Epithermal gold prospects dot the countryside of central Nevada, but
Midway lies between the famous Tonopah mining district to the south and the venerable Round Mountain gold mine to the north. Tonopah and Round Mountain were considerable producers in the first half of the past century, and the latter lives on as a heap-leach operation under the banners of
Although Midway pales in comparison, it is not for want of trying. Houston Oil & Minerals was first on the scene in the 1970s, followed by
In 1997, after 191 drill holes and extensive geophysical surveying, the property reverted back to the local owners, and there it sat until last year, when Red Emerald picked up an option for a 65% interest.
“[Kennecott] came up with a reported resource of about two-hundred and seventy-thousand ounces,” says Brian McAlister, Red Emerald’s president, “but, at that time, the company was bought out by RTZ, so its threshold was bumped up significantly. We went in with the view of stepping out from the discovery holes to try to build a reserve base.”
The Midway property is covered by alluvium, underneath which lies the favourable tuffaceous rhyolites of the Tombstone formation and older sedimentary rocks of the Palmetto formation. Subvertical dykes emplaced during the Upper Cretaceous intrude the Palmetto units.
Hills to the east, north and south represent trachyandesite flows left over from the Miocene. The average thickness is 3-4 metres, though beds can thicken to as much as 300 metres.
Gold is mainly found in a silicified portion of the rhyolite sequence, and, to a lesser extent, in a similarly altered argillite unit of the Palmetto formation. Regional extensional faulting provided the conduits for the hydrothermal fluids, but mineralization is pervasive.
“You get bonanza intersections with a structural component to them, but you also have disseminated mineralization carrying two-hundred-plus parts per billion over fairly significant widths,” says consulting geologist Geoffrey Goodall. “I don’t know about size, but I think the Round Mountain analogy is fairly reasonable.”
Red Emerald has one core rig turning in the Discovery area and one reverse-circulation (RC) rig operating at the much deeper 121 prospect. The targets are about 200 metres apart and possibly connected, making them the most favourable of the five historic areas of mineralization.
“The bottom line is that we wanted to go back and quickly build an asset with as little of the money that we had,” says McAlister, “and we thought the best place to make hay was around the Discovery zone.”
So far, half of a planned 20 infill holes have been drilled at Discovery, adding to the 30 RC and four core historic holes. Seven of the planned eight stepout holes for 121 have been drilled, adding to two historic holes.
At Discovery, hole MW201 returned 17 metres grading 1.1 grams per tonne (starting at 31 metres down-hole) and just over 6 metres grading 30.26 grams (starting at 69 metres). Both intervals carried 1.5 metres of 6.91 and 117.1 grams, respectively.
Holes 203 and 204, which were drilled from the same station but at different orientations, yielded similarly impressive results. Just over 10 metres (starting at 34 metres) of the former averaged 2.77 grams, while nearly 11 metres (starting at 30 metres) of the latter graded 7.77 grams.
Like the first hole, holes 203 and 204 carried higher-grading subintervals: 4.8 grams over 4.57 metres and 80.9 grams over 0.76 metre. The former was drilled vertically, and the latter at 65 from the horizontal.
Results are pending for the remaining holes, but coarse visible gold was noted over 4 metres of hole MW210, just before the drill rods were sheared off at 47 metres down-hole. The grains appear as dendritic intergrowths with quartz-calcite crystals, as bands in quartz-chalcedony veins, and as liners around vugs in the rhyolitic host.
Visible gold occurs frequently at Midway and was reported in historic drill logs. Limited metallurgical tests carried out by previous owners confirmed the coarseness of the particles, though more than 82% of the yellow metal was liberated after 24 hours under cyanide leach.
Red Emerald is spacing its holes on 7.6-metre centres to gain a better understanding of the geometric distribution of gold mineralization. This is tighter than Kennecott’s fences and allows for a more reliable resource calculation.
Outcrops
Historic drilling suggests that the Discovery zone is 250 metres long and 160 metres wide. It also is the only prospect on the property to outcrop at surface, appearing as siliceous, argillic rhyolite containing minor sulphides associated with brecciation.
At the 121 prospect, hole MW202 cut 52 metres (starting at 145 metres down-hole) averaging 0.69 gram gold, including three 7.6-metre sections carrying between 1.14 and 1.43 grams. The final high-grade section represents Palmetto argillite and begins just below the contact with the overlying silicified rhyolite tuff, at 189 metres down-hole.
The hole was collared 30 metres from historic hole MW121, which averaged 1.82 grams over 56.4 metres. The final 29 metres represents weak to moderately silicified shale.
Holes 205 to 207 returned insignificant results. Results for the remaining holes are pending.
The same mineralized rhyolite horizon found at Discovery and 121 also appears about 500 metres to the east. Dubbed 63-77, the prospect sits 60-140 metres beneath the alluvial cover and has returned upwards of 8.6 grams over 1.3 metres.
Another area lies about 1,400 metres northwest of Discovery, on the eastern flank of the San Antonio mountains. Known as SP, the zone was explored by Rio Algom in the late 1980s but returned minor, and deep, intersections of hydrothermally altered rhyolite tuff beneath trachyandesite.
Other areas demand follow-up exploration, but Discovery and 121 are priorities. Nevertheless, Goodall remains optimistic about the property’s overall potential.
Million-plus ounces
“I do believe [Midway] is not a target for Kennecott in that it is never going to be ten million ounces,” says Goodall. “But I think we can probably come up with half a million-plus [ounces] with some good work.”
According to its agreement, Red Emerald must spend US$1.2 million on exploration and property payments by September 2004. Once covered, a joint venture is formed with a private company that holds the right to buy the property outright from the underlying vendors for US$3 million.
Red Emerald is funding the current campaign using $787,500 (minus a broker’s fee) it raised earlier this year by issuing 3.5 million units at 22.5 apiece. Since then, the company’s share price has more than quadrupled, giving McAlister pause to consider the possibility of another financing.
“This all has happened very quickly, so we haven’t got anything planned immediately,” he says. “If the price were right, we would do it.”
He added that the warrants are being exercised (each unit came with a warrant priced at 25). Also, the company recently issued 50,000 options to Goodall and the two underlying property vendors, who are assisting with the geological investigation. Each option can be converted to a share by June 2004, at 60.
On March 31, Red Emerald had $37,983 in working capital. This amount excludes any proceeds from the equity financing.
Red Emerald plans to change its name to Midway Gold to reflect its newfound focus. A shareholder vote will be held at the upcoming annual meeting.
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