Precious Metals Division

Norton Sound Oceanic Placer Gold Project JV;

Potential for up to 500,000 ounce per year Gold Production 

Arctic Oil & Gas Corp. (Pink Sheets: AOAG, 360 million shares issued). 80% equity. Website; http://www.arcticoag.com/

Norton Sound Alaska, OCS 720 square mile, OCS Gold Leases Application

(1-10 million ounce Gold targeted placer resource potential)

In 1991 the MMS indicated that a small portion of the lease application area could yield as much as 1,060,000 ounces of gold from gold bearing placer deposits at or near the seafloor extending up to 10 miles seaward beyond the State of Alaska’s 3-mile coastal waters limit. 

Norton Sound OCS Lease Application Area History

In July 1991 the MMS scheduled a competitive OCS mineral lease sale in Norton Sound for 147,050 acres area an area covered by this Lease Application. The focus of the sale was gold bearing placer deposits at or near the seafloor extending up to 10 miles seaward beyond the State of Alaska’s 3-mile coastal waters limit.  Preliminary studies had indicated that the area could yield as much as 1,060,000 ounces of gold. 

A comprehensive positive final Environmental Impact Study was released in March 1991. However no bids were received, due in large part to the small lease blocks on offer, lease terms and collapsed gold price at the time of the sale, so the lease sale was cancelled and has never been revived.

Nome Mining History

Every means of mining from shovel to dredge has been used in Nome. Ditches and pipelines, some tapping sources as far away as the south flank of the Kigluaik Mountains, brought the water needed for large-scale operations. The Miocene ditch, the first major ditch constructed on the Seward Peninsula, was begun in 1901 and completed in 1903, paving the way for the integrated operations that made possible large-scale mining in the Nome area. The "high-bench" placers near Nome were preserved from subsequent erosion in the divide between the headwater gulches of Anvil, Dexter, and Dry Creeks in the saddle between King Mountain and the hills to the south. As these deposits were far from any dependable source of water for sluicing, only the richest material (at least $6 per yard) could be mined. Erosion of the "high-bench" placers probably contributed much of the gold in the rich stream placers in Anvil, Dry, and Dexter Creeks.

 

Nome Economic Geology

PLACER DEPOSIT TYPES

Placer gold is widely distributed throughout the Nome district (Cobb, 1973). Placer gold may occur on or near bedrock, disseminated through gravels, or as definite horizons or concentrations in the gravel above the true bedrock. Mineralization is entirely free gold and amenable to gravity recovery. Changes in sea levels during the last glacial and interglacial periods have resulted in a series of beach and marine sedimentary deposits on the Nome coastal plain both above and below the present sea level. These beach and marine sediments are generally overlain by younger glacial deposits. A vast majority of the placer gold is hosted within the oldest beach deposits that lay on wave bench abrasion platforms in bedrock and false bedrock (Cobb, 1973). Lesser gold deposits are found in the marine sediments and deltaic sediments as well as the overlying stream deposits and in the present beach sands. The glacial deposits do not contain significant concentrations of gold but tend to be barren overburden. Since most mining on the coastal plain has been with bucket line dredges, the geology of all of these deposits is not entirely understood, as these deposits were not exposed for inspection during the mining process (Cobb, 1978).

MINERALIZATION 

Placer gold occurs on or near bedrock, disseminated through gravels, or as definite horizons or concentrations in the gravel above the true bedrock. Mineralization is entirely native gold and is recoverable by simple gravity recovery methods. Changes in sea levels during the last glacial and interglacial periods have resulted in a series of beach and marine sedimentary deposits on the Nome coastal plain both above and below the present sea level. These beach and marine sediments are generally overlain by younger glacial deposits.

A vast majority of the placer gold is hosted within the oldest beach deposits that lay on wave bench abrasion platforms in bedrock and false bedrock. Approximately 10,000 churn holes have been drilled on the project from 1910 until 1998. The drill hole database includes entries for 7,248 holes including location, sample results and down-hole volumes.

The separate Nova Gold onshore Nome Project has historic measured plus indicated resources 139,061,000 tonnes containing 1.2 million ounces of gold and an additional inferred resource of 156,479,000 tonnes containing 1.1 million ounces of gold. These resources are contained within 295 million cubic yards of sand and gravel aggregate. Average grades in various resource blocks range from 0.156 to 0.342 grams per tonne (0.005 to 0.011 ounces of gold per cubic yard).

WESTGOLD PRODUCTION

From 1987 to 1990 inclusive Westgold Corp produced 118,078 ounces of fine gold from near-shore placer deposits using the Bima Dredge at an average recovered grade of 824mg/m3. 106% of the drill estimated grade. The coarsest gold recovered was about 15mm in size.

 

The Bima dredge was 558 ft long and could operate in water depths to 148 ft. It typically processed 10,000-to 20,000 cubic yards per day and operated in water depths of 20-60ft.  Unfortunately it was not designed to operate in the Nome ocean swells and suffered overstressed components due to excess loads.

Westgold’s typical recovered peak gold grades were

1. 820mg/M3 at 0-1 meter below seabed.
2. 1,120mg/M3 at 3-4meters.
3. 980mg/M3 at 13 – 14 meters.
4. 670mg/M3 at 13-14 meters.

The recovered gold grades in the lease Application areas are expected to average approximately 30-50% lower than the Westgold leases due to the distance from source rocks being greater and the proposed bulk mining methods being used.

Bima’s Nome Unit operating costs averaged US$7.00/M3 on a cash basis, compared to US$1.10/M3 for the same dredge operating in Indonesia.  The cash cost of gold was $335/ounce. The operation closed down when the price of gold dropped to $350/ounce.

The Bima Dredge used circular jigs as the primary gold recovery device.

The Bima Dredge recovered an average grade of .824 grams per cubic meter from 5 million cubic meters mined, which was 106% of the drilled grade, so they actually got more than was indicated in the drilling program. However, they might have privately expected more.

The primary reasons for their failure were;

1) The price of gold collapsed to $250/ounce, above the Bima's cost of production of around $300/oz.

2) The Nome ocean swells caused the dredge to rock, putting too much stress on the ladder when the ladder was pushed into the ground, which bent and broke expensive parts of it, including the top tumbler, which alone cost $5 million to replace.

3) The Bima had a crew of about 90 people operating the 550ft ex-tin dredge resulting in very high operating costs of over $7/meter. We will have about 9 staff operating our modern suction-cutter dredges.

4) The Bima tin recovery jigs lost more of the gold than a modern gold jig recovery system would.

3) The Bima only treated about 250 yards per hour, it needed about 1,000 yards per hour to make enough money for a major company to stay interested.

We will be deploying an increasing number of modern 2,500 yard/hour suction cutter dredges with operating costs of approximately $3/yard, ($4/meter) or lower, against estimated more conservative lower gold recovery of .5 grams = $13.50/yard. Thus each dredge will gross nearly $100 million per season. That is a large enough revenue stream for any major company to stay interested.

A suction-cutter dredge can move around the boulders more effectively than a bucket line dredge.  Modern underwater video cameras will also make it easier for the dredgemaster.

Modern Trailing dredge or bucket wheel dredges boast operating costs of approximately $1.00/M3, without the added costs of gold recovery process equipment, the short Alaska operating season, logistics expenses and Alaska weather issues factored in.

 

Westgold’s State Waters Placer Gold Leases in 1980’s

Onshore beaches, including the two Submarine Beaches, were mined in the early 1900's by drifting from shafts sunk from the surface. Dumps were accumulated near the shafts and sluiced with what water was available during the short spring runoff season. This water shortage and the inherent high expense of drift mining soon caused the amalgamation of large blocks of claims. Subsequent large-scale dredging, preceded by cold-water thawing of permafrost in areas to be dredged, allowed many of the remaining old beach deposits and much of the intervening auriferous glacial drift to be mined at a profit. Unfavorable economic factors rather than exhaustion of resources finally caused large-scale operations to cease at the end of the 1962 season. Production from the old beaches accounted for most of the gold recovered in the Nome area and possibly for as much as half of that reported for the entire Seward Peninsula region.

“Sediments in the Sledge Island area were difficult to sample because of the coarseness of the bottom gravel and the presence, in some places, of outcrops at the sea floor. No samples were obtained at many

stations within 3 to 5 km (2 to 3 nautical miles) of the Seward Peninsula coast. Nearly half the samples from the remaining stations contain fine trace-sized gold, and several samples have No. 3 sized particles. The richest sample contains about $0.50 in gold per cubic yard (318 ppb) by color count (table 3). The relatively high values in the Sledge Island area are surprising, because gold placer deposits are only sparsely distributed on the mainland nearby. The occurrence of highest values in the outer sampling lines suggests that the gold is derived from previously unrecognized areas of mineralized bedrock in the offshore area.”  Source page 20:  http://www.dggs.dnr.state.ak.us/webpubs/usgs/p/text/p0689.PDF  

Alternatively the Seward Island gold most likely represent part of a larger offshore placer deposit derived from the Nome source rocks dispersed by wider glacier action.

Researchers have recovered fine trace-sized gold (<0.250 mm) in sediments as much as 20 miles (36 km) from the nearest shoreline. Analyses of sands of the open Bering Sea indicate that gold particles of relatively large size (0.100 to 0.250 mm) are widely distributed and account for a significant part of the low gold content of the sediment.

Data from drilling and surface-sediment sampling point to the conclusion that most gold in Nome offshore sediments isolated from bedrock was deposited there by glaciers, which scraped the gold from onshore bedrock and placer sources. Furthermore, the association of coarse gold with glacial drift and the lack of coarse gold in outwash fan deposits of the sea floor suggest that mass transport by glacial ice movement has been the chief process by which coarse gold was transported.

The richest concentrations and coarsest particles (1 mm or larger) of gold occur in sea-floor relict gravels that mantle glacial drift lobes in the Nome near-shore region and in gravel patches over bedrock in the Sledge Island area;