Skyline scours BC’s Golden Triangle

Skyline Gold (SK-V) is hunting for high-grade gold at its Iskut property in northwest B.C.’s Golden Triangle region, with hopes of striking it big.

The junior even has dreams that Iskut can 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 Skyline’s management hopes it can be reached in the long run. Bolstering their belief is the property’s closeness to 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 by-products.

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 Resources’ (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 1980s, and the other in the early 1990s. The mine produced a mere 90,000 oz. gold at an average grade of 14.34 grams gold.

“It wasn’t a roaring success,” the company’s new CEO John Zbeetnoff said in a recent corporate presentation. “It’s a good example of how the [National Instrument] 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 millions of ounces, but after 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,” Zbeetnoff comments, who is a geologist by training. He previously worked as the chief geologist at Brett Resources until Osisko Mining  (OSK-T) scooped up the junior for its Hammond Reef gold project in Ontario in May 2010.

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

Through selective acquisitions, it grew its prospective land holdings from under 1.6 sq. km in 2005 to its current 247-sq.-km land package.

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

Zbeetnoff became Skyline’s chief executive last August after the company’s former CEO, Patrick Soares, and board member Robert Mathews recruited geologists they previously worked with to strengthen the company’s management and technical team. Other recent additions include: Jim Sparling, 

Hudbay Minerals’ (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 Netolitzky, 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 (IJV) property, which allowed the company to consolidate the Gorge trend target. Skyline owns 95% of the IJV, but fully owns the rest of the Iskut property.

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

“They were small juniors. They would raise a little bit of money and 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,” Zbeetnoff comments.

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

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

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

The Gorge area is a major exploration target. It has historic drill intercepts of up to 6 metres grading 93.71 grams gold per tonne. Its trend and mineralization style 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 limited drill testing.

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

It has under $2 million of cash-in-hand, and raising money might be tricky given the company’s share price trades 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 the last quarter of 2012, the company expects to have road access within 18 km of the property.

“Road access would be really, really nice,” Zbeetnoff says, adding that air support is expensive. “When you’ve 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, and it’s so rugged. You’ve got to have helicopters to do that.”

Despite the hurdle, Zbeetnoff says Iskut has the potential to be something big.

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