Northern Gold takes more land around Garrison

Northern Gold Mining (NGM-V) is adding to its hefty land position in northeastern Ontario.

The company has cut a deal with privately held Tiger Gold Exploration to acquire its Buffonta property, which sits near Northern Gold’s flagship Garrison gold property.

To get the claims, Northern is paying Tiger $1.5 million in cash and a 3% royalty, and issuing 3 million of its shares a year after the deal closes.

The Buffonta claims are in the Garrison, Thackeray and Harker townships, 4 km southwest of the Garrison project, and covering 15.6 sq. km of ground.

Northern says that Archean rocks underlie most of the property and are 3.3 km south of the east-striking Destor-Porcupine fault zone, which is associated with many of the big gold deposits in the Abitibi greenstone belt. The southern portion of Buffonta is intersected by the Ghostmount fault, which hosts the legendary Holt-McDermott mine.

But Buffonta isn’t only about prospective real estate — the property also hosts known deposits. Three gold zones have been outlined over the years, including the Open Pit zone, the No. 5 zone and the No. 6 zone. Northern Gold says that historical production reports indicate 9,000 oz. gold was recovered from 63,000 total tonnes milled at the Kerr-Addison mill.

The same reports suggest a non-National Instrument 43-101 compliant resource of 544,000 tonnes of material at 4.8 grams gold remains in the three zones. Northern Gold cautioned that it isn’t treating the historic information as current, and can’t yet be relied upon.

The deal is the first significant move since the company brought Greg Gibson on board as its CEO in July. Gibson was formerly president and CEO of Trelawney Mining, which discovered the Côté Lake gold deposit in northern Ontario, and was later sold to Iamgold (IMG-T, IAG-N) for a cool $585 million.

The company’s Garrison project hosts the Garrcon deposit, which has measured resources of 17.6 million tonnes grading 1.06 grams gold for 604,000 oz. gold; indicated resources of 20.8 million tonnes grading 1 gram gold for 668,000 oz. gold; and inferred resources of 15.8 million tonnes grading 0.72 gram gold for 367,000 oz. gold.

A preliminary economic study on Garrcon envisions an open-pit mine that would produce 130,000 oz. gold per year over an eight-year mine life at cash costs of US$495 per oz. The initial capex is pegged at $156 million, and the net present value of the project is calculated as $265.9 million.

If all goes well, Northern Gold plans to have the deposit in production by mid-2015.