Joint venture deal lets underground work begin on Lightning

Although it was staked 65 years ago, the Lightning gold zone in northeastern Ontario was only discovered in 1984. Now, after a protracted session of haggling over ownership interests, the property’s several participants have come to an agreement and plan to begin underground development.

Hemlo Gold (TSE), Freewest Resources (TSE) and Teddy Bear Valley Mines (CDN) announced recently the formation of a joint venture “for the purposes of funding and managing the Holloway project.”

The joint venture “unitizes” a portion of the Lightning zone containing the known reserves that straddle the boundary between the Holloway property owned by Hemlo Gold and Freewest and the Teddy Bear property in which Teddy Bear, Hemlo Gold and Freewest each have an interest.

Hemlo Gold is the operator of the new joint venture, the ownership of which breaks down into Hemlo Gold, 50.79%, Freewest, 33.86%, and Teddy Bear, 15.35% (Hemlo Gold and Freewest have earned a 70% interest in Teddy Bear, with Newmont Mining (NYSE) converting its “earn-in” into a net profits interest in Teddy Bear).

A $12-million program comprising underground exploration and ore reserve validation will start immediately. Hemlo plans to sink a 430-metre exploration shaft and complete 1,100 metres of drifting plus 25,000 metres of underground drilling.

A production decision will be made following the estimated 14-month work program.

The “unitized” block carries a geological reserve of 5.0 million tonnes grading 11.5 grams gold per tonne.

A mechanism is provided in the agreement that will allow the owners of the Holloway and Teddy Bear properties access to the shaft (or other infrastructure) for mining any ores found outside the unitized block. The property sits astride the Harker Twp. and Holloway Twp. line about one mile north of the Holt-McDermott mine of American Barrick Resources (TSE). Spectacular gold was found in the 1920s about one kilometre south of the current surface drill sites, prompting a frenzy of exploration in the general area.

Work included a 150-metre shaft and two levels as well as extensive trenching and short-prospect shafts elsewhere. The prospectors of the era were focusing on quartz veins, traditionally considered the primary targets of the gold seeker.

The Lightning zone, however, is a greyish, stratiform, siliceous horizon, rather than a quartz vein. Gold values are carried within coarse grained disseminated pyrite and none of the gold is visible. The 80-degree south-dipping ore zone is enveloped by sericite-altered mafic rock lying above an ultramafic footwall; the whole sequence lies along the prolific Porcupine-Destor fault.

So far, the zone has been traced on strike for 800 metres. The orebody does not reach surface but makes a first appearance at a depth of 250 metres. It continues to the lowest level so far tested (550 metres) and remains open downdip.

Ore widths deduced from surface drilling are mostly in the 5-10-metre range, with some reaching 20 metres and 23 metres. There is a second zone indicated in the hanging wall of the Lightning zone and this will be investigated during the underground program.