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Treasury Metals Goliath gold project developing into multi-million ounce gold resource

Treasury Metals (TSE:TML) is the new gold vehicle managed by the former Aquiline team. The company is developing the Goliath Gold Project located in the Kenora Gold District, of Northwestern Ontario, as a potential multi-million ounce gold resource. The flagship project is a newly discovered gold resource made by Teck Exploration in 1990 and has a current NI 43-101 compliant resource of 1.7 million ounces in the combined categories.  

The Goliath Gold Project is 100% owned by Treasury Metals and includes the Goliath Gold Deposit, along with numerous highly prospective targets that include a 6 kilometre mineralized gold trend that strikes out from Thunder Lake, within a 48 square kilometre land package.

The project is fully supported by all utilities and is close to the Trans Canada Highway, 20 kilometres east of Dryden, where skilled personnel and mine development services are available.

Indicated Resources at the Goliath Lake Deposit for near surface open pittable ore are estimated at 6,002,000 tonnes at a grade of 1.8 g/t Au for 326,000 ounces of gold, and 1,257,000 ounces of silver at a grade of 7.1 g/t Ag, at a cut-off grade of 0.3 g/t Au. Indicated Resources for underground ore are estimated at 3,136,000 tonnes at a grade of 4.3 g/t Au for 433,000 ounces of gold, and 1,812,000 ounces of silver at a grade of 18.0 g/t Ag; at a cut-off grade of 1.5 g/t Au.

Total Indicated Resources are 9,140,000 tonnes at a grade of 2.6 g/t Au for 760,000 ounces of gold, and 3,070,000 ounces of silver at a grade of 10.4 g/t Ag, for a grand total of 810,000 gold equivalent ounces.

Inferred Resources for near surface open pittable are estimated at 11,093,000 tonnes at a grade of 1.0 g/t Au for 352,000 ounces of gold, and 1,184,000 ounces of silver at a grade of 3.3 g/t Ag, at a cut-off grade of 0.3 g/t Au. Inferred Resources for underground ore are estimated at 4,789,000 tonnes at a grade of 3.3 g/t Au for 514,000 ounces of gold, and 807,000 ounces of silver at a grade of 5.2 g/t Ag; at a cut-off grade of 1.5 g/t Au.

Total Inferred Resources are 15,900,000 tonnes at a grade of 1.7 g/t Au for 870,000 ounces of gold, and 1,990,000 ounces of silver at a grade of 3.9 g/t Ag, for a grand total of 900,000 gold equivalent ounces.

This resource upgrade included two infill drilling programs of 12,000 metres completed in 2010, and 48,000 metres completed recently for a total of 134 holes. The two drilling campaigns have generated very positive results that have led to an increase of more than 200% in Indicated Resources from the prior estimate.

The successful conversion of Inferred Resources to Indicated Resources confirms the continuity of gold shoots within the deposit, and the significant increase of the overall resource to 1.7 million Indicated and Inferred gold equivalent ounces confirms the longevity of the project. The bulk of the mineralization is contained in the Main Zone and C Zone, which now become primary targets for underground mining.

Recent drilling at Goliath focused on the Eastern and Central sections of the Main Zone.  Additional drilling at the Western and Western-Central Zones also confirm the development of a significant new target.

Highlights from drilling within the Western Section of the Main Zone include TL11-220, which intersected 4.0 metres at 8.8 g/t Au at a depth of 345.6 metres; and include two deeper intersections within the C Zone at a depth of 388.0 metres with 5.8 metres at 5.1 g/t Au, and at a depth of 413.5 metres with 3.5 metres at 14.9 g/t Au.

The recent drilling campaign demonstrates that high grade gold continues at depth and is open in all directions. This mineralization is contained within a broadly mineralized resource envelope that extends for a strike length of 1,200 metres and vertical depth of at least 600 metres, and warrants a much larger drilling program in 2012.

Gold mineralization at Goliath has now been identified over a strike length that exceeds 5,000 metres.   

In addition, Treasury Metals will also continue to move development and engineering activities ahead to support advancement of a pre-feasibility study and towards production.

In July of 2010, A.C.A. Howe completed a Preliminary Economic Assessment for Thunder Lake confirming the economic viability of the project, at a production rate of 1,500 tonnes per day over a mine life of 8.5 years.

Three open pits containing 2.2 millions grading 2.2 g/t Au, supply all of the feedstock ore over the first three years, and then blend 750 tonnes per day of underground ore grading 4.3 g/t Au, over the balance of the life of the mine.

Capital costs for a 1,500 tonnes per day open pit and process plant are estimated at $38 million, and rise to $59 million, as underground operations contribute feedstock over the life of the mine. This produces a Net Present Value, less 5%, of $91 million and Internal Rate of Return of 43%, utilizing a US$1,200 per ounce gold price.

In June 2011, G&T Metallurgical Services reported metallurgical testing and confirmed exceptional gold recoveries of non-refractory and free milling gold, yielding a recovery of 96 to 97%, utilizing a simple gravity recovery circuit, plus cyanide leach of the gravity tailings. Silver recoveries fell into the 50 to 60% range. These results support the development of a concentrator design, and capital and operating costs at a scoping or pre-feasibility study level.

Treasury Metals plans to continue with advanced exploration and mine permitting in 2012, and to extend the decline at Goliath Gold deposit  to a depth of 400 metres.

The Kenora Mining District and its greenstone belt are underexplored relative to other Canadian Gold Camps found in greenstone belts. This potential is borne out by Rainy River Resources (TSX-V: RR), which is developing the nearby Rainy River Gold Deposit, which hosts a current Indicated Resource of 2.37 million ounces and an Inferred Resource of 2.66 million ounces of gold.

Treasury Metals continues to stake or acquire additional properties in the Kenora District, and is also advancing the Goldcliff Project, which is located approximately 40 kilometres southeast of Goliath. There are several gold showings on the property, with surface assays up to 106.4 g/t Au.

The property is on the same strike line and abuts the Mantiou Gold (CVE: MTU) gold find at Kenwest, which  is now reporting multiple gold intercepts up to and including 6 metres at 10.30 g/t Au. Treasury Metals is mapping alteration zones and structures to develop targets for a drilling campaign that is planned for late 2011.

The company has cash of $5 million, and is generating an annual return of $1 million from a 3% Net Smelter Royalty from the Goldcorp (NYSE:GG) Cerro Colorado Mine in Mexico.

Cormark, Cannacord Genuity and Raymond James are offering 3.48 million flow-through shares at $1.15 to raise $4 million to fund and maintain an aggressive development effort at Goliath into 2012.

Part of Treasury Metals’ growth strategy will be through further consolidation of land positions in the Dryden area and acquisitions of accretive advanced stage gold assets located in the Americas.