A glance at Riverstone’s Karma project

OUAGADOUGOU, Burkina Faso — You don’t want to lean over too far when peering down one of the dark narrow man-dug mine shafts at Riverstone Resources’ (RVS-V) Karma gold project. If you were to fall, the 15-metre-to-60-metre plunge could do some serious damage.

Climbing down a shaft on purpose, as artisanal miners do every day here, comes with its own risks. There’s nothing to stop the shaft walls from caving in, as they have elsewhere in this country. And snakes and scorpions are known to populate the grooves carved into the sides of the shaft that miners grab as they scale down to the bottom. Add 40-degree temperatures and poor ventilation and you’ve got a lot working against you.

But risk doesn’t come without the chance for reward, a truism for all miners, whether they are digging with their hands or with modern equipment. There’s a reason why about 8,000 people have flocked to the Nami zone at Karma. There’s gold to be found here and a lot of it. All the vendors selling mobile phones, motorcycles, clothing and food onsite tells you that many artisanal miners are having some luck.

Nami is the newest area of focus for the Karma project, about 200 km northwest of Ouagadougou. Karma already has four separate yet nearby deposits: Rambo, Goulagou 1, Goulagou 2 and Kao. These deposits, on adjacent claim blocks, have a combined indicated resource of 820,500 oz. gold averaging 1.2 grams gold per tonne plus another 320,300 oz. gold classified as inferred.

When Paul Anderson, Riverstone’s vice-president of exploration, was visiting the Karma project in April 2009, an impressive 3,000 people had just arrived in a matter of days to an area 3.5 km to the north of the Rambo deposit in true gold rush style. Anderson decided to check it out.

“I asked the lone local policeman onsite how long it had been active and he said ‘six days’ yet it looked like they’d been there for months,” Anderson says. “There were big piles of dirt everywhere and they were going to town.”

Now there are usually 15 police officers onsite to monitor the temporary mining camp though it looks like these miners will be here for a while.

Not long after Anderson saw the mass commotion at Nami, he sent some staff to take 200 samples out of the shafts. The idea was to go down about five metres, take a sample all the way around the shaft about a foot wide, and then go down another 10 metres and take another sample.

“That proved to be a little bit hard,” Anderson says. The problem was the shafts don’t go straight down. When miners find a vein they follow it, making it difficult to climb down, sample and map the findings. Drilling alongside the shafts was also a challenge because the company kept hitting old workings.

Next Riverstone sampled the waste dumps, which averaged 1.3 grams gold, giving the company a better idea of what kind of luck some of the miners were having. “They hand-sort the quartz, if ore doesn’t have quartz, they throw it away,” Anderson explains. “It kind of gave us an idea of what the footprint would be.”

Whenever Riverstone needs to do work where the artisanal miners are working, the company gives warning to the village chief who gets the miners to move. Anderson has not reported any difficulties with this process. Artisanal mining is technically illegal so people are generally cooperative. And once Riverstone is done its work, the artisanal miners are free to come back.

“They are the best unpaid employees I have,” Anderson says, half joking, before getting serious. “We get a lot of questions. Up at Nami people ask, ‘Why don’t you kick all these people off?’ Well, why would you, they found this thing in the first place.”

There’s no obvious method to the artisanal miner’s exploration strategy. Many wander around and don’t find much. You see women wind panning (similar to panning in a river) and come across shallow hand-dug holes all over the Karma project.

Nami is surprisingly well-organized. The shafts are 4-5 metres apart and manned 24 hours a day by the miners, all men, who are assigned a spot to dig by the local chief. Someone usually sleeps beside each shaft so no one else has the chance to take any of the potentially valuable ore below.

In another area, not far away, both men and women (often carrying babies) are crushing the rock. Until recently, they were using sticks and random bicycle parts to crush the rock but now many are using diesel-powered machines to help grind the ore, making the labour a little less back-breaking.

Next to crushers is where the excitement happens. Workers recover the gold from the crushed ore using an artificial channel called a sluice. Water and ore are mixed to create a slurry and then the mixture is dumped down the sluice. Part of the sluice is lined with burlap, which catches the gold.

Artisanal mining is a way of life for many here in West Africa. Burkina Faso, one of the poorest countries in the world, was lagging behind its gold-producing neighbours like Mali, Ghana and Cote d’Ivoire until recently.

Modern gold mining is undergoing a boom. In the last three years, six gold mines have come online starting with High River Gold Mines’ (HRG-T, HRITVF-O) Taparko-Bouroum mine in 2008. Prior to that, there was only the government-owned Poura mine, which shut down in 1999. But gold explorers have flocked to Burkina since the gold price started to rise in the early 2000s, taking on exploration projects that were worked on in the 1990s and searching for new discoveries on uncharted land.

The most recent mine to come online was Iamgold’s (IMG-T, IAG-N) Essakane mine in July, which is also the largest. Iamgold projects it will produce 315,000 oz. gold per year over an initial 12-year mine life but the company sees a lot of room for growth.

Most gold miners in the region have started with open pits, mining the easier-to-recover oxide ore first before getting to the sulphides underneath. So far, only Semafo (SMF-T) is working toward underground production at its Mana mine in Burkina Faso but Anderson is not ruling anything out.

“(Burkina Faso) is a lot like Mali; the mines went into production ten years before here and it’s just now that they are getting into the sulphides,” Anderson says. “You look at the Ashanti mine in Ghana. It’s 60 million ounces give or take but it started out as a series of open pits, it coalesced at depth and there was a huge orebody there. We are very early stage now.”

Anderson, who’s worked in Burkina off and on since the late 1990s, says he has noticed a lot of changes over the last few years in addition to all the new gold mines. In Ouagadougou there never used to be multi-level buildings or so many vehicles. Although now there’s a very North Americanlooking car dealership in the city, years ago, he had to wait up to eight months to order in trucks for the company.

Burkina has a long way to go though. Literacy is just 26% and life expectancy is 51 years for men and 55 years for women. Nearly 90% of the 16 million people count on subsistence agriculture to survive. And then there’s mining.

“What normally happens on these sites is somebody goes in and finds a big quartz vein, finds some gold, makes lots of money, and then goes to town and buys a moto,” explains Anderson, using the local nickname for motorcycle. “Then everybody hears about it, and everybody and his dog, literally, goes out and starts digging. A couple other people make some discoveries but most people just lose their shirt and go away. It goes up and down, real gold rush type of stuff.”

Since March, Riverstone has done 18,000 metres of reverse circulation (RC) drilling, 4,400 metres of diamond drilling and 7,000 metres of rotary air blast (RAB) drilling at Karma. The RAB drill is a way to test for gold mineralization cheaply and is followed up by the RC and diamond drills. Mineralization is generally found in quartz and iron oxide.

In mid-August, the company put away the drills for the rainy season with plans to start ag
ain in late September at which time most of the assays will be in. Riverstone is planning to drill another 20,000 metres at Karma in the coming months. It will also fly an airborne survey over Karma and its other properties and continue with various geotechnical, hydrological and metallurgical studies in anticipation of starting a prefeasibility study at the end of the year. Riverstone has about $8.5 million in the bank and the upcoming program will cost about $2.5 million.

The company will also be calculating new resource estimates for each of the deposits as well as an initial resource for Nami.

Nami

Riverstone has done 5,200 metres (44 holes) of RC drilling at Nami, 1,300 metres (10 holes) of diamond drilling and 7,200 metres of RAB drilling. Gold mineralization has been confirmed over an area of about 700 metres in a north-east direction by about 200 metres but stretching as wide as 450 metres. Drilling with the RAB drill shows the area could be potentially extended by another 700 metres but the company will need to use the RC or diamond drill to confirm this.

Highlights from Nami: hole 56 returned 24 metres grading 5 grams gold, including 12 metres of 9.45 grams gold, hole 49 cut 12 metres of 4.67 grams gold including 6 metres of 7.73 grams gold and hole 45 returned 34 metres of 1.17 grams gold.

The company used the diamond drill to twin some RC holes to test the accuracy of the results. In late August, Riverstone compared five low-grade RC holes twinned with the diamond drill and found the assays were about 22% higher with the diamond drill.

For example, hole 43 returned 20 metres of 0.27 gram gold with the RC drill (between 20 and 40 metres depth) but with the diamond drill, hole 14 returned an intercept of 19.5 metres (between 20 and 39.5 metres depth) of 0.34 gram gold, an improvement of 24%.

Rambo

Rambo is the smallest deposit with resources only in the inferred category but the highest grade — 300,000 tonnes of 7.02 grams gold totaling 57,000 oz. gold. This year, Riverstone has done 2,700 metres (26 holes) of RC drilling at Rambo and 1,800 metres (14 holes) of diamond drilling.

Highlights from drilling at Rambo this year include hole 69 with 28 metres of 3.11 grams gold including 14 metres of 5.88 grams gold. Hole 71 returned 14 metres of 1.35 grams gold.

Gold mineralization is confined to quartz-rich zones within a breccia body at the contact between volcano-sediments and an intrusive body. Mineralization is open along strike to the east and to depth where the mineralized zone appears to be thickening.

Rambo was the first property Riverstone optioned in 2003 before acquiring the others. It’s a small high-grade deposit but Anderson says it doesn’t look like it will turn into a large one at least for an open pit.

“We could start there and get something into production, get capital costs back and then mine the deposits in sequence,” he says.

Last year, hundreds of artisanal miners dug hole after hole at Rambo. The holes were so close together that eventually the whole area caved in and now there’s a small pit about 15 metres deep and 350 metres long.

Rambo consists of felsic volcanics and mafic volcanics. The deposit is in laterite material surrounded by saprolite. “You can map the laterite and figure out where the intrusives are by where the laterite is,” he says. The deepest the company has drilled at Rambo is about 150 metres and Anderson says they are likely getting close to the depth limitation for an open pit.

“We also wanted to see where this goes as well because it’s pretty high grade. The average in the country is 1.5 to 2 grams. With that grade you could take it down a little deeper or if you had something larger you could think about underground stuff,” Anderson says. “We aren’t quite there yet.”

Goulagou 1

Goulagou 1 has inferred resources of 6.9 million tonnes grading 0.63 gram gold for 140,400 oz. gold. The company has done 9,200 metres (74 holes) of RC drilling here.

Highlights from drilling so far include hole 80 with 45 metres of 0.85 gram gold including 8 metres of 1.48 grams gold and 16 metres of 1.26 grams gold.

Goulagou 1 mineralization occurs along strike for at least 1,500 metres and is still open. Mineralization occurs in a series of sub-parallel lenses with a maximum thickness of at least 350 metres.

Goulago 2

Goulagou 2 has indicated resources of 6.7 million tonnes of 1.83 gram gold for 390,500 oz. gold and another 48,600 oz. in the inferred category. Mineralization has been confirmed along strike for about 2,300 metres, also in series of parallel lenses. The greatest width of the deposit is about 150 metres.

Riverstone has done 1,250 metres (10 holes) of RC drilling and 1,300 metres (10 holes) of diamond drilling. No results have come in yet here.

Kao

Kao is the largest of the deposits at this point with an indicated resource of 14.7 million tonnes of 0.91 gram gold for 430,000 oz. gold plus inferred resources of 76,400 oz. with an average grade of 0.65 gram gold.

Mineralization is found in an area 800 metres by 350 metres and is still open to the north, northeast and at depth. The company hasn’t done any drilling here yet this year but instead is expanding its other deposits.

Riverstone shares were trading at 57¢ apiece at presstime. The company has a 52-week trading range between 19¢ and $1.01 and nearly 91 million shares outstanding.