Earlier this year, Prize Mining Corp. (PRZ:TSX.V) acquired the Kena Daylight project, which consists of 8,000 hectares in British Columbia's Nelson region.
As you can see on the next map, the Kena claims are located just five miles south of Nelson along Highway 6. From Highway 6, a short forest service road gets you to the property and the past-producing mines on the property.
Nelson has approximately 10,000 inhabitants (providing an easily accessible labor pool). There are several additional advantages, such as having a power line that runs along Highway 6, and the proximity of the Trail smelter, owned and operated by Teck Resources (TECK) farther down the road.
The smelter itself is focusing on lead and zinc concentrate (which is useless for Prize as it owns a gold project), but it's perhaps interesting to know Teck has a majority stake in the Waneta dam (which is currently being sold to Fortis), which provides low-cost electrical power. The dam is producing more energy than Teck needs, so the excess power is put on the power grid, and this could be an important advantage for Prize if/when it develops a mine plan in the future.
The Kena Daylight property currently hosts a resource estimate containing 1.8 million ounces of gold at an average grade of just over 0.5 grams per tonne (0.5 g/t), which is a great starting point. It won't be easy to bring a low-grade deposit into production as the daily throughput would have to be relatively high to warrant a development scenario, but there's plenty of potential to increase the average grade. First of all, the previous owners and explorers only completed a "first pass" drill program, with Sultan Minerals completing tens of thousands of meters of drilling, but it looks like none of the higher-grade zones have been drilled.
The available historical records indicate the Starlight, Daylight and Great Eastern mines (located on the Kena Daylight property) were mining ore with an average grade of 0.85-1.2 ounces of gold per tonne of rock. Yes, the production volumes from these zones were very low so you can't extrapolate these numbers into additional resource-ounces, but it's clear some parts of the property hosted higher-grade gold mineralization and Prize will very likely follow up on this.
Toughnut—a logical addition to the land package
A few weeks ago, Prize Mining announced it signed an option deal to acquire 100% of the Toughnut property. Not only is it located contiguous to the western border of Prize's Daylight property, the 1,000-hectare land package covers approximately 2.2 miles of the Silver King shear strike length, which connects Prize Mining's Starlight-Daylight block (on the northwest side of the land package) with its Sand block.
And this shear zone is quite important. Toughnut contains old pits and shafts that were used for mining operations, very likely around the same time the Daylight, Starlight and Great Eastern mines were in production. You might also remember what we wrote about the Silver King shear zone in our first full report on Prize Mining:
". . .the Silver King gold corridor might play a really important role in the potential development of Kena, as this zone hosts veins with an average grade of 5-80 g/t. Needless to say finding more high-grade zones could provide a real boost to the average grade."
The Toughnut property contains several high-grade showings, with the Toughnut showing returning assay results of 6.6-32.8 g/t gold (with 1-5.5 ounces per tonne silver) from a small grab sample program. These were indeed very encouraging assay results, and the previous operator followed up on them in 2010 with a small drill program, which intersected 2 meters of 6.9 g/t gold and 143 g/t silver, as well as 8 meters of 4.05 g/t gold.
The second showing on the Toughnut property, Gold Eagle, has also been drilled and the most noticeable intercept was a 1.5-meter interval containing approximately 90 g/t gold, while another drill hole encountered 14.47 g/t gold over 4 meters as part of a longer interval of 24.3 meters containing 4 g/t gold. Interesting fact: The Gold Eagle zone remains open along strike and that's very likely where Prize Mining will focus its exploration efforts.
The acquisition of Toughnut is an important piece of the Kena-Daylight puzzle, and the acquisition terms seem to be very favorable. Prize Mining will pay CA$150,000 in cash, issue 250,000 shares and complete CA$750,000 in exploration expenditures over the next five years.
Our main concern about Prize Mining in our first report was the average grade of the existing resource, but none of the previous operators has tested the higher-grade zones and areas. There's a lot of potential to increase the average grade as Prize will be the first exploration company "drilling for grade" at Kena Daylight.
And while the 1,000 hectares of the Toughnut are a relatively small addition to the existing land package, it's the location that really matters as Prize now controls the Silver King shear zone, where it expects to find more higher-grade mineralization.
Thibaut Lepouttre is the editor of the Caesars Report, a newsletter and mining portal based in Belgium that covers several junior mining companies with a special focus on precious metals and base metals. Lepouttre has a Bachelor of Law degree and two economics masters degrees that have forged his analytical approach to the mining sector. Considered a number cruncher, Lepouttre focuses on the valuations of companies and is consistently on the lookout for the next undervalued mining company.
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