Homestake tallies resource, passes project to Agnico

VANCOUVER — Homestake Resource (HSR-V) is turning the page on nine years of exploration at its Homestake Ridge gold-silver property on the Iskut-Stewart-Kitsault belt, 32 km northwest of Alice Arm, B.C. A final resource update on April 25 marks the culmination of Homestake’s work on the project, with producer Agnico-Eagle Mines (AEM-T, AEM-N) taking over operations under an option agreement signed in late 2012.

Since acquiring the project in 2003, Vancouver-based Homestake has spent $30 million on exploration and established a database for 238 diamond drill holes totalling 66,000 metres.

The company delineated two high-grade gold-silver deposits during that time and tacked on a third in its South Reef zone, which was the focus of Homestake’s final $2.5-million drilling effort in 2012.

Agnico optioned Homestake Ridge in late August and agreed to spend $25.3 million on the project over five years in exchange for a 65% interest. Agnico is scheduled to spend $3.5 million on exploration at Homestake Ridge in 2013, and could earn a 51% interest by spending $10.3 million on the project before 2015.

Agnico can then earn its final 14% by spending another $15 million at Homestake Ridge, or taking the project to the feasibility stage. An additional 5% interest may be earned by arranging Homestake’s share of eventual project financing, which would take Agnico’s stake to 70%.

“[Our] consistent and systematic exploration efforts have yielded three significant deposits at Homestake Ridge, making it now one of the top undeveloped higher-grade precious metal projects in the world,” president Joe Kizis commented. “As Agnico-Eagle assumes exploration and development [of the property], we are confident that additional high-grade resources will be found, which will increase the value for our shareholders. Few junior explorers are as well positioned for success during this period of market uncertainty.”

Mineralization at Homestake Ridge is spatially associated with a large volcanic centre that occurs within the prolific Iskut-Stewart-Kitsault belt, with Homestake’s final resource incorporating 70,000 metres of drilling on the Main Homestake deposit, Homestake Silver deposit and newly discovered South Reef deposit.

Homestake’s drilling caused a 40% jump in global resources at the project, with the bulk of the mineralization in the inferred category and totalling 6.8 million tonnes grading 4.2 grams gold per tonne, 93.6 grams silver per tonne and 0.11% copper. On a gold-equivalent basis that equates to 1.23 million contained oz. at an average grade of 5.6 grams per tonne.

The South Reef discovery is a high-grade zone that remains open to the northwest and lies 800 metres southwest of the Homestake Silver zone. South Reef adds 332,000 inferred tonnes grading 13 grams gold and 3.6 grams silver for 140,000 contained oz. gold equivalent. An $85 net smelter return royalty per tonne cut-off value was applied using average long-term prices of US$1,500 per oz. gold, US$27 per oz. silver and US$3.50 per lb. copper, along with metal recoveries of 92% gold, 88% silver and 88% copper.

With Agnico-Eagle taking over at Homestake Ridge, Homestake will turn its attention to a 623 sq. km piece of adjoining land at its Kinskuch project. The property contains over 37 documented precious and base-metal mineral occurrences, many of which are hosted in the same rocks as those hosting the Homestake Ridge volcanogenic massive sulphide (VMS) and vein deposits.

“Some of the best VMS deposits in the world occur within Jurassic-age Hazelton rocks, and include the past-producing Eskay Creek and nearby Dolly Varden deposits,” vice-president of exploration Robert Macdonald commented. “We feel there is a good likelihood of developing an attractive resource there, but VMS deposits typically form in clusters, so other deposits probably exist in this under-explored region.”

Homestake shares rose 18% following news of the resource update to 10¢. The company has traded within a 52-week range of 6¢ to 44¢, and has 29 million shares outstanding for a $2.9-million market capitalization at press time. Homestake will likely look to raise more capital over the next few months, as the company reported $1.1 million in cash at the end of January.