Sultan deals Kena to Kinross (September 11, 2002)

Vancouver — Frank Lang-led Sultan Minerals (SUL-V) has inked a deal paving the way for Kinross Gold (K-T) to earn a majority stake in the Kena gold project near Nelson, British Columbia.

Under the agreement, Kinross will fund at least $500,000 in exploration costs this year, plus another $500,000 by Sept. 4 next year to acquire the right to earn its interest in the 77-sq.-km property. The gold producer must then spend another $9 million over five years and make annual payments of $250,000 to take hold of 60% of the project. Sultan will remain project operator until the option begins and then Kinross can elect to take over.

“We believe that by entering into this agreement, the project will be moved forward to possible production in the most effective and efficient manner possible,” says Sultan’s President, Arthur Troup, “especially at a time when it is so difficult to raise equity financing for junior resource companies like Sultan.”

The project covers claims wholly-owned by Sultan, as well as six properties held under option by the junior. Over the past year, the company has been busy tying up ground around its Gold Mountain zone. Most recently, Sultan inked a deal with privately-held Arbutus Resources over the Silver King property, which lies 1.5 km southwest of the Gold Mountain discovery zone. The property hosts the historic Silver King mine. In production from 1896 to 1910 the operation yanked out 247,100 tonnes averaging 3.29% copper and 665.2 grams gold per tonne. Some 54 holes drilled in the 1960s and 1970s outlined a proven reserve of 84,000 tonnes grading 2% copper, 0.9% lead and 294.8 grams silver. In 1998, Arbutus defined a strong geophysical anomaly associated with the favourable Silver King intrusive rocks that Sultan has been targeting on the adjoining property. Located 300 metres southwest of the old mine, the anomaly measured 1 km long and 260 metres wide. It has never been drill-tested.

The price tag for the property is $130,000, plus 250,000 shares over a 3-year period, as well as the greater of $240,000 or 120% of the assessed value of the surface rights of the property payable in 2006. Sultan will issue a further 200,000 shares on commercial production or the completion of a positive feasibility study. Arbutus retains a 3% net smelter royalty, which Sultan can reduce to 1.5% by paying $1 million.

Late last year, Sultan inked a deal to pick up the Cariboo, Princess and Cleopatra properties located immediately north of the Kena property. The Cariboo claims host similar alteration to the Gold Mountain zone with grab samples returning up to 5.5 grams gold per tonne.

The company can earn 100% of the properties by paying $51,500 over four years and issuing 200,000 shares. The vendor retains a 3% and 1.5% net smelter royalty on any gold/silver and other metal production, respectively. The completion of a feasibility study gives the claim owner an additional 200,000 shares.

In 2001, Sultan drilled 29 holes into the Gold Mountain zone. Four of the first five holes cut broad low-grade mineralization ranging up to 1.87 grams gold per tonne over 116 metres in hole 3. The style of mineralization suggested a gold-bearing porphyry, favourable for a large tonnage, open pit operation. Subsequent drilling hit sporadic intervals of low-grade mineralization with some holes yielding bonanza grade gold values over 2 metres width.

The latest results are more indicative of a structurally controlled style of mineralization, favourable for higher grades but much lower tonnage.

Most of the high-grade intersections lie near the contact between the Silver King Porphyry and the Elise footwall volcanics, and the values occur in either rock type. The highest gold grades came from hole 3 where a 1.23 metre returned 240 grams gold and hole 8, which yielded a 2 metre interval grading 172.1 grams gold per tonne. These holes were collared 125 metres apart covering a vertical depth of 40 to 190 metres.

So far, Sultan has identified seven promising target areas over the project. Previous exploration focussed on Gold Mountain and the Kena target, some 2-km to the south. The third target, lying another 3 km to the south, is marked by a large geochemical anomaly, dubbed South Gold. The other prospects are defined by historical working dating back to the early 1900’s and include the Great Western, Tough Nut, Starlight, Cariboo and Silver King Mine.

This year’s exploration program was launched in June and consists of mapping, rock chip sampling, soil geochemical and geophysical surveys leading into a drill program, which is expected to begin shortly. The aim of the program will be to expand the known mineralization at the Kena Gold and Gold Mountain zones, as well as scout testing of the five new targets.