Is a Cassiar Revival in Sight?

SITE VISIT

Cassiar, B.C. — For more than 10 years, Cassiar was a ghost town. The northern B.C. town had thrived on an asbestos mine for 40 years but in 1992, the mine suddenly shut down due to diminishing demand and the expenses of converting an open-pit operation to an underground mine. Most of the town, including houses, were sold off and trucked away, or bulldozed and burnt to the ground. Only a Catholic church, a hockey arena, and four old apartment blocks still stand, accompanied by one of the largest tailings piles in the world.

But the ghost town is experiencing a revival, with two exploration companies — Cusac Gold Mines (CQC-T, CUSIF-O) and Columbia Yukon Explorations (CYU-V, CYUXF-O) — working within a few kilometres. Cusac has been in the area for years, searching out gold; Columbia Yukon joined the Cassiar scene only a few years ago to explore for molybdenum. Disparate though they may be, they’re working together where possible. In fact, both companies are housing their staff in the abandoned apartment blocks.

The township is still diesel- powered; the nearest point of a B.C. electrical grid is the town of Stewart, some 350 km south. Access is straightforward, as the town sits just a few kilometres off highway 37, and there is telephone service and a revitalized airstrip now busy with activity.

Moly Storie

A few kilometres southwest of Cassiar, near the top of the hill that rises gently out of Troutline Creek then plunges down into Lang Creek, sits the Storie molybdenum deposit. Columbia Yukon Explorations optioned the property from private Calgary-based Eveready Resource in March 2006, signing a 5-year payment agreement worth $1.15 million and 600,000 shares as well as $4 million in exploration spending.

Eighteen months later, Columbia Yukon is so confident in the deposit that it has already completed its option payments and has drilled 24,000 metres since mid-July.

“We’re not goofing around on this thing — we want to finish all the drilling that’s needed on the property in the next 24 months,” says president Ronald Coombes. “We’ve got four drills turning day and night and it’s going extremely well. I’m just tickled.”

After a 20-hole, 5,000-metre drill program in 2006 designed to twin many of the holes drilled by Shell Canada Resources in 1979 and New Jersey Zinc in 1970, Columbia Yukon had the resource estimate recalculated to comply with National Instrument 43-101 standards. The report found that Storie hosts an inferred resource of 101.6 million tonnes grading 0.67% molybdenum, based on a 0.035% molybdenum cutoff, an open-pit depth maximum of 325 metres, and an assumed 1.5:1 stripping ratio.

The deposit as currently outlined is a slightly elongated circle, measuring 700 by 600 metres, but it is still open to the east, west, and north, as well as at depth. It occurs within the Cassiar Stock, which is composed mostly of quartz monzonites, and mineralization is associated with quartz-feldspar porphyry.

The zone is cut by northerly and easterly trending faults, most notably the west-southwest-trending Crone fault. The deposit consists of one or more vertically separate and interconnecting tabular to lens-shaped bodies, generally parallel to the Crone fault. There is no large-scale quartz stockwork of vein system; rather, molybdenite occurs as selvages on or within quartz veinlets and as coatings on fracture surfaces, grains or smears on slickensided fractures, rosettes and disseminations.

Columbia Yukon’s 2006 drill program met with success, returning numerous intercepts of over 100 metres grading between 0.05% and 0.12% molybdenum. Several intercepts included higher-grade segments, including: 128 metres of 0.063% moly from 27 metres depth in hole 13, with the top 87 metres grading 0.07%; 69 metres grading 0.104% moly from 117 metres in hole 5; and 186 metres of 0.098% moly in hole 8.

Based on those results, the company closed a series of financings and then announced an ambitious 30,000- to 40,000-metre, $6-million drill program for the second half of 2007. As of mid-October, drillers had completed 24,000 metres and planned to keep drills turning at least a few more weeks, to complete up to 10 more holes.

Much of the program is aimed at infill drilling so as to upgrade the inferred resource to indicated, though a number of holes are being drilled to the east of the current resource to expand the deposit.

The company has received assay results for the first 16 holes from the 2007 program, all of which were drilled east or south of the resource boundary. The results extended the mineralization 100 metres east along the Crone fault.

Most of the assay results were similar to those from the previous year. Hole 27 returned 80 metres grading 0.082% molybdenum from 110 metres depth, and hole 29 intersected 57 metres grading 0.1% moly from 66 metres.

Several holes returned shorter, higher-grade assays: hole 31 cut 54 metres of 0.18% moly from 36 metres depth, and hole 33 hit 9 metres of 0.238% moly from 51 metres.

As an interesting note to those grades, Columbia Yukon was worried about molybdenite loss in the core-splitting process and twinned one of its 2006 holes (no. 20). The entire core from the new hole (no. 41) was sent to the assay lab, unsplit. Hole 20 had returned 87 metres of 0.093% moly; the whole-core assay for hole 41 returned 78 metres grading 0.125%, a 30% difference. Coombes says the company is currently twinning two more holes to determine if a 30% loss is the norm.

The company also recently completed an induced-polarization (IP) survey of Storie that pointed to the deposit’s expansion potential.

“The IP shows the X fault as being much more significant than the Crone fault,” Coombes says. “It displays as a strong linear feature with multiple parallel breaks, and potentially larger than Crone as far as setting goes. You never know until you drill it, but it’s exciting.”

In mid-October, Columbia Yukon was trading around $1.35. The company has a 52-week trading range of 39-$2.88 and 33.1 million shares issued, 50.6 million shares fully diluted. Coombes says the company currently has roughly $15 million in the bank from recent financings and a fairly steady cash stream from the exercise of warrants.

Confident in Cassiar

Cusac Gold Mines has been working in the Cassiar region since 1978, though the family ties go deeper. A photo on the company’s website shows Guilford Brett, Cusac chairman, prospecting in the Cassiar in 1957. It was Brett who in 1978 staked some of the mineral claims the company still holds.

Commerical gold production at Table Mountain, the gold centre of Cassiar to date, started up in 1979 and has continued intermittently since then. The original mill, built in the late 1970s, burned down in the mid-1980s; the 300-ton-per-day mill that currently sits on-site was built in 1986. Cusac’s private joint- venture partner Total Energold shut down production in the late 1980s and struck a deal to sell all its claims, mill, buildings and equipment to Cusac, which has been the sole owner and operator since.

Cusac restarted production at Table Mountain in 1993. Aside from a brief shutdown in 1997, the mill ran through the 1990s, producing 60,000 oz. gold from Table Mountain. Low metal prices forced Cusac to let the project sit idle for the next few years, but in 2005, the company started nosing around its favourite district again. And they’re finding that this old hunting ground still contains some significant gold.

All told, Cusac’s Cassiar property is a 175-sq.-km land package host to numerous gold deposits and exploration targets along a 10-km belt of favourable stratigraphy.

Table Mountain is still the only deposit to have seen production. In December 2006, Cusac poured the first gold bars since 1999, using ore mined from the Rory vein. Rory lies on the north side of Table Mountain, less than 1 km from the mill, and hosts probable reserves of 14,500 tonnes grading 13 grams gold.

On the
south side of Table Mountain sits the portal to the West Bain vein, which was mined out to produce some 24,000 oz. gold. To get to the untapped East Bain vein, which hosts 25,400 tonnes grading 14.2 grams gold, Cusac knew itwould have to use 230 metres of the West Bain decline, and then turn east and blast another 400 metres.

Given the advanced development necessary to access the East Bain vein, Cusac decided to start mining at Rory. Unfortunately, Rory’s geology was not as predicted. The expected quartz veins and stringer zones were present, but much wider than expected and contained significantly lower grades than drill cores had returned. Thus Cusac processed substantially lower tonnage and grade than predicted.

The company turned its attention to the East Bain vein, where problems were also encountered. The first 205 metres of the West Bain decline had to be widened to accommodate 13-tonne underground trucks, which initially went well. Then ground conditions worsened and the company had to start on the new decline 78 metres earlier than expected. After the bypass, Cusac’s workers managed 228 metres on the 15% grade decline, during which they came across an unexpected zone of alteration and quartz veining with visible gold, before hitting extreme water flows from an intersected fault in October. Though the decline is within 150 metres of the vein, Cusac has decided to postpone development for the winter to concentrate on the project’s other major focal point, the Taurus deposit.

Taurus sits roughly 4 km northwest of the Rory vein, along the same stratigraphic trend. A near-surface, bulk-tonnage, disseminated gold deposit, Taurus hosts 32.4 million tonnes grading 1 gram gold for 1.04 million oz. gold.

Taurus hosts numerous quartz veins that were explored in the 1930s. From 1981 to 1988 an underground mine produced 35,000 oz. gold. Later, geologists began to see potential for large-scale, lower-grade mineralization. A few broad intersections attracted Cyprus Amax, now part of Phelps Dodge (PD-N), to the project. Cyprus drilled 13,500 metres in 78 diamond-drill holes and completed a preliminary economic analysis. After Cyprus left the scene, other operators drilled 55 more holes into Taurus.

Over the summer, Cusac conducted a 25-hole infill and stepout drill program designed to increase tonnage, improved resource confidence and conduct metallurgical testing. Assays returned broad zones of near-surface, low-grade mineralization, as well as higher-grade zones within the deposit and at depth.

Hole 1 intercepted 80 metres grading 1.15 grams gold per tonne from 3 metres depth, followed by 11 metres grading 2.11 grams gold at 100 metres below surface. Hole 2 returned a similar 64-metre section grading 1.14 grams gold, as did hole 7, which intersected 116 metres of 0.9 gram gold from 55 metres. Hole 9 found a higher-grade zone near surface, cutting 6 metres of 4.17 grams gold from 4 metres depth. All gold grades were capped at 12.42 grams gold.

Work at Taurus shows intensely altered volcanics hosting abundant quartz veins and stringers, some containing visible gold.

Low relief and near-surface mineralization make Taurus amenable to open-pit mining. A February 2006 Wardrop report concluded an open-pit operation could be profitable at a gold price as low as US$450 per oz. Cusac is aiming for a prefeasibility study in the near future.

Cusac owns 30% of the Taurus deposit claims outright, and is optioning the other 70% from American Bonanza Gold (BZA-T, ABGFF-O). The option agreement calls for Cusac to pay $6 million and 3 million shares over two years.

In mid-October, Cusac was trading around 12. The company has a 52-week trading range of 10-35.5 and 83.9 million shares issued.