Skyline scours the Golden Triangle

Skyline Gold (SK-V) is hunting for high-grade gold in the Golden Triangle in northwest British Columbia at its Iskut property, with hopes of striking it big.

The junior is confident that Iskut could potentially yield a 5-million-oz. gold resource.

It may sound like an ambitious number for a company yet to initiate a large drill program, but one that Skyline’s management believes is attainable in the long run. Bolstering their belief is the property’s proximity to other past-producing and current high-grade gold deposits.

Iskut is within 50 metres and along strike of Cominco’s past-producing Snip gold mine, which ran for eight years in the 1990s. Snip generated over 1 million oz. gold grading 25.32 grams gold per tonne from 1.2 million tonnes. The mine also produced silver and copper byproducts.

Barrick Gold’s (ABX-T, ABX-N) past-producing Eskay Creek gold mine is 40 km to the east. Eskay churned out 3.2 million oz. gold averaging 49.5 grams gold.

Iskut, which is near Pretium’s (PVG-T, PVG-N) Brucejack high-grade gold deposit, also contains the past-producing Johnny Mountain underground mine.

Skyline’s old management team operated the mine for two short stints, one in the late 80s and the other in the early 90s. The mine produced a mere 90,000 oz. gold at an average grade of 14.34 grams gold.

“It wasn’t a roaring success,” said the company’s new chief executive John Zbeetnoff in a recent corporate presentation. “It’s a good example of how the [NI] 43-101 is a useful tool to have these days.”

He explains that the initial resource calculation for the mine was 1 million gold oz. And after completing a financing the company installed a mill appropriate to process those million ounces, but after three to four years it produced less than a tenth of its target.

“I could only imagine what those poor underground geologists had to go through to feed that mill,” comments Zbeetnoff, who is a geologist by training. He previously worked as the chief geologist at Brett Resources until Osisko Mining (OSK-T) scooped the junior for its Hammond Reef gold project in May 2010.

In 1999, a mine closure and reclamation plan was approved for Johnny Mountain. Since then, Skyline has been cleaning up the area, and slowly gaining a larger foothold in the metal-rich area.

Through selective acquisitions, it grew its prospective land holdings from under 160 hectares in 2005 to its current 24,700-hectare land package.

In 2010, the company started shuffling its management and adding to its technical advisory board.

Zbeetnoff became Skyline’s chief executive last August after the company’s former chief executive, Patrick Soares, and board member Robert Mathews, recruited geologists that they previously worked with to strengthen the company’s management and technical team. Other recent additions include: Jim Sparling, HudBay Mineral’s (HBM-T, HBM-N) previous senior exploration geologist, as Skyline’s chief operating officer; Susan Craig, Northern Freegold Resources’ (NFR-V) former president and CEO, as vice president of corporate development; and Ron Netolizky, who helped discover the Eskay Creek and Snip mines, as a technical advisor.

Now with new blood, the company, which has a lengthy history, can work on the underexplored land package it has pieced together over the last seven years.

Its latest land addition included the Iskut River Joint Venture (ISJV) property, which allowed the company to consolidate the Gorge Trend target. Skyline owns 95% of the ISJV, but fully owns the rest of the Iskut property.

In 2011 the junior consolidated Iskut and started compiling historic drill data that roughly 30 companies collected over 30 years.

“They were small juniors. They would raise a little bit of money. They would go out and drill their brains out but never do follow-up work. Other companies will do a bit of trenching but will never do another year’s financing and never follow up,” comments Zbeetnoff.

Skyline is currently amassing all that data into unified database. “That’s going to be an ongoing project for quite some time,” notes Zbeetnoff.

Along with initiating the data compilation, the company last year conducted an airborne geophysics over a significant portion of the property to locate priority targets. It has been applying borehole pulse electro-magnetic surveys to Iskut to find Snip-like high-grade ore.

For 2012, it is focusing its exploration work on the Gorge, Snip-Bronson Trend, Johnny Flats and Burnie Trend targets, and aims to design a significant drill program by year end.

The Gorge area is a key exploration target. It has historic drill intercepts of up to 5.9 metres grading 93.71 grams gold per tonne. Its trend and style of mineralization is similar to what’s found at the Snip mine, which is described as a structurally controlled high-grade gold deposit.

The Snip-Bronson Trend is on strike with the Snip mine and extends over 3.5 km. This target contains the Bronson Slope gold-copper porphyry deposit. A November 2010 preliminary assessment on the deposit projects a 38-year mine life with production of 1.75 million oz. gold, 383.6 million lbs. copper, 6.8 million oz. silver and 9.6 million tonnes of high purity magnetite powder. Metal prices of US$950 oz. gold, US$2.50 per lb. copper and US$15 per oz. silver were used. The company says while the Bronson Slope study showed economic potential it wasn’t big enough to stand on its own.

The Johnny Flats target has a strike length of 2.8 km, and has not been drill tested but hosts drill-ready targets. The Burnie Trend has a minimum strike length of 5 km and has seen very limited drill testing.

Zbeetnoff estimates this year’s exploration budget will be between $4 and $7 million, and expects to do a financing soon to cover that cost.

It currently has under $2 million of cash in hand. And raising money might be tricky given the company’s share price is trading near its 52-week low of 11¢. The company has a yearly high of 30¢, and closed March 22 at 12¢ apiece. It has 182.7 million shares outstanding.

Other than stock price, the logistic hurdle the company faces is road access and air support.

By fall 2012, the company expects to have road access within 18 km of the property.

“Road access would be really really nice,” says Zbeetnoff, adding air support is expensive. “When you got to move the drill by helicopter, in some of these places, you will not have a chance to do anything else but that. It’s so steep. It’s so rugged. You got to have helicopters to do that.”

Despite that hurdle, Zbeetnoff, who has been involved in over a dozen projects, says Iskut really stands out.

“It’s one of the better ones I’ve been involved in. I’ve seen a lot of projects. My experience what I worked on is at least 15 projects that are either in production or are still being advanced towards production… I have seen a lot of deposits, a lot of prospects, but this thing really stands out.”