Geology Unlike Any Other
The geological understanding of the Golden Triangle is still unfolding. Geologists are scrambling to understand what created the phenomenal concentrations of gold at the Valley of the Kings discovery of Pretium. Recent drill results include 0.5 meters that carried 41,582 grams per tonne gold (1.6 feet at 1,213 ounces per ton of gold). Another hole hit 2,393 g/t gold 1,605 g/t silver over 10.7 meters (70 ounces gold and 47 ounces of silver per ton over 35 feet). Numerous intersections have exceeded 1,000 g/t,grades rarely seen in gold deposits.
The broad picture, in simplest terms, is that most of British Columbia is made up of blocks of crustal material (terranes) that have been accreted to the coast over a period of hundreds of millions of years. Those terranes include a wide variety of rock types, including metal-rich material derived from the depths of the crust.
Most metal deposits are derived from hydrothermal systems. That is, superheated water, circulating kilometers deep in the crust, gathers metal atoms and then deposits them in particular zones, creating concentrations of metals. Typically, such a system would remain active for hundreds of thousands of years to as much as perhaps a couple of million years. For reasons not yet well understood, the hydrothermal processes in the Golden Triangle were active for much longer, in some areas for perhaps 10 million years. Few areas on the planet have seen such long-lived geological conditions.
That long period of stable mineralizing systems played an important role in creating the high concentrations of metals at Eskay Creek and Valley of the Kings. It is also the reason for the very large and well mineralized systems at Red Chris, KSM, Galore and other porphyry deposits in the region.
Historic work throughout the region in almost every instance started with recognition of metals at surface and then tracked the deposit beneath the surface. Only in retrospect are the geologists putting together the bigger picture and probing what were the geological conditions that created such immense mineral wealth. The next step in this evolving exploration story is to start with the bigger geological story and begin to look for metal deposits that do not stick out of the ground. There is every reason to believe that there are numerous similar deposits that are hidden beneath the surface.
One interesting point to ponder is that many of the discoveries have been made at high elevation, above the tree line, where the rocks are well exposed. In fact, many of the deposits were found where glaciers have only recently retreated, leaving the rocks completely uncovered. It is more than probable that there are additional discoveries waiting to be made under the thick forests that cloak the valleys and lower slopes of the mountains.
As the geological understanding builds, geologists, guided by the regional features, will use geophysics and other tools to probe untested areas. That process is just getting underway and could add enormous value to companies that hold large land positions in this region.
American Creek Resources
( AMK-TSXV)
American Creek has several exploration projects in British Columbia, the most significant of which is a property adjacent to and on trend with two of the largest gold deposits in the world. Drilling on that property has confirmed that the rich mineral endow- ment on the adjacent properties carries across the property boundary. While that property is exceptionally well located, American Creek's interest in the property is subject to litiga- tion. This highly prospective mineral claim is worth fighting over.
The Treaty Creek property is located just north of the KSM deposits of Seabridge and Pretium's Snowfield and Brucejack deposits. Those deposits host a total of 130 million ounces of gold, 800 million ounces of silver, 21 billion pounds of copper plus molyb- denum and other metals, representing one of the premier concentrations of metal wealth anywhere.
The Treaty Creek property hosts the same rock units and structural features that are related to the vast mineral deposits on the properties to the south. The structural trend appears to continue on to the Treaty Creek property.
Surface sampling and the drilling in 2009 outlined two mineralized zones that look similar to the porphyry cop- per-gold mineralization on the Seabridge property. Drilling by American Creek on the Copper Belle zone encountered 241 meters that averaged 0.8 grams per tonne, ending in mineralization. That grade and width are in line with the resources on the adjacent property.
The GR2 Zone hosts gold, silver and base metals in a volcanogenic massive sulfide (VMS) setting similar to the Eskay Creek deposit, just 15 kilometers to the northwest, which was one of the highest grade major gold-silver deposits. Results of drilling in the GR2 zone included 5.4 g/t gold over 14 me- ters along with silver and base metal values.
Several other areas on the extensive property also have potential to host additional mineralized zones, judging from surface sampling in areas with extensive gossans (that is, areas where metal sulphides have weathered at surface, producing distinctive "rusty" zones).
Those results from surface sampling and an early stage drilling program would be significant in any setting. Located adjacent to and on trend with gold deposits hosting 130 million ounces of gold, the Treaty Creek property is an exceptionally prospective exploration target.
Unfortunately, American Creek has not conducted any work on the property this year or last year as the title has been caught up in litigation. American Creek optioned the property from Teuton Resources (TUO-TSXV) in a deal that allows it to earn up to 60%. Upon meeting the spending and other requirements to vest at 51%, Teuton challenged the spending claims of American Creek. As it became clear that the required earn-in expenditures had been incurred, Teuton amended its legal case to challenge the geoscientific reliability of the results of the work performed. The legal dispute drags on and at the moment, the lawyers are the only ones benefiting from the immense geological potential of the Treaty Creek property.
It seems to me that normal industry practice would hold that if a partner has spent the required amount of money in accordance with the terms of the earn-in agreement, then that should be adequate. However, it is dangerous and futile to try to guess the results of litigation.
This project is clearly worth fighting for. In addition to the enormous geo- logical potential, the property holds considerable strategic value. An important element of Seabridge's development plan for its huge KSM project is to construct twin tunnels to transport ore from the open pit mining operation to the processing facility located near the highway. Those tunnels would pass under the Treaty Creek claims.
As part of the ongoing engineering evaluation of the KSM project, Sea- bridge plans to drill geotechnical holes along the proposed tunnel route. That is, the company intends to drill holes to investigate the ground conditions in the area where it plans to put the tunnel. Clearly, those holes will also pro- vide geological information which will be very valuable to American Creek.
Before commencing a $5 billion mine development project, it is clear that the developer of KSM will need to have clarity with regard to the ownership of the Treaty Creek claims in order to establish certainty with regard to the tunnel right-of-way. Aside from any mineral potential on the property, just getting assured access to the tunnel right of way is likely worth more than the combined values of these companies.
While the Treaty Creek property is tied up in litigation, American Creek drilled a few holes last year on its Electrum property, located in a highly prospective region just north of Stewart. Earlier work had identified several high-grade but narrow gold-silver veins. The drilling last year tested the potential for the property to host a bulk tonnage gold-silver deposit. Those initial results fell short of expectations, identifying several zones with good values, but lacking the combination of grade and size to make it economically viable. The presence of gold and silver values over a wide zone is promising, but considerably more drilling would be required to test the bulk-tonnage potential and/or outline some continuity in the higher grade zones.
The company recently sold its 51% interest in the nearby Tide property for $1.5 million cash, providing some working capital. Several other early stage exploration projects in BC have significant potential, but no work is planned at the moment.
Normally, I would not get involved in a company where the value is dependent upon the outcome of a messy litigation. This situation is interesting because of the enormous potential value of the Treaty Creek property, which appears to be related to the same geological system that produced an extraordinary endowment of gold, silver and base metals on the proper- ties just to the south. This situation is highly speculative, legally and geo- logically, but may be worth a shot at prices near the current level.
*Update as of September 17, 2012: Seabridge is proceeding with applications to the BC government to permit and construct the proposed Mitchell Treaty tunnels that will link the KSM mine area to the proposed processing plant. Seabridge has requested that American Creek and Teuton reopen negotiations in order to come to an agreement on Seabridge obtaining access rights to proceed through the company's Treaty Creek property.
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