Pure Gold’s fresh look at Madsen in Red Lake

VANCOUVER — The drills are turning in the shadow of a head frame at Pure Gold Mining’s (TSXV: PGM; US-OTC: LRTNF) Madsen gold property in Ontario’s prolific Red Lake gold district, as the company ramps up exploration and initiates a preliminary economic assessment (PEA) of the former high-grade, underground gold mine.

The Vancouver-based junior has been exploring ways to leverage the infrastructure — which includes a permitted 500-tonne-per-day mill and tailings facility — with the resource  locked in the ground.

“The launch for the PEA is to establish a base-case snapshot with the existing infrastructure and the resource that’s near-surface and ramp accessible, so the scenario we’re looking at is a low capital option,” Darin Labrenz, president and CEO of Pure Gold, tells The Northern Miner at the company’s headquarters in Vancouver.

The resource at Madsen is divided between four shear-hosted and replacement-style mineralization zones — Austin, South Austin, McVeigh and Zone 8 — delivering 3.2 million indicated tonnes grading 8.93 grams gold per tonne for 928,000 oz. gold, plus another 297,000 oz. gold within 790,000 inferred tonnes at 11.74 grams gold.

The Austin and South Austin horizons were the principal sources of mill feed for the historic Madsen mine, which has produced 2.4 million oz. gold since 1935 from surface to 1.2 km deep.

“The mine shut down in the mid-1970s for various reasons, one being that Austin plunged away from the head frame, so by the time they reached the 24 level, it was 2.5 km of drifting just to reach the outer orebody, so it really would’ve benefitted from a second shaft,” Labrenz explains. “If you look at the Campbell mine at Red Lake, there are a number of shafts accessing that orebody, whereas Austin only had one.”

Although the resource at Austin is still “wide open” at depth, Labrenz says that Pure Gold’s focus is on the less-examined potential at the parallel-trending McVeigh horizon, which only saw development down to 300 metres.

“It’s always easier to push the mine down another level because it’s right in front of you, and so long as your mill is well-fed, you don’t really have the time to think about these bigger-picture questions,” Labrenz says.

He explains that his team spent considerable time pouring over the historical datasets on the property last year, searching for what previous operators might have missed in their interpretations of the deposit.

“It’s a data-rich project, so we spent a lot of time working with the data and creating geological models both within the existing mine and externally across the property,”  he says. “We suspected there was tight folding of the geology and that McVeigh may be the same as the Austin horizon, it’s just tightly folded upon itself — and we’re confirming that theory in our drilling.”

Since January, Pure Gold has drilled 3,000 metres in 10 drill holes at McVeigh and Austin, returning geological information that supports the company’s geological model, along with high-grade intercepts of 7 metres of 16 grams gold from 153 metres.

Labrenz says that results so far carry “real implications for the discovery potential at McVeigh, so we’re pretty excited about it.”

Pure Gold is expanding this year’s drill program from 5,000 metres to 16,000 metres, mostly targeting mineralization at McVeigh, with the idea that it “may have the same depth potential as Austin.”

Being a former geologist at Placer Dome’s Campbell mine in Red Lake, Labrenz is quick to point out the technical challenges of pinning down a structurally complicated orebody in the Red Lake mining camp.

Lower production guidance at Goldcorp’s (TSX: G; NYSE: GG) Éléonore mine in Quebec, demotion of Goldcorp’s Cochenour deposit from development to exploration, and the demise of Rubicon Mineral’s (TSX: RMX; US-OTC: RBYCF) Phoenix mine show the challenges producers and explorers face dealing with the highly deformed, 2.8-billion-year-old rocks.

“I worked underground at the Campbell mine and the geology is certainly complex, but let’s not forget that Red Lake is one of the richest gold districts on the planet — it has produced 28 million oz. gold at an average grade of half an ounce per tonne, so certainly the reward and continuity is there,” he says.

After an in-depth conversation about Madsen’s geology with Pure Gold’s director of geoscience Phil Smerchanski and in-house structural geologist Christopher Lee — a former SRK geological consultant, and semi-finalist for the Goldcorp Challenge — it’s clear that Madsen’s advantages outweigh the uncertainties.

“Trying to drill off a structurally controlled deposit at depth is incredibly challenging from surface. We benefit from the fact that not only is our target near-surface, it’s also backed with a 13,000-drill hole database, along with old sections and plans from the mine, and that’s really powerful,” Smerchanski says.

But one of the biggest upsides to the project, Smerchanski continues, is that Madsen’s geology is exposed at surface, unlike Cochenour or Phoenix, which are both underwater.

“We have outcrop where we’re working, so we can develop ideas from the digital database at depth and project them to surface, to see if they make sense,” he says. “The ability to map the property and work on targets that are so close to surface has really helped guide our current drilling and increase our confidence in the geology.”

Labrenz says the company expects to deliver a simple PEA on the project by mid-year, noting that any drill success at McVeigh will be bolted onto the analysis at a later date.

“What we hope to demonstrate is a base-case PEA scenario that is low capital and economically viable,” he says. “The drilling we’re doing at McVeigh will feed into that, so we’re aggressively exploring to add material.”

Pure Gold’s cash and marketable securities total $7.1 million, while shares have traded within a 52-week range of 7¢ to 29¢, and closed at 27¢ at press time.

The company has 125.7 million shares outstanding for a $32.7-million market capitalization.

Macquarie research analyst Michael Gray has rated the stock “outperform,” with a 12-month target of 80¢ per share.