Richard (Rick) Mills
Ahead of the Herd
As a general rule the most successful man in life is the man who has the best information
Today I’m speaking with Todd Hilditch and Charlie Sulfrain from Terraco Gold Corp. TSX.V - TEN
Todd has over 15 years experience in the natural resource sector and has been President and CEO of Terraco since inception in 1995. Todd was President and CEO of Salares Lithium Inc. which merged with Talison Lithium, in September 2010, in a $340 million merger to become the world's largest producing lithium company.
Charlie has more than 25 years of national and international exploration experience. In 1982, he discovered the Post Oxide Deposit and in 1984 co-discovered the Deep Post Deposit.
Rick: Todd because of your huge success with Salares Lithium you have quite a loyal following. Could you tell us a bit about that story?
Todd: Certain individuals, and a major mining house, asked us to get involved with Salares Lithium from a corporate standpoint. Certainly, we did not expect that within one year of stepping in to help guide the company that Talison and Salares would merge. As it turned out the assets proved up early on to be a really unique opportunity, one of the better ones in the lithium space.
What that did for us as a management team is that it validated the project but more importantly it opened up a tremendous amount of doors and contacts that we are now able to use for Terraco.
Rick: Tell us a bit about Terraco Todd.
Todd: Terraco moved into the gold exploration business in 2001. We were fortunate enough to acquire some excellent properties, but knowing that we didn’t have a strong level of geological expertise within the organization, I reached out to Ken Snyder.
Ken introduced us to Charlie Sulfrain who had spent 23 years with Barrick and working in the US west. Charlie had been involved in the early exploration that led to the discovery of the Post and Deep Post deposits, which turned into Barrick’s Nevada flagship Goldstrike mine.
As far as I’m concerned, Terraco has two of the best geologists working today and we have tried to build our exploration company around their abilities.
We think we’ve got excellent geological and operational expertise, as well as financial and market expertise what with being directly involved in raising over $120 million dollars on the lithium project besides that of our existing financial contacts in the gold space. We think we have the properties on our books that can take us to the next level. In short, we’ve got all three legs of the stool being management, money access and projects.
Rick: Terraco has an early exploration stage project called Moonlight.
Todd: We were fortunate to be able to pick up the Moonlight property about five years ago, but during 2007, 2008 when the world was kind of falling apart we decided to back off and conserve capital and come out of the gate strong when things settle down.
Today gold exploration is increasingly looking like the place to be. Barrick stepped in to a joint venture with Midway Gold on their Spring Valley Project (next door to Terraco) and it’s grown to 4.1 million ounces, so from a corporate standpoint, looking at the development right next door, we have a great opportunity to really understand Spring Valley and it’s an opportune time to get working on our Moonlight Project.
Rick: Tell us a bit about the Almaden Project.
Todd: We’ve kept our eye out and continued to review projects that fit our criteria - we were looking for a resource property that would allow us to have an advanced stage project to grow and also open doors to institutions, showing them that we had significant ounces on our books. We were fortunate enough to come across a company that had a property in Idaho called the Almaden project with a near one million ounce gold resource.
Charlie and Ken thought that we could improve upon that resource, get it up over one million ounces by simply using core drilling which is a better type of drilling than previous operators used to get a realistic grade and confirm continuity as well. We’d be doing something that hadn’t been done by previous operators, that is drill deeper than 150 meters (500 feet) looking for high grade feeder zones.
Rick: Charlie, can you lay out the geology regarding Moonlight and the thinking behind the ongoing exploration plan?
Charlie: We acquired the Moonlight property from a company called Metallic Ventures - they were a very strong player in Nevada for a number of years. Originally the Moonlight property was a group of claims staked by an outfit called Cordillera Exploration or Cordex, the principals were John Livermore and Andy Wallace, two very well-known individuals in Nevada geology and exploration. John Livermore having discovered the original Carlin Mine, Andy Wallace was credited with the discovery of Marigold and two or three other significant ore deposits in Nevada. They both like the area for its own merits, not just as a silver project, but potentially as a gold area as well.
Midway was just beginning to realize their deposits potential in Spring Valley. Their model for mineralization and the morphology, basically the physical layout of the occurrence, suggested that Spring Valley and our property might be mirror images.
But not a lot was known about the geology or the true occurrence of the mineralization on the original claim block that we acquired from Metallic Ventures, it being an alluvium filled valley. We ran resistivity-sp geophysics, had a ground magnetic survey, mapped in the hills around the valley, did quite a bit of rock sampling where we could in outcrop, and developed drill targets that we felt were similar in nature to what they were drilling at Spring Valley.
That first program was basically geared towards a look-alike type of occurrence. As we found out later, the geology was more complicated than originally thought. We realized that we didn’t have the full story.
Our initial drilling program indicated that alteration appeared to increase eastward across the Moonlight Basin. Therefore, we started acquiring additional lands to the east and that enabled us to get out and have a broader look at the property.
Rick: This is when you brought in Tom Chadwick.
Charlie: Yes, we hired Tom Chadwick. Tom had done a lot of the mapping at the Coeur Rochester Mine. He has also worked for Barrick on a number of different properties, and when Barrick came in to joint venture with Midway, they sought his expertise in the area, to do a lot of their mapping.
Tom first came out and did some of our mapping in 2007. We have retained him on occasion since then and he has helped fill in a lot of the geology, structure, and alteration for the newer property position. His work has really brought us many steps forward in the exploration process at Moonlight.
Rick: We’ve kind of come full circle now, haven’t we?
Charlie: A bit. As Midway and then Barrick gained better understanding at Spring Valley we certainly saw that the original perceptions and interpretations we had of the occurrence at Spring Valley, the interpretations were changing. Likewise, our view of Moonlight changed.
Structure, like the district-scale Black Ridge Fault, played a very important part in controlling mineralization at Spring Valley, just as it does at the Coeur Rochester Mine, and in fact, all the way down to Relief Canyon at the southern end of the Humboldt Range.
Rick: I was going to ask you that, if perhaps the Midway project wasn’t the model that we’re going to base the exploration of the Black Ridge Fault on. Perhaps it was another mine in along the ridge.
Charlie: Actually, yes, there is a whole series of occurrences, mines, deposits strung out along the Black Ridge Fault. You know, we’ve used the phrase a string of pearls, starting with Relief Canyon going up to Packard Flats, to Coeur Rochester itself and Spring Valley, and then of course Moonlight.
Tom’s work at Coeur Rochester gave him great familiarity with the rock package and the structure in the local districts. He has, with confidence, extended the Black Ridge Fault onto our property. And I think that we have some pretty compelling targets near the structure. We also have mapped at surface the same rock types which host gold mineralization at Spring Valley.
In the area that we are going to be drilling this fall we have taken rock samples, one dump sample at 11.5 grams per tonne gold, and some outcrop samples that have run 3.6 to 4.8 grams across 1.5 meters (3-5 feet) respectively. So we know that there is gold in the system. We are along the right structures, and like I said, we have the right host rocks outcropping. That to me, makes for a pretty compelling story, as far as the potential to find gold mineralization. What remains is to drill those targets.
Todd: Going back to when we originally grabbed the Metallic Ventures project, it was a joint venture 70:30 earn in. We decided early on, by watching Midway continue to grow their asset, to step up and prior to doing a lot of exploration work buy out Metallic Ventures to get our 100%. This gave us about 70% of the district.
We needed to pick up additional ground to sufficiently cover the potential upside to the north. So we did the recent transaction, which we announced in June and we should be closing it here pretty quickly. We already controlled about 70% of the district, this new transaction basically completes the district to the north.
Rick: How many kilometers of the Black Ridge Fault would we actually have control over and is there anything else you want to add about the geology or anything on the Black Ridge Charlie?
Charlie: We are looking at controlling at least 3.3 to 5 kilometers (2-3 miles). We did an airborne magnetic susceptibility survey back in 2006, which also contributed to some of the general drill targets that were within our control at that point. The mapping of the Black Ridge Fault coincides with an anomalous feature in the air mag that suggests that we’ve got several kilometers of strike length that needs to be investigated.
To summarize, Tom Chadwick’s mapping has reinforced not only the fact that the right structures are there, but that we have alteration along them, then in places, the right host rocks in outcrop, in others perhaps as subcrop. You know, there’s a lot of stuff that we’re seeing for the first time, and now that we have a better context, a better understanding of the deposits to the south, we are pretty excited.
Todd: In the last few years we couldn’t have asked for something better, here we were, because of the economic crisis, not spending a dime and Barrick was spending four million dollars in the first year, five million in the second year, putting 17 or 18 million dollars into exploration in the joint venture in the first few years. That’s a lot of work and a lot of holes, you learn a lot. In order for Barrick to earn in 60% there is a total of some $30 million to be spent, so we have the benefit of seeing a lot of additional work.
If you look back at the 43-101 stuff and the press releases that Midway put out based on Barrick’s work you can start to see how the growth and some of the best grade continues to be on the north side of that deposit.
Rick: Have you got an anticipated drill start?
Charlie: We’re talking with two different drilling companies right now, and it looks like we are going to be somewhere in the October 1st to October 15th range. Hopefully, we are going to have 2 drill rigs, keeping my fingers crossed there, so that we can get in and get our program finished before bad weather sets in, it is steep country up there. We’re up around the 1800 meter (6,000 foot) elevation, and so once winter comes in, it comes in enough that it keeps you out. Being in Nevada, the ground doesn’t freeze solid. That’s why you can’t really have programs all winter, it just turns either to mud or ice for miserable access, things like that.
Rick: Terraco has an advanced development project in Idaho.
Charlie: Yes, the Almaden gold project in western Idaho. The geology of the deposit is what is known as a low-sulphidation epithermal deposit. It’s hot springs related and was an old mercury mine. There are sinter terraces so it’s a very near surface, upper level system. Very similar to deposits like Hollister. The Ken Snyder/Midas mine is also similar in nature. It’s a very well-known deposit type and the model that we’re using is also pretty well established.
There are approximately 950,000 ounces of Measured, Indicated, and Inferred resources (M+I+I), 43-101 compliant, that was done in 2009. There are 887 drill holes. Some of the mineralization outcrops and the bulk of the deposit lies within 100 meters (300 feet) of surface.
Todd: When we acquired Western Standard Metals (WSM) for a .75 share of Terraco, we ended up issuing 45 million shares. Now at first blush that sounds like a lot of shares, but when you take that and apply it to what we were getting, it ended up being that we were acquiring the deposit for less than $20 an ounce, that’s back in the twelve hundred dollar gold timeline.
With gold trading where it is today, one should look at what we did and say “wow, what a great time” and “what a great transaction.”
One thing that has been a little bit frustrating is the selling of some of the 45 million shares issued to shareholders of Western. Although frustrating people have different reasons why they invest in companies.
We’ve traded 25 million shares since the deal, that’s a lot of liquidity, and certainly a lot of buying, what it has created is an opportunity for folks to get meaningful positions. We feel pretty good about the transaction and I’d like to think that with the ounces on our books we deserve to be a higher price.
Rick: If you include management shares we’ve chewed through almost 80% already.
Todd: If you include the one director that came in with the transaction, and including ours, yeah, we’re through a good chunk of it.
Rick: There is no sense pushing the share price up and changing hands at a higher price. If they want to sell, let them sell to new, committed, long-term shareholders at a lower price, and then let’s move on.
Charlie: One of the things about Almaden that I think hindered its development over the years (it’s been around for 30 years) is that over that 30 years, the price of gold, except for the last several years, has been fairly depressed. The average grades at Almaden are about 0.7 grams per tonne gold and that doesn’t always lend itself to really developing a property the way it could be, because you’re either getting by, by the skin of your teeth, or it doesn’t look like the best thing since sliced bread, if you will.
Rick: Yes, it also doesn’t attract the retail crowd without the high grades.
Charlie: Right. When we picked it up, as mentioned, the price of gold was $1200.00 an ounce. I actually think that long-term prices of gold are not going to relax all that much, but that’s totally outside my realm of experience. But it certainly helps with deposits like Almaden and we are hoping to improve ore continuity and grade there.
The idea of our work at Almaden is twofold really. Looking for a deeper feeder is not something that is totally pie in the sky. These sorts of systems are well known for often having bonanza-type feeders at depths. As I said, the Ken Snyder/Midas mine is a good example of that. So is Hollister.
But nobody has really taken the bull by the horns, if you will, and gone after the feeder target. We need to be looking at the geology, the structure and we need to test for this stuff at depth; depth being anything greater than 150 meters (500 feet). Rick we’ve previously talked a little about an area called Stinking Water up to the north.
Rick: Yes, for the article Terraco Gold. The first Terraco article I wrote was Nevada Moonlight and Terraco.
Charlie: There is a hole at Stinking Water (SW-40) that has grade an order of magnitude, tenfold times the average grade of the deposit. I mean we’re looking at 0.7 grams as an average for the near surface deposit and there, at Stinking Water, you’ve got intercepts that include 3-1/2 meters of 11 grams. This area is 600 meters northwest of and 150 to 180 meters below the top of Nutmeg Mountain (which is the surface exposure of the main area of the Almaden deposit).
So, immediately, you are down below that surface expression of the hot springs sinters and a lot of the lower-grade mineralization. This is important because below the sinters is where you might expect to start seeing feeder-like veins and structures. Some of the material that’s historically been drilled at Stinking Water, like SW 40, is what you would expect to see in feeder structures. At the surface are boulders of material that have this banded chalcedonic quartz veining, as opposed to just silicification. Well, these are the types of veins you would expect to see in the feeders, starting at that kind of depth below surface (150-180 meters).
Whether everything is in place or not, we’re still trying to figure that out, but the fact that this type of high grade mineralization exists suggests that there are going to be high grade zones. Unfortunately, you don’t just walk right out and drill a few holes under the deposit and say “ah, here it is.” It’s not there waiting for you.
Rick: It’s not quite that easy, is it?
Charlie: No it isn’t. At Hollister the actual high grade veins are about a half a mile from the open pit. And so it’s not as if you are only drilling right below the mineralization, although with the program we have this year, we do have a few holes in the main zones.
That’s because you’re looking at drilling both your best mineralization within the confines of the deposit for continuity, and of course there may be the occasion where you do have feeders that are directly below the deposit.
We are using some of the old geophysics as well as geochemistry to step out and drill peripheral pit deposit targets and we’re starting to look for some of the deep targets as well. You don’t want to ignore one in favor of another, you want to take all the evidence that you’re given and plan your drilling accordingly.
Rick: Assays from two holes have been released, what do they tell us?
Charlie: In these first two holes we see that the thickness of mineralization is consistent with the model and with previous drilling; however, we have been able to improve on the grade a bit. And that’s important, when you’re talking about an average grade of 0.7 grams per tonne, if you can take that up to 0.9 or 1.0 gram per tonne, you are talking about a significant percentage increase.
Rick: Absolutely, it’s huge.
Charlie: For example, a 10 – 20% increase in grade (going from 0.7 gpT to just 0.77 or 0.84 gpT), in a million ounce deposit equals 100,000 to 200,000 ounces without really adding to the tonnes that you need to process. So that in itself is a goal. And I think that because the original drilling was primarily rotary drilling, a lot of that being air track (RAB), which is a conventional rotary technique, as well as reverse circulation, it leaves some question as to the accuracy of the assays, and we are certainly going to be doing development style drilling to be sure that we have the grade of the deposit well established. Perhaps we can improve on the grade.
As a start, our fist drill hole, TAL-751C, is approximately 40% better grade than the deposit as a whole and approximately 20% better than rotary holes nearby. The second hole drilled, TAL-752C, had intercepts grading 25% better than the deposit as a whole and yielded better average grades than surrounding rotary holes. While we can’t extrapolate that same success over the entire deposit, I think that we are on the right track.
Rick: In your opinion could Almaden go into production today, with no further discovery or increase in grade?
Charlie: I believe it could.
Rick: Two different types of projects in two of the best mining areas in the world.
Charlie: Oh yeah, they both have me pretty excited, but for different reasons. Obviously, with Moonlight, it’s exploration with a lot blue sky potential.
And with Almaden, the excitement is maximizing the resource, make sure we optimize it, and get some really good numbers to improve the grade and recoveries.
Rick: As you said we might be able to improve the grade at Almaden through different drilling methods but what about the metallurgy?
Charlie: Some of the metallurgical testing in the past has focused on a just throw everything together approach. And that was one of the things that was of real interest to me - having been Chief Chemist and Recovery Supervisor at the Goldstrike mine for a year.
Previous metallurgical work at Almaden basically focused on lumping everything together, the oxide, oxide/sulphide mix and sulphide material. That is a very pragmatic, cost conscious approach but it means that you haven’t optimized recoveries on your oxide portion of the mineralization.
And we’re talking about, as far as oxide goes, over half the deposit so far, nearly 500,000 ounces. About 330,000 ounces are mixed oxide and sulfide, and the recoveries there seem to be reasonable. Of course, the oxide is going to have the best recoveries, and then we have sulfide, which counts for about 5% of the deposit. Well, if that’s thrown in with the oxide in a column test you may not see the best recoveries or even something that would approximate what you would see from a heap leach, because you have refractories mixed in with the oxide material, which you would certainly do your best to segregate when you are processing it.
I think that there is room for us to improve recoveries by paying much more attention to the ore type, because you certainly would do that in a mining situation. I come from a mining background, that’s just the practicalities and the realities of putting something in production. You know, you don’t just throw everything into the pot and hope it comes out alright.
Rick: As Terraco’s exploration manager you’ve got several challenges in two different types of projects, but that equates into something for every type of investor – early stage and development scenarios.
Charlie: Yes. Almaden is an advance-stage project with a 948,000 ounce M+I+I resource. We have a good chance to increase grade, add new resources, and find deep, high grade feeders there. It’s pretty exciting.
Moonlight is primary stage with very attractive targets waiting to be drilled.
This I think, is a great position for Terraco to be in. To have resources like this, of nearly a million ounces in ground, and have a property adjacent to a 4 million ounce resource that really has never been touched yet.
Rick: Moonlight, as you said is next to 4 million ounces, but it’s also one potential pearl in the middle of a string of very real pearls, meaning projects.
Charlie: Very much so.
There is one last point I that would like to make. We talk a lot about the Black Ridge Fault and it’s a very important structure. The Black Ridge Fault is mapped onto our property and has alteration associated with it. We also have the right rock types (host rocks) and we see some of the other ancillary features of deposits that have us pretty excited about where we are going to be drilling. But, frankly, the Black Ridge may not be the end all of everything either. I mean, just as you have on any trend, you’re not going to always have just one structure controlling mineralization across an entire trend, not even within a district.
The structure of trends like this, while they may appear to be dependent upon one structure, includes other structures that also come into play, whether they’re cross structures or parallel structures. Things like that create opportunity and we’re just barely scratching the surface. That is another reason that I’m pretty excited about Moonlight.
Rick: Early days.
Charlie: It really is. I mean our first programs out there were somewhat limited by our experience in the district, the knowledge of the occurrence at Spring Valley, and our property position. We’ve increased all three of those, and I think to our great advantage.
Rick: Thanks for your time Todd and Charlie, it’s been a pleasure.
Richard (Rick) Mills
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