Royalstar Resources aims to revive Tonkin Springs gold mine

Vancouver-based Royalstar Resources (VSE) has acquired an interest in the Tonkin Springs gold project, a re-emerging gold producer situated in central Nevada.

The company acquired the interest with the purchase of 300,000 shares, priced at US$1 each, of Denver-based Gold Capital (NASDAQ). Gold Capital holds a 60% interest in the project with the remaining 40% controlled by U.S. Gold (NASDAQ).

In addition to the 300,000 shares, Royalstar obtained the right to purchase another 2.2 million Gold Capital shares at the same price. If the transaction is executed, Royalstar would own about 51% of the company, plus a 30% interest in Tonkin Springs.

This is the second go-around for Tonkin Springs and, if the latest feasibility study is on the mark, it could be a profitable one.

The project encompasses 735 contiguous claims underlain by an 8-mile strike-length of the prolific Carlin Trend. The Carlin has yielded more than 22 million oz., or roughly 80%, of the total gold production in the United States.

U.S. Gold became involved with the project in 1984 after earlier exploration completed in 1981 uncovered mineralization. By 1985, the company had sufficient oxide reserves to warrant production. The company began mine construction and, later that year, began heap leaching oxide ore.

In addition to development and production activities, exploration continued. By 1987, the company had defined an additional 1.5 million tons of sulphide mineralization averaging about 0.1 oz. per ton, below the oxide reserves.

Studies were undertaken to determine the feasibility of the mine/mill complex needed to process the sulphide reserves. In 1988, construction of the complex was initiated, and a 1,500-ton-per-day, bio-oxidation/CN-CIL plant was constructed later on.

Despite the bright outlook and increased production capacity, the project soon ran into difficulty, including some technical problems related to the bio-oxidation process. Total plant development costs and related infrastructure costs swelled to US$56 million and created a heavy burden on U.S. Gold’s financial resources. As a result, U.S. Gold sold a 60% interest in the project to Gold Capital. Ultimately, however, the financial problems were too great and the Tonkin mine closed in 1990.

Past producers are rarely forgotten and, occasionally, they get more than one chance. This was the case for Tonkin Springs, when Royalstar caught wind of the project and took a second look.

A new feasibility study was produced, which concluded that almost 4 million tons of oxide reserves averaging 0.33 oz. could be processed using a direct, cyanide heap-leaching method. However, the almost

3 million tons of sulphide reserves averaging 0.095 oz. would be processed using a combination of acid bio-oxidation and heap leaching, followed by CIL milling and cyanide gold recovery.

The main difference between the previous operation and the one proposed in the new feasibility study is where the ore will be processed, says Bill Reid, president of U.S. Gold. “Previously, we pre-oxidized the ore in a milling environment and then put it through the CIL plant,” he explained. “Now we’re planing to pre-oxidize in a heap environment, using an acid leach, and then put it through the CIL plant.”

Reid added, “Essentially we’re using two well-established processing techniques that will enable us to achieve similar recoveries at a lower cost.” The operation still has recoverable reserves of 91,000 oz. gold within oxide reserves and 313,000 oz. from sulphide sources.

For its part, Royalstar is also encouraged by the exploration potential. Only 2.5 miles of the 8-mile strike-length have undergone detailed exploration, and a number of geological, geochemical and geophysical anomalies remain to be defined and drill tested.

Royalstar expects to complete its due diligence review of Gold Capital and the Tonkin Springs project next month. The company anticipates exercising the rights to acquire a 51% interest in Gordon and a 30% interest in the Tonkin Springs project.

Following the acquisition, the companies plan to upgrade the necessary permits and, if all goes well, Tonkin Springs could become a producer by the end of this year.