Augen Gold on hot property

SITE VISIT

JEROME, ONT. — Augen Gold (AUJ-V) CEO Michael Fowler believes that where there’s smoke, there’s probably fire. And with the Young-Shannon gold deposit close by (owned by Metallum Resources [MRV-V, MRVFF-O]), and a large land package that hosts a past-producing gold mine, there’s plenty of smoke here on Augen’s Jerome property, in northern Ontario’s Swayze greenstone belt.

“We have all the ingredients, and now it’s a question of solving the jigsaw puzzle,” Fowler says.

The company is exploring the mineralized veins in and around the past-producing Jerome gold mine, which Augen says are open along strike and at depth. It’s also investigating the larger land package in light of geological similarities to the Abitibi greenstone belt, as well as the possibility that the major structural zones that host the mesothermal gold deposits of the Timmins and Kirkland Lake areas extend into the Swayze belt. Augen is searching for three types of deposits on the Jerome Mine property: quartz carbonate Archean lode gold; iron formation-hosted gold; and volcanogenic massive sulphides.

Augen believes that the geological setting is prospective. The Swayze greenstone belt is the western extension of the Abitibi greenstone belt and the two are separated by the Kenogamissi batholith.

The major structural zones that host the mesothermal gold deposits of the Timmins and Kirkland Lake areas appear to wrap around the northern and southern margins, respectively, of the batholith and extend into the Swayze belt. Augen’s claims straddle the Ridout deformation zone, which is in- ferred to be the western continuation of the Cadillac-Larder Lake deformation zone, and the company’s geologists believe that the extension of the Kirkland Lake break, or the Larder Lake break, goes through the property. The junior has plans to explore a series of felsic porphyritic intrusions that occur along the southern Swayze belt that could be associated with gold mineralization.

Christopher Marmont, senior vice-president of exploration, says that the geological structures on the Jerome property are similar to those in the prolific gold camps to the north.

“We are in a structural situation that is identical to that of Kirkland Lake, and the rock types are basically very similar,” Marmont says. “There are mafic volcanic rocks. . . intermediate volcanic rocks, sedimentary rocks, and they are intruded by younger porphyry rocks.”

Two historic resource calculations were completed for the Jerome mine in the 1980s. A 1983 estimate put the resource at 583,000 short tons grading 0.203 oz. gold per ton (about 529,000 metric tonnes grading 6.96 grams gold per tonne), totalling about 118,000 oz. gold at a cutoff grade of 0.1 oz. per ton (or 3.4 grams per tonne). A 1989 estimate, meanwhile, put the resource at 577,000 tons grading 0.2 oz. gold per ton (523,000 metric tonnes grading 6.86 grams gold), for about 115,000 oz. (Because the calculations are historic, there is some uncertainty regarding the use of short tons. If metric tonnes were used, the gram-per-tonne grades should be lowered by about 9%. However, the total number of ounces would remain unchanged.)

Nestled on a peninsula on the picture-postcard Opeepeesway Lake, the Jerome gold mine operated between 1941 and 1943, and milled 335,000 short tons with a head grade of 0.182-0.189 oz. gold per short ton, or about 304,000 metric tonnes grading 6.24-6.48 grams gold per tonne. Recoveries were about 90%-92.4%, and the mine produced a total of 57,000 oz. gold and 15,000 oz. silver. After 65 years, all that is left is a capped shaft and the remains of a headframe and a mill. The underground workings are flooded, but past owner Muscocho Explorations used them for underground exploration in the 1980s and Augen hopes they will be usable for production if the company discovers an economic deposit.

The capped shaft is 347 metres deep, and there is about 7,500 metres of drifts and crosscuts on five levels. The orebody that was mined was known as the main zone, and it had a strike length of 900 metres. Augen is exploring for extensions of the mineralization in the main zone at depth and along strike. Another vein being explored is known as the south zone, about 120 metres south of the main zone. Fowler says that there are a number of other mineralized veins on the property, for example, the south zone 2, about 80 metres south of the main zone. The two south zones were not mined.

After the mine closed, the property saw a total of 60,000-70,000 metres of diamond drilling by Muscocho Explorations in the 1980s and Osprey Gold in 2004. Augen owns the core, which is kept at Gilla Camp, located near Gogama, about 150 km north of Sudbury and 140 km south of Timmins. Augen rents space at the camp, which has utilities, a core shack, living quarters and a dining room.

Following a helicopter-borne geophysical survey, conducted at treetop level, Augen completed 10,500 metres of diamond drilling in 21 holes to test mineralization downdip and along strike. The first two holes were intended to confirm historical grades. Hole 2 returned 8.35 metres (true width 5.9 metres) of about 15 grams gold per tonne and 0.08% molybdenum from 134 metres depth, including 3.6 metres of 31 grams gold and 0.14% molybdenum. The same hole also returned 4 metres (2.8 metres true width) of 7.9 grams gold and 0.076% molydbenum from 165 metres, including 1 metre of 23 grams gold and 0.078% molybdenum from 168 metres. Hole 1 returned 0.42 metre (0.3 metre true width) of 71 grams gold and 0.17% molybdenum from 165 metres.

The core from five holes drilled by Osprey Gold but not previously analyzed, was also assayed, and the two best intersections were from holes 29 and 30. Hole 29 returned 13.4 metres (true width 9.3 metres) of 5.6 grams gold per tonne and 0.062% moly from 88 metres depth, including 1.8 metres (true width 1.2 metres) of 30.2 grams gold and 0.22% moly. Hole 30 returned 15.6 metres (true width 10.9 metres) of 4.6 grams gold and 0.072% moly from 186 metres, including 1.9 metres (true width 1.3 metre) of 21.1 grams gold and 0.52% moly. All five Osprey holes contained some gold and moly mineralization.

Assays from 18 holes drilled to confirm mineralization at depth and along strike have also been released. Although mineralization does continue at depth at both the main and south zones, grades are lower at depth. Drilling intersected the mineralized main zone in two holes (holes 14 and 17) 1 km west of the Jerome mine shaft and also revealed a new gold-bearing sulphide- rich zone south of the south zone. Gold mineralization was intersected in hole 21 along strike, 700 metres east of the main zone.

Augen concludes that gold and molybdenum mineralization extends to a depth of 600 metres, with a strike length of 2,500 metres. Notable assays include hole 5, which returned 5.7 metres (true width) grading 1.7 gram gold per tonne and 0.013% moly from 373 metres depth; and hole 14, which returned 1.7 metres (true width) of about 1.7 grams gold and 0.047% moly from 146 metres. Most of the 18 holes returned some gold and moly mineralization.

The company will probably conduct a limited drilling campaign in the fall, and is planning to compile a National Instrument 43-101 resource estimate in 2008 based on the combined 70,000-80,000 metres of core from about 220 holes drilled by Augen and past operators. A scoping study is planned for next year. The company is also digitizing all the historic and current assays in order to compile a 3-D model of the mineralized zones.

Augen’s 100%-owned claims total about 198 sq. km. The patented claims, consisting of the Jerome property, are subject to a 2% net smelter return (NSR) royalty, while the unpatented claims have no third-party royalty interest. In July, Augen signed an option agreement to earn a 100% interest in six additional claims, measuring about 6.5 km by 2 km in total, for $100,000 and 120,000 shares. About 3 km south of the Jerome mine, the
claims are subject to a 2.5% NSR royalty.

The Jerome mine is underlain by meta-arkose and meta-conglomerate that have been intruded by the “Jerome porphyry.” The porphyry includes trondhjemite, granodiorite and syenite varieties, with quartz and/or feldspar phenocrysts. The contact between the Jerome porphyry and the metasediments is strongly sheared and altered over a width of some 120 metres. The two mineralized veins, the main zone and the south zone, occur along the edges of the shear zone and are separated by it.

Gold mineralization at Jerome is hosted by blue-grey to black cherty quartz, which also contains the fine-grained sulphide minerals pyrite, chalcopyrite, tetrahedrite, galena, sphalerite and molybdenite. One historical report found an average grade of about 0.09% molybdenum in the main zone. The association of gold mineralization with the presence of molybdenite is not common, but molybdenum mineralization hasn’t received much attention in the past. Since the market for moly is firm, Augen is paying attention. Metallurgical tests to establish molybdenum recoveries have not been conducted yet.

Erratic values of gold also occur in a glassy quartz associated with white carbonate, with chalcopyrite and tourmaline. The gold-bearing cherty blue-grey quartz bodies commonly occur as breccias or disaggregated ribbons and thumbnail-sized fragments, and are cut by glassy quartz veins.

Since it is possible that mineralization continues underneath Opeepeesway Lake, Augen may decide to drill under the lake — either in winter when the lake is frozen, or in summer from a barge. The last campaign already saw drilling in the lake.

The Jerome property has good road infrastructure. The site is accessible via a combination of roads including 11 km of bush road, about 35 km of well-maintained, unpaved logging road (Sultan Road) and a paved highway that leads to Sudbury. There is no electricity on site, and if power is needed for the exploration program, Augen can use a diesel generator or connect to the power line on Sultan Road. If Augen is successful and a mine is built, a longer connection to a heavy-duty power line will probably be required.

Since Augen’s claim block is 45 kmlong, roadandelectricityinfrastructure for any particular site varies, depending on location. However, the area has many logging roads, so chances are that there is a logging road in the vicinity of most potential drill sites. There are also two railway lines in the region, one of which has a station at Gogama.

In July, Augen concluded an exploration agreement with the three First Nations in the area: Mattagami, Brunswick House and Flying Post — an astute move at this early stage. First Nations representatives were also onsite during The Northern Miner’s recent visit. Evidently, management is aware of the significance of maintaining good working relations with the project’s aboriginal neighbours.

Augen shares have been trading at a range of 31.5-$1.05 over a 52-week window. The company has about $2 million in the treasury and 26.5 million shares fully diluted, of which there are about 2 million warrants outstanding. No options have been issued yet.