 15,050,200 0.80 g/t Au 352,667 indicated resources,
NI
43-101
compliant
Hope Butte 5,000,000 0.91 g/t Au 146,300 historical, not NI
43-101
compliant
1. For Quartz Mountain, resources above a 0.34-gram-per-tonne cut-off
with silver converted to gold equivalent using a ratio of 49.5 to 1, silver
to gold. Metallurgical recoveries were not considered. Indicated resources
are as reported in an independent November, 2006, NI 43-101 report, posted
on SEDAR at that time.
2. The Hope Butte resources are considered historical in nature, do not
comply with current NI 43-101 standards, have not been verified by the
company and therefore should not be relied upon. It is uncertain if
further exploration will result in the discovery of an economic mineral
resource.
We seek Safe Harbor.