Cautious investors show interest in St. Jude

While Ghana’s gold potential is undeniable, junior companies exploring concessions in the West African country are facing increased scrutiny from investors in the wake of a high-profile tampering scandal that took place there last summer.

Several months after the Busang salting scam was exposed, an audit team was unable to duplicate the high-grade gold results reported from the 1997 sampling and drilling program carried out by Golden Rule Resources (GNU-T) at the Stenpad property in western Ghana. The audit revealed that the work program was poorly planned and executed, and found sample tampering to be the most probable cause of the reported high values.

Made wary of grades that appear too good to be true, investors are keeping a close eye on the bonanza grades reported by St. Jude Resources (SJD-V) from diamond drilling of the Father Brown zone at the Hwini-Butre concession in Ghana.

Michael Terrell, president of St. Jude, acknowledges the new era of investor caution, but says the company is confident the grades of its reported intersections are “accurate and conservatively stated.” And he says drill core containing abundant visible gold has been made available for analysts to inspect.

Experts in West African geology say it is not uncommon to find high-grade values in quartz veins and veinlets, particularly in areas that have lured artisanal miners in the past. The challenge, they say, is to define a deposit large enough and continuous enough to warrant a modern mining operation.

St. Jude points out that the Father Brown prospect has been mined for decades by natives, who continue to work the area today.

“The area is infested with so many galamsey (artisanal workings) that it is difficult even to walk there,” says Larry Brock, director of investor relations for St. Jude. “We’ve always known it was an attractive area and that grab samples were good, but we were unable to do detailed geochem[ical] and geophysics programs because of the tortured topography.” St Jude’s exploratory hole intersected an average of 10.23 grams gold per tonne over the first 24 metres, with the mineralized portion of the zone, between 18 and 24 metres downhole, averaging 38.08 grams (including 2 metres of 78 grams). Results from four subsequent holes were impressive; among them were two 14-metre intervals averaging 5.3 grams and 37.57 grams gold.

It has not gone unoticed, however, that all five holes were drilled from the same pad in an east-west-trending fan that tested the extent of the mineralization for only about 50 to 60 metres downdip.

Terrell says this was done because the topography is “so pock-marked” by artisanal workings that it was difficult to find another spot to put the drill. He says the company wanted to make sure the high-grade zone wasn’t an area of pocket enrichment, so it opted to test the downdip extension rather than trace the zone along strike with stepout drilling. “We don’t have it on strike yet,” he says.

The drill section reveals that, with the exception of holes 1 and 2 (6 metres of 38.08 grams and 5 metres of 24.14 grams, respectively), results do not represent true widths. Terrell says work to date shows that the zone pinches and swells, as do other known zones on the concessions.

Hole 2, drilled at a minus-65 angle to the east of the first hole, returned 5 metres averaging 24.14 grams, starting at 19 metres. Hole 3, drilled vertically, hit a 9-metre interval averaging 4.05 grams gold starting at 21 metres downhole.

Hole 4, drilled at a minus-75 angle to the west, hit 14 metres averaging 37.57 grams gold, starting at a downhole depth of 30 metres. This hole also hit a 9-metre interval that ran 57.45 grams gold, starting at 30 metres downhole. Hole 5, drilled at minus 65 to the west, intersected 5.31 grams gold over 14 metres, starting at 44 metres downhole.

St. Jude reports that core from the deposit contains “exceptional quantities of visible gold.” The company does not cut high grades to eliminate possible distortions resulting from “nugget effect,” whereas some companies would, as policy, cut bonanza grades back to 10 grams. For example, the 9-metre high-grade section from hole 4 was derived from the average of nine samples, three of which returned very high grades (94.47 grams, 330.33 grams and 54.9 grams).

All core is split, with half sent to SGS Laboratories in Tarkwa, Ghana, for preparation and testing. Duplicate checks are performed on all high-grade assays. For example, a second lab found the 9-metre section mentioned above to average 65.63 grams gold. Again, a few high-grade samples gave the average a substantial boost.

St. Jude plans to continue drill-testing the mineralized zone, stepping out along strike to the north and south, once new drill pads have been constructed. Work also is planned to test other known targets on the concession. The company’s work program is managed by George Flach, a consulting geologist who has been working in Ghana for about a dozen years.

St. Jude has been exploring the concession for about three years, performing a variety of ground geochemical and geophysical surveys.

The Father Brown zone lies between the Dabokrom and Adoikrom prospects, on the southern portion of the 83-sq.-km Hwini-Butre concession.

“We took a long-shot because it looked like there might be some structural continuity between the Adoikrom and the Dabokrom” Terrell says.

Based on current data from the Father Brown zone, gold mineralization appears to be associated with quartz veining and intense alteration, and to follow a major north-south fault structure.

St. Jude holds the option to earn a 65% interest in the project. The company has completed its exploration and expenditure requirements but is still required to make a cash payment of US$800,000 to its joint venture partner, Hwini-Butre Minerals, a local subsidiary of a European mining company. The government of Ghana holds a 10% interest.

The concession has been worked in the past, notably by Placer Dome (PDG-T) and Finnish major Outokumpu. About seven holes were drilled by the joint-venture partners, including some near the Father Brown zone, but results did not sustain their interest.

Before drilling the Father Brown zone, St. Jude had focused its efforts on the Adoikrom and Dabokrom prospects, situated a few hundred metres northwest and southeast, respectively, of Father Brown.

Previous drilling on Adoikrom identified a highly altered and silicified body of gold mineralization traced along strike for about 200 metres and across a width of about 14 metres. Results from the 1997 spring program include 8 metres averaging 10.54 grams, 8 metres averaging 6.65 grams, and 18 metres averaging 1.28 grams. More drilling is planned to better define its size and grade.

On the Dabokrom target, the company identified a geochemical anomaly measuring about 1 km by 1.5 km. Preliminary drilling was designed to gather enough data to establish a geological model. Holes were spaced at 100-metre intervals and drilled vertically to a depth of 150 metres.

This work indicated that the predominant structure is a series of roughly parallel, north-south mineralized shears dipping west at a shallow angle. The shear zones were found to pinch and swell, with the degree of mineralization varying by location.

Hole 16 returned three mineralized intervals: 4 metres of 2.32 grams gold (starting at 2 metres); 4 metres of 2.7 grams (starting at 66 metres) and 2 metres of 1.06 grams (starting at 116 metres). Hole 17 returned 1.9 grams over 4 metres (starting at surface) and 1.3 grams over 2 metres (starting at 18 metres).

DAK-21 intersected 1.62 grams gold over a 2-metre interval (starting at 38 metres) and 3.78 grams gold over 2 metres (starting at 116 metres). DAK-22 intersected 16.44 grams gold over 6 metres (starting at 94 metres).

The Hwini-Butre concession is situated in western Ghana, about 230 km west of the capital city of Accra. The property lies just 20 km from the port city of Takoradi and has good access to rail and power lines.

St. Jude has about $14 million in working capital and 14.8 million shares out
standing, or 18 million shares on a fully diluted basis.