Hawthorne Gold picks up remainder of Taurus Gold deposit

Hawthorne Gold (HGC-V, HWTHF-o) is boosting its gold resources by taking full ownership of American Bonanza Gold’s (BZA-T, ABGFF-o) Taurus gold deposit near Cassiar in British Columbia.

The Vancouver-based company currently owns about 30% of the Taurus property, which is contiguous to its own Table Mountain project.

The sale of the remaining 70% will consolidate the two properties within the Cassiar gold mining district of north-central British Columbia.  

The Cassiar gold belt is a 23-km greenstone-hosted quartz carbonate formation that stretches from Mount McDame in the north to Juniper Mountain in the southeast.

Hawthorne estimates that the realized acquisition cost per in-situ inferred resource ounce, (based on acquiring the remaining 70% of the deposit, or 728,000 ounces of gold), is less than $2.75 per oz. gold.

The acquisition cancels a previous option agreement the two companies had signed in 2007, saving Hawthorne additional cash payments of up to $6 million, the company explains.

The option agreement had required Hawthorne to issue 250,000 shares to American Bonanza in Dec. 2008 and give it cash payments of $3 million in 2009 and a further cash bonus payment of $3 million on the earlier of (i) a feasibility study or (ii) the property moving into commercial production.

Under the agreement, Hawthorne will issue 6.75 million shares to American Bonanza in exchange for 46 mineral claims making up about 70% of the property. Ten of the 46 claims acquired are subject to a 2.5% net smelter return royalty in favor of a third party. American Bonanza will own roughly 13% of Hawthorne.

The Taurus project is a large-tonnage, low-grade gold deposit with a  National Instrument 43-101 compliant inferred resource of 1.04 million oz. gold. The resource holds 32.4 million tonnes at an average gold grade of 1 gram gold per tonne using a cut-off grade of 0.5 gram gold per tonne. 

The project is made up of wholly-owned and optioned mineral claims and the wholly-owned Taurus II property, which has been drilled over the last two years. The drilling has expanded the mineralization with grade intercepts similar to the known resource of 1 gram gold per tonne. 

A former high-grade, small underground gold mine, the Taurus deposit was actively operated in the early 1950s and again in the early 1980s. The high-grade areas were eventually abandoned and attention turned to a large low-grade mineralized zone, where about 370 holes have been drilled.

Hawthorne‘s goal is to become a junior gold producer by moving its wholly-owned Table Mountain gold mine in northern British Columbia into production in 2009.

Table Mountain is a high-grade, underground mining operation. The gold mine, which shut down in Oct. 2007, consists of a 300-ton-per-day, gravity flotation mill, power plant, assay laboratory and permitted tailings pond.

Gold mineralization at Table Mountain is hosted in a greenstone quartz carbonate gold system that is typical of some of Canada’s largest gold camps, including Timmins, Kirkland Lake and Val d’Or, the company notes on its website.

Hawthorne is also working towards a resource estimate at its Frasergold project in the historic Quesnel Trough area in the Cariboo region of south-central British Columbia and believes potential exists for a low-grade, bulk tonnage open-pit mining operation there.

The company compares the potential of a mining operation at Frasergold to Kinross Gold’s (K-T, KGC-n) Paracatu gold mine in Brazil and its Fort Knox gold mine near Fairbanks, Alaska, which are both low-grade, open-pit bulk tonnage operations. Paracatu and Fort Knox operate at a grade of 0.38 gram gold per tonne and 0.86 gram gold per tonne, respectively, the company notes.

Under a 2006 option agreement with Eureka Resources (EUK-V), Hawthorne can earn a 51% interest in the Frasergold property by spending $3.5 million on exploration, finishing a feasibility study by April 30, 2010, and making cash payments totaling $175,000 ($75,000 paid to date) before Oct. 31, 2009. Hawthorne can earn an additional   9% (for a total of 60%) by arranging financing for 70% of the estimated capital costs for production.

At press-time, Hawthorne was trading at 35¢ per share but has traded in a 12¢-$2.41 per share band over the last year. The company has 26.5 million shares outstanding.

American Bonanza Gold was trading at 4.5¢ per share and has a 52-week trading range of 2¢-27¢ per share. The company has 115.6 million shares outstanding.