Rubicon Expands Its Red Lake Jewel

SITE VISIT

RED LAKE, ONT. — In summer, Red Lake (population 5,000) is a charming place, well known for its abundant fishing and annual float-plane festival which attracts spectators from all over the globe. In winter, however, the weather can be rather less inviting. This was the case on a recent visit to Rubicon Minerals’ (RMX-T, RBY-X) Phoenix gold project, when the northwestern Ontario town greeted visitors with a -25C wintry blast.

But Red Lake is also home to a prolific gold camp, which has produced more than 24 million oz. gold to date and where Rubicon controls 10 exploration projects totalling about 260 sq. km, which the company says is 40% of the core of this district.

And this is where Rubicon drilled into high-grade gold mineralization early last year on the F2 zone, part of its 7.5-sq.-km Phoenix project, located on Red Lake’s East Bay. Phoenix is 27 km from the town of Red Lake, 7 km northwest of Goldcorp’s (G-T, GG-N) famed Red Lake gold mine complex, and 5 km northeast of its past-producing Cochenour- Willans mine.

Beside the Phoenix claims, Rubicon also controls mining infrastructure on the project, including a shaft, a hoist, a headframe, a mill and a tailings pond. The shaft is 450 metres from the F2 zone.

The discovery holes on F2, drilled in early 2008, were holes 1, 2 and 3, suggesting that Rubicon’s geologists were somehow lucky to have hit mineralization so early in the drilling program. But in reality, the discovery was preceded by years of exploration. After the company acquired the property in 2002, Rubicon drilled 98,000 metres, and completed 22,000 sq. metres of trenching and stripping. The company has also re-logged and re-sampled some of the 55,000 metres of the historic drill core stored onsite.

“It has taken us a long time to twig onto a system which we think has the potential to be the next big discovery in Red Lake,” says David Adamson, Rubicon’s president and CEO.

The assays of the discovery holes were released last March. Hole 1 returned 4.5 metres of 8.4 grams gold per tonne from 95 metres depth, plus 11 metres of 6.8 grams gold from 235 metres. Hole 2 cut 25.3 metres of 3 grams gold starting at 185 metres depth, 28 metres of 3.3 grams gold from 367 metres, and several shorter high-grade intercepts, including 1 metre of 36 grams gold from 305 metres. And hole 3 returned 1 metre of 283 grams gold from 268 metres. (True widths are unknown.)

From the first hole, the company saw some interesting alteration associated with high-titanium basalts, says Ian Russell, Rubicon’s regional exploration manager.

After drilling the F2 discovery holes, Rubicon conducted a deep-penetrating magneto-telluric geophysical survey based on resistivity and induced polarization, designed to detect deep anomalies. The survey defined a 1,500-metre-long chargeability anomaly with depths to 750 metres — the depth limit of the survey. The anomaly partially correlates with mineralization found so far, but more drilling will be required to prove that it describes the contour of the mineralized envelope. Rubicon says the chargeability anomaly is correlated to the presence of sulphides.

Following the geophysics survey, the F2 zone returned a number of other notable holes. Hole 7 cut 17 metres of 24 grams gold from 378 metres depth, plus 3 metres of 73.2 grams gold from 246 metres and several other intervals. Hole 8 intersected 11 metres of 42 grams gold at a depth of 295 metres, plus several shorter intervals. Hole 35 returned three short intersections totalling 11 metres that graded 14-391 grams gold from depths of 887-1,127 metres. And hole 29 returned eight sections totalling 41 metres grading 3.7-891 grams gold from depths of 328-871 metres. True widths are unknown.

“What makes this F2 discovery intriguing is that it has a significant proportion of high-grade gold. We have a system that goes down 1,100 metres,” Adamson says. “Every hole has an economically significant intercept in it, and a significant portion of high-grade gold in the setting, which we think is analogous to the Campbell-Red Lake setting. So we think the F2 zone is starting to show signs of being a major gold discovery in Red Lake.”

Last year, Rubicon drilled 56 holes totalling about 41,000 metres, with the majority, 35,000 metres in 39 holes, drilled on F2. Of these, assays for 35 holes have been released, all of which returned gold mineralization.

During The Northern Miner’s visit, a number of drill-core intersections with visible gold were observed, including a bonanza-style core with prominent solid visible gold.

Rubicon’s geological model describes a vein system, with horizontal vein widths typically in the 2-4 metre range. The most closely spaced drilling was done within a 170-metre strike length, giving it a high degree of confidence. This central zone is now known as the F2 core zone. Stepout drilling extends this to the northeast, to a possible 360-metre strike length, but more infill drilling will be required to prove continuity along the extension.

And with the recent release of assays from hole 39, the strike length could grow by a further 220 metres to the southwest, for a total of 580 metres.

Hole 39, a stepout hole, returned 0.5 metre of 3,151 grams gold from 119 metres depth and 1 metre of 35 grams gold at 678 metres. Altogether, the hole returned 10 intersections that totalled 38 metres with gold grades ranging from 3.5 grams to 3,151 grams per tonne at depths of 119-959 metres.

Rubicon says the mineralization in hole 39 is similar to that found in previous holes, which may suggest it has hit the same mineralized system.

Adamson says the system is growing laterally, and is open in all directions.

“Our stepout drilling, where we have been reaching out where we think the system should be present, has been highly successful, so there is a very high hit ratio outside of the zone to suggest that this system is going to continue on strike and to depth.”

In February, Rubicon released assays from five more holes, numbered 40 to 44, drilled within the northeast and southwest extensions of the 170-metre core F2 zone. All five cut gold mineralization, with the best intercept grading 174 grams gold per tonne over 2.5 metres in hole 44. The holes were drilled within the chargeability anomaly. Some were drilled at distances of up to 200 metres northeast of the core F2 zone, and others southwest of the zone.

“This is one of our major corridors that we are focusing on now,” Russell says.

“As we start stepping out along strike, we see very similar alteration assemblages,” he adds. “And we are certainly encouraged by the vertical continuity of this F2 zone.”

The vein starts at 100 metres depth, ending at 1,100 metres, but it is not continuous or uniform. A substantial portion of the mineralization seems to be in the 100-to 500-metre depth range. But overall, the vein is made up of about three to four consecutive vertical sections totalling about 800 metres, within a 1,000-metre vertical length.

The vertical sections are not identical. The mineralization is best described as a braided or interweaving vein. For example, the 100-to 500-metre depth range has two to three parallel sub-veins.

“We now know fairly clearly (that) there are multiple parallel zones, which is. . . what the model would predict,” Adamson says. “But the more drilling we do, the more we see these zones being developed. So the potential for this to be multiple parallel zones is now, I think, very clear.”

And Russell says that F2 is not necessarily a single zone, but potentially “a series of zones that are multiple zones dipping off to the northwest.”

Geology

What is most striking about the F2 discovery is how crucial it was to understand the geology in and around Phoenix before the discovery could be made.

“The concept behind why we wanted to drill these holes,” Russell says, “it really came down to a c
orridor of crosscutting northwest structures, north-trending structures, the right stratigraphy.”

Rubicon constructed a geological model using its own drilling results, as well as detailed geological information from the Campbell and Red Lake mines made available by Goldcorp. The model allowed Rubicon to put drilling results into context, decide what the exploration program should concentrate on, and identify the more promising targets.

The key geological feature at Phoenix is the East Bay deformation zone, which is a structural break with strong-to-moderate deformation. The zone starts at the Cochenour-Willans mine, and continues through the past-producing Abino mine. It proceeds through the Phoenix project, and continues to Goldcorp and Premier Gold Mines’ (PG-T, PIRGF-O) East Bay project. The Bruce Channel gold discovery, acquired last year by Goldcorp in a $1.5-billion takeover of Gold Eagle Mines, may also lie on the East Bay deformation zone.

A technical report on Phoenix filed by Rubicon in January describes it as underlain by a north-northeast-trending, westerly-dipping belt of deformed and intermixed metasediments, mafic volcanics and ultramafic rocks that define the East Bay trend. The Archean-age rocks are part of the Balmer sequence.

A strong north-northeast trending structural fabric through the area is considered part of the East Bay deformation zone, which extends south into the Cochenour-Willans mine area. There, it intersects the northwest “mine trend” of the Red Lake mine.

Russell describes the geological setting of the project as a “regional series of northwest-trending structures, basically slamming into the Phoenix project, where they are intersecting another series of stratigraphy dipping to the northwest, and also associated with an F1 fold structure, (and) F2.”

He says: “It’s the high-angle intersection of the two that we believe plays a very important role in the gold mineralization in this project, and also what they (Goldcorp) have in the Campbell and Red Lake complexes.”

The technical report says the zones that are prospective for mineralization occur at the high-angle intersection of northwest-trending structures (known as F2) that crosscut the northeast-trending East Bay deformation zone, in conjunction with the footwall stratigraphy defined by Rubicon (which also trends northeast). The three key rock types are ultramafic, mafic and associated felsic intrusives.

Lithology

According to the technical report, the main host for mineralization at the F2 zone has been the internal basalt sequence, but high-grade intercepts have also been encountered in the ultramafic rocks and felsic intrusions.

“A strikingly similar stratigraphic package of rocks hosts the mineralization at the Red Lake gold mine,” it notes.

Russell and Adamson say that geochemical work at the Red Lake mine has shown that high-iron, high-titanium basalts “are key units that host a lot of the high-grade mineralization,” at both the Campbell- Red Lake and Cochenour mines.

“It’s not all just a sea of ultramafic,” Russell says, adding that the complex package of rocks at the F2 zone is “an absolute dead ringer” for the package that hosts the high-grade at Red Lake and Campbell.

The technical report says the stratigraphy of the F2 zone may have either mafic volcanic-hosted mineralization or felsic intrusive-hosted mineralization. The mafic volcanic-hosted mineralization is of particular interest because of its potential high grade and large size. A third style of mineralization found in the Red Lake greenstone belt, known as stratabound deposits, is considered unlikely in the F2 zone.

John Watkins, Rubicon’s consulting geologist, says that mineralization in the F2 core zone is hosted in basalts and in ultramafics.

“This relationship is very important, between the basalt and the ultramafic,” Watkins says. “At the Red Lake mines, the orebodies occur in basalt, or in ultramafic rock close to basalt. This is the ultramafic-to- basalt contact.”

Pointing at a cross section of the mineralization, Adamson says: “You have to see the alteration. That’s actinolite alteration. There is very strong biotite. There is a huge halo of alteration, which is what you would expect in a big hydrothermal system.”

Although the key lithology is the basalt unit, another lithology found at Phoenix, which Rubicon suspects is analogous to rocks at the Campbell and Red Lake mines, is found at what the company used to call informally the “north zone.” At the north zone, mineralization is associated with veins in felsic intrusives, and Rubicon speculates that this lithology could be equivalent to the rhyolite unit at the Red Lake mine complex.

Within Rubicon’s Phoenix claim boundary, the East Bay deformation zone is 3.5 km long and trends to the northeast. It is moderately to steeply dipping to the northwest into Rubicon’s claim.

Rubicon says three styles of mineralization are present at F2. The first is found within broad, sulphide-rich zones with up to 20 grams gold per tonne. The second is found in breccia zones, with up to 73 grams gold. And the third is bonanza-style, often with prominent visible gold, and grading up to 3,000 grams gold per tonne over short intercepts.

At Phoenix, the East Bay deformation zone is close to the property boundary with Goldcorp’s claims to the east, and straddles both sides of the boundary. However, Rubicon believes that along the 3.5-km trend, most of the key prospective stratigraphy is on its own side of the claim border. Furthermore, the potential mineralization in the downdip extension, which dips to the northwest, is on Rubicon’s side.

Infrastructure

The Phoenix project, formerly known as the McFinley property, has been explored since the 1920s, with exploration proceeding intermittently until Rubicon optioned the property in 2002.

McFinley Red Lake Mines explored the project in the 1980s, drilling 61,000 metres, some from surface and the rest from a three-compartment, 142-metre-deep exploration shaft dating back to 1956. Located on the McFinley Peninsula, it was formerly known as the McFinley shaft and has now been renamed the Phoenix shaft.

In the late ’80s, McFinley Red Lake Mines built a 150-tonne-per-day mill on the peninsula, a hoist on the shaft, and a tailings pond. But the company experienced financial difficulties soon after construction, with almost no mining taking place.

Rubicon estimates hoist capacity at about 500 tonnes per day, and hopes that it could be pushed to 750 tonnes per day.

Adamson estimates that the existing infrastructure on the McFinley Peninsula is worth $25-30 million, and two to three years of construction time. “Moderate development costs should apply here. If we can fast-track this over the next two years, we could well be in a somewhat unique situation,” he says.

“This is a project, in a sense, (with) a mine built waiting for a deposit.”

Rubicon has started to dewater and rehabilitate the Phoenix shaft, which it plans to use in its drilling program this year. The work should be complete in March. It has also submitted a closure plan to the Ontario government, and if approved, the company plans to extend the shaft by about 200 metres to a depth of 350 metres, and carry out 200- 250 metres of drifting to the southeast. This will bring the drift to within 200-250 metres of the F2 mineralization, facilitating an underground exploration program.

A $15-million drill program is under way, with 36,000 metres of a total 40,000 metres planned for F2, both from surface and underground. Currently, two drills are operating from surface. Once the Phoenix shaft is extended and the drift completed, Rubicon plans to add two drills underground. If all activities are completed on schedule, Rubicon hopes to start drilling from the shaft in the summer, and from the drift in the fall, subject to permitting and ground conditions.

Paradoxically, Rubicon seems in no rush to compile a National
Instrument 43-101 resource estimate for Phoenix. This reluctance stems from a fear that, with the limited drilling completed to date, such an estimate would not reflect the full potential of the discovery.

An estimate produced in the 1980s put inferred resources at 334,000 short tons grading 0.2 oz. gold per ton (303,000 tonnes at 6.86 grams gold per tonne), for 67,000 oz. gold, but this was based on mineralization to a maximum depth of 122 metres.

A subsequent internal estimate produced by McFinley Red Lake Mines put resources at 890,000 tons grading 0.19 oz. gold per ton (808,000 tonnes at 6.51 grams gold), for 169,000 oz. gold.

In summer, drilling is conducted from a barge on East Bay, which is about 50 metres deep, while in winter it is done from ice. This being one of the premier gold mining districts, infrastructure in the area is good.

Phoenix includes water-covered claims and land claims. The water-covered claims, which include the F2 discovery, are subject to a 2% net smelter return (NSR) royalty, for which advance payments of US$50,000 per year are due. Rubicon can buy 0.5% of the royalty for US$675,000. The land claims are subject to an NSR royalty of 2-3%, for which advance payments of $75,000 per year are due. Rubicon can buy 0.5% of that royalty for $1 million.

Although Phoenix is now Rubicon’s main focus, the company has a pipeline of other projects at Red Lake, as well as one in Nevada, and one near the Pogo mine in Alaska.

The company has 156.2 million shares outstanding, or 171.6 million shares fully diluted. On Dec. 31, Rubicon had an estimated $23 million in the treasury. At presstime, Rubicon shares were trading at $1.75 in a 12-month range of 90¢-$2.

Rubicon’s largest shareholder is mining tycoon Robert McEwen, who holds about 29%. The company has 10.7 million warrants outstanding, which expire on May 21, with an exercise price of $1.50. Of these, 7.1 million warrants are controlled by McEwen.

In February, Rubicon announced a private-placement financing of 25 million shares at $1.60 apiece, for $40 million. The offering was scheduled to close in early March.

In a January research report, Research Capital analyst Barry Allan rated Rubicon a buy with a $2.78 target. And in December, GMP analysts Jacques Wortman and Eldon Brown rated Rubicon a buy with a $2.10 target.