We commenced preliminary metallurgical testing of composite samples from Nucleus and Revenue in early February. Whilst we have previously released (news release dated March 5th 2010) some limited gold recovery results from Nucleus with bottle roll test gold recoveries of 86% or more, this work is much more comprehensive and is being undertaken by SGS Canada Inc. of Vancouver, BC., one of the premier metallurgical consultants in North America. The objective of the program is to demonstrate that we have good recoveries from both the Nucleus and Revenue Deposits and from all of the key metals including gold, copper and molybdenum. This metallurgical program is a key step in the evolution of the project, and the resulting data will assist in demonstrating the economics of this rapidly expanding project. We expect results shortly from SGS.
2012 Drill Program at Nucleus
In May we completed a small financing which raised gross proceeds of $756,500. Given the on-going challenging market conditions for raising capital, the Board decided to initially focus on a more limited drilling program which could be funded by the raise and previous prepayments. We reopened the camp at the Freegold Mountain in May and began diamond drilling at the Nucleus Gold Deposit at the end of the month. The rationale for drilling at Nucleus, which is by metal value 75%+ gold, is that we believe with a limited drilling budget there is room to grow the resource at depth. Our latest N.I. 43-101 Nucleus Resource was published in February 2011. The Nucleus Zone has an Indicated resource of 1.1 M oz Au, 1.4 M oz Ag, 67.8 M lbs Cu or 1.4 M oz AuEq (at a 0.4 AuEq cut-off) within 48.5M tonnes grading 0.70 g/t gold, 0.90 g/t silver and 0.06% copper, and 0.6 M oz Au, 1.3 M oz Ag and 62.0 M lbs Cu or 0.9 M oz AuEq within 41.5M tonnes grading 0.47 g/t gold, 0.98 g/t silver and 0.07% copper in the Inferred Category (as tabulated below).
The goals for this phase of the 2012 exploration and drilling work are to:
- Expand the existing resource at the gold dominant Nucleus Deposit at depth;
- Update the resource estimate for the Nucleus zone (Q4 - 2012); and
- Allow us to complete our first Preliminary Economic Assessment for the Freegold project
Preliminary Economic Assessment
The next key milestone for the Company is an external Preliminary Economic Assessment for the Freegold Mountain project, which we plan to complete by the end of the first half of 2013. This assessment would build on the forthcoming metallurgical results, the 2012 drilling program, and the expected update to the Nucleus N.I. 43-101 resource estimate. While we have undertaken internal assessments of the economic viability of the project it is important to deliver an external assessment.
Marketing & Trading
We recently completed a weeks' marketing in the US as part of the Yukon Gold Mining Alliance ("YGMA") annual tour. The YGMA held successful half day seminars in San Francisco, Chicago, Atlanta, New York, and Boston which were well attended. Over 150 investors, brokers and analysts were in attendance. In April, by invitation, we attended the European Gold Forum in Zurich for the first time as a junior exploration company. In February we began trading on the OTCQX in the US. Previously, we had limited volumes in the US due to our Pink Sheet trading. Since February, we have seen an improvement in US volumes which now often account for 10-15% of total volumes. Overall volumes have improved partly as a consequence of this such that year to date our average daily trading volumes are over 200,000.
Value
We believe Northern Freegold offers some of the best value to gold in the junior exploration market as our stock is currently trading at below $6 per ounce of gold resource on an enterprise value basis. And yet, according to the Fraser Institute, we operate in one of the best ranked mining jurisdictions in the world; and we have good physical infrastructure around our project and a large and rapidly growing resource. Our grades are comparable to some of the world scale porphyry mines in construction or production.
Management
Northern Freegold is pleased to welcome Paul Reynolds in leading the Company towards reaching these milestones. Paul succeeded Mr. Al Armitage in the position of Vice President Exploration on June 1, 2012. Paul brings 25 years of experience to the Company and has worked with projects similar to those at the Freegold Mountain Project in Canada, the USA, and South America. Paul has recent experience managing a junior gold company in the Dawson range near our Freegold Mountain project, and has been actively involved in the management of public companies for the past 16 years, holding roles of both Director and/or Executive Officer. Mr. Armitage will still be actively involved in the Freegold Mountain Project through his association with GeoVector Management Inc. which continues to manage the exploration program.
Costs
We continue to reduce our G&A costs and manage our overall burn rate to ensure our drilling costs remain competitive to our peers. We have reduced our monthly G&A costs by over 30%.
In 2011 we had industry low exploration discovery costs in the $3 per gold ounce range and $1-2 per resource ounce range made possible by several factors. Our drill bit costs are below $100/meter reflecting logistical and locational advantages that we enjoy. Firstly, recall our logistical advantages given our location in south-central Yukon and proximity to its capital and international airport at Whitehorse only 200 Km southwest of us. We have excellent government maintained road access into our Freegold Mountain property, allowing us to truck in rigs, equipment and people, which keeps our drilling costs per meter low and thus our overall costs in check. Secondly, the size of the mineralized zones at our two main deposits (Revenue and Nucleus) is large, demonstrated by several hundred meter intercepts. This allows for rapid conversion of ore into resource.
We will keep you updated as the drill program crosses new milestones over the summer months. We remain focused on quickly demonstrating the economic viability of this project. We would like to thank our shareholders for their continued support and loyalty through this process.
Yours Sincerely,
"John Burges"
President & Chief Executive Officer
Cautionary Note Regarding Forward-Looking Statements
The information in this company update includes certain "forward-looking statements". All statements, other than statements of historical fact, included herein including, without limitation, plans for and intentions with respect to the company's properties, statements regarding intentions with respect to obligations due for various projects, strategic alternatives, quantity of resources or reserves, timing of permitting, construction and production and other milestones, are forward looking statements. Statements concerning Mineral Reserves and Mineral Resources are also forward-looking statements in that they reflect an assessment, based on certain assumptions, of the mineralization that would be encountered and mining results if the project were developed and mined in the manner described. Forward-looking statements involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Northern Freegold's expectations include the uncertainties involving the need for additional financing to explore and develop properties and availability of financing in the debt and capital markets; uncertainties involved in the interpretation of drilling results and geological tests and the estimation of reserves and resources; the need for cooperation of government agencies and First Nation groups in the exploration, and development of properties; and the need to obtain permits and governmental approval. Northern Freegold's forward looking statements reflect the beliefs, opinions and projections of management on the date the statements are made. Northern Freegold assumes no obligation to update the forward looking statements if management's beliefs, opinions, projections, or other factors should they change.
Paul Reynolds, B.Sc., P. Geo., Vice President Exploration for Northern Freegold Resources Ltd. is the qualified person, as defined by NI 43-101, and has reviewed the technical information in this company update.
To view the graphs and charts included in this company update please see our most recent corporate presentation.