Sennen and North Arrow turn to Arctic gold

Sennen Resources (SN-V) is showing its faith in Arctic gold by cutting a deal with North Arrow Minerals (NAR-V) for a stake in its Hope Bay Oro gold project in Nunavut.

In a somewhat convoluted deal, a third junior Chelsea Minerals (CCC.H-V), will buy the right to earn a 60% interest in the project from North Arrow, only to be subsequently acquired by Sennen.

The Oro project covers 40 sq. km adjacent to Newmont Mining‘s (NMC-T, NEM-N) Hope Bay Gold mine, which is scheduled to go into production sometime this year. Once it does, it will represent the second major gold mine in Nunavut after Agnico-Eagle Mines‘ (AEM-T, AEM-N) Meadowbank gold mine, which went into commercial production last year.

Sennen will earn its stake in the grassroots exploration play by paying $50,000 in cash to North Arrow and spending $5 million over five years, of which $500,000 must be spent in the first year.

The acquisition of Chelsea will come through a share exchange that will see Chelsea shareholders get one Sennen share for every two and one half Chelsea shares.

The deal will give Chelsea shareholders access to Sennen’s treasury, which is currently stacked with over $15 million in cash ready to be poured into exploration at Oro.

In reaction to the deal, on Feb. 2 Sennen shares were up 19% or 6¢ to 37.5¢ on 124,000 shares traded, while North Arrow shares were up 17% or 3¢ to 20¢ on 1.1 million shares traded. Chelsea shares were flat at 18¢.

Newmont’s Hope Bay project is made up of three main deposits – Doris, Boston and Madrid – which together contain over 9 million oz. gold.

The leases being acquired by Sennen make up the northern 10 km of the 80-km-long Archean greenstone belt which hosts Newmont’s deposits.

While Sennen can take a majority stake, the exploration program will be run by North Arrow. The company says it will start drilling and surface exploration as early as possible but gave no specific dates.

North Arrow says there are several gold showings and potentially gold-bearing structures on the site but they have been minimally explored.

When the program does get underway, it will focus on two mineralized zones: the Ida Point prospect at the northern end of the property; and the Wombat zone at the southern end.

Trenching at Ida over a 400-metre strike length returned gold values of 11.6 grams per tonne gold over 1.9 metres and 24.7 grams over 5 metres.

A 4-hole diamond drill program in 1998 returned intersections of 14.3 grams over 2 metres and 5.5 grams gold over 6 metres.

As for Wombat, North Arrow describes it as a gold-bearing shear zone which has been traced for more than 1 km near the property’s southern boundary. Several short holes have been drilled, returning 40.3 grams gold over 2.7 metres.

As for gaining access to the remote project, the benefits of being near Newmont again come into play, as Newmont has built a port and airstrip just a few kilometres away from the site.