Within Huckleberry's Reach: Gold Reach's Ootsa Project Presents Two Roads to Production

For the last 17 years, the Huckleberry Mine has been producing copper, gold, silver, and molybdenum. But without some significant forethought, the life of the mine could come to its end within the next 7 to 8 years. One avenue that could see the region's mining fortunes continuing comes next door across a narrow reach, over to a large 47,559 hectare claim named Ootsa, that's held and developed by Gold Reach Resources [GRV - TSXV].

As the clock ticks down on Huckleberry, the big question is: Will the owners of the mine look to takeover Ootsa before they close down operations? Or will Gold Reach find a partnership of its own to create a standalone project in Huckleberry's wake?

Co-owned by Imperial Metals [III - TSX] and a Japanese conglomerate that includes Mitsubishi, the open-pit Huckleberry Mine currently processes 17,000t per day, and employs 380 people. However, the days for the Mine appear to be numbered. With a mineral reserve of 39.7 million tonnes grading 0.343% Cu, and all necessary infrastructure in place, the operation is expected to run out in 2021, according to a November 2011 news release.

So one could infer that the long-term future of Huckleberry will either have to include Gold Reach's 47,599 hectares on the Ootsa property, or else, the consortium behind Huckleberry are going to need a new resource discovery on their own current property. At this stage, the Ootsa expansion seems more likely.

THE OOTSA PROPERTY

Though the Ootsa property has been worked on intermittently since the early 2000s, Gold Reach's Ootsa story really didn't catch fire until the company's arrival of Dr. Shane Ebert. The current president's previous successes include the sale of his previous company, Tyler Resources, to a Chinese group in Mexico just before he joined the team. After looking over Ootsa's data, Ebert joined the team and took over the helm.

Within the last two years, since Ebert's arrival, the company has taken its resource estimate from an inferred 60 million tons to 530 million tons, both at 0.34% copper equivalent.

Last year was especially important for the project. In 2012, Gold Reach drilled 45,147 metres on the Ootsa, which resulted in several milestones. One milestone of note was the discovery of the West Seel, which since being discovered has been greatly expanded. So far, results on the West Seel have been quite significant, including multiple eye-popping intercepts. These included:

- Hole S12-101, with 521.8 metres grading 0.57% copper equivalent

- Hole S12-118, with 537.0 metres grading 0.65% copper equivalent (incl. 194m of 1.01% copper equivalent)

- Hole S12-119, with 442.0 metres grading 0.51% copper equivalent

The results at West Seel were not only encouraging, but they gave the company's shares a major lift-off. In June/July of 2012 the company's stock soared upon the announcement of hole S12-101 returning 817 metres at 0.45% copper equivalent.

But the West Seel alone does not paint the entire picture for the Ootsa. While the West Seel received the most attention last year, it is only one part of a two-anomaly program laid out inside Ootsa's massive territory. The other half of the picture comes to the northeast, on the company's other discovery, called the Ox.

Located only 4km from the eastern portion of the Seel deposit, the Ox is a crescent-shaped zone that the company sees as a location for one of two starter pits for when the day comes to construct a mine. Like the Seel, Ox has an at surface high-grade area, which helps with payback economics for any long-term plans.

Originally drilled in 1968, Gold Reach began drilling this portion of the property in 2007, drilling 26 holes into the zone. Last year the Ox received less attention that its West Seel cousin, however Gold Reach still added 4947.4 metres of exploration through 18 holes. So far, the Ox has been identified to stretch a length of 750 metres, with widths ranging from 100-150 metres, and plunging down to depths between 150-230 metres. As of February of 2013, the latest resource calculation on the Ox, based on 11,090 metres of drilling in 44 holes, is estimated to contain an indicated resource of 52.65 million tonnes grading 0.21% copper, and 0.022% molybdenum (or 0.32% copper equivalent).

THE PLAN FOR 2013 AND THE BLUESKY AHEAD

Working within a budget that reflects the current investment climate, Gold Reach has in place a 2013 exploration program that includes infill and expansion drilling on both the western and eastern halves of the Seel deposit, as well as on the Ox. Diamond drilling will continue on site around the clock, 24 hours a day.

The West Seel will see expansion drilling on the higher grade zones to identify potential underground minable resources. The other drill rig will begin on the Ox deposit to infill the higher-grade core to the system. Currently, this higher-grade mineralization is absent from the 2013 Ox resource update. As it stands the previous data is categorized as historical. Thus, the plan is to increase the Ox's grades through the centre of the current resource in anticipation of future economic studies.

While these two deposits are being given the bulk of the company's focus, the Ootsa is large enough to contain multiple other deposits in the future. Given the outline of the trends from both Gold Reach's deposits, and that being exploited at Huckleberry, there are favourable indications in place that hint towards all of these areas being part of a much larger system.

One of the outside areas of interest is Gold Reach's Damascus silver/gold vein system, which is a fault running north-south to the southeast of Seel, but also within Ootsa's borders. Damascus is a dark horse on the project, but gives a lot of bluesky when looking at it under the lens of a later stage mineralization in a copper porphyry environment with gold and silver potential.

Applying some "closeology" logic to all of these showings, a possible implication arises. What if these anomalies are actually bleeders out of a much larger system entirely?

THE BOTTOM LINE

Right now Gold Reach has approximately 530 million tons, however, the deposits already witnessed may potentially be just feeders coming up from underneath. It's hard to ignore this possibility after Gold Reach returned their S12-101 hole that plunged 817 metres at 0.45% copper equivalent open at depth. In a perfect world, where financing wasn't like pulling teeth, Gold Reach would instantly go back in and drill deeper holes down to depths of 2,000 metres to see if this structure starts looking more like a Duluth complex.

It should be interesting to keep an eye on the Ox, because in comparison to the Seel, it's hardly been drilled. This year they're going to drill at least 25 holes in the Ox, and hopefully prove up the historical data and officially get the higher-grades on the books.

The goal going forward for the team is to have 100 million tons of indicated resource outlined by the end of the year. The team has their work cut out for them, as they'll be operating within a constricted budget, while tackling a total of five anomalies in all.

During the process of moving forward, some budgetary shortcuts will come in the form of roadside geology. The Ootsa is criss-crossed with plenty of logging roads that open up the possibility for seemingly endless amounts of roadside exploration to keep the company working while it assembles access to capital through the spring, summer, and fall.

Though a challenge in today's reality, Gold Reach does have a capital-raising advantage over many of its peers due to its favourable share structure. The company remains quite tightly held, with the shares outstanding hovering around the 30 million mark, and with 80% of those being held by a group of 30 people.

The current structure has all of the earmarks of an old-fashioned Vancouver resource company. Of that group of 30, they're currently still basking in the big win they had when their previous baby called Richfield was bought out at handsome profit. But even more important is where their current incomes are derived from. Much of this group of 30 are heavily involved in the forestry and logging business in Prince George. They're not really dependent on Gold Reach to make a living, thus a pressure to sell isn't seemingly on the horizon.

Thus, it will be quite interesting to watch how things play out in this area of BC. If Huckleberry is to continue beyond its 2021 projections, an expansion outward would need to take place. Should Gold Reach become closer to wanting to execute on its exit strategy, Huckleberry does present a likely suitor. However, another scenario could very well involve Gold Reach looking in another direction to find a JV partner that can take the Ootsa towards production of its own. Time will tell which scenario lines up, but in the meantime, it'll be interesting to watch as Gold Reach reports back with more information on the area, and approaches the century mark of 100 million tones indicated.

G. Joel Chury
for the Bottom Line Report

Disclaimer: No information in this article should be construed as individualized investment advice. A licensed financial advisor should be consulted prior to making any investment decision. VantageWire makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of the VantageWire only and are subject to change without notice. VantageWire assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this article and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, VantageWire assumes no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this article.

www.vantagewire.com

� 2013 Copyright Vantage Communications LTD. All Rights Reserved.