Historically, miners have left a lot of gold in the ground simply because it was no longer economically viable past a certain depth with the existing technologies and techniques of the times. But with modern technological advancements in mining, coupled with the strong rise in gold prices, these past-producing mines are now proving to be attractive targets for those positioned to capitalize on them.
For example, at Winston Gold Mining’s (CSE: WGC)(OTCQB: WGMCF) eponymous project southeast of Helena, MT, two past-producing underground mines—dubbed Edna and Custer—didn’t go deep into the earth or mill grades below 0.5 ounces per ton (opt). Considering the mining district has a history dating back to the 1860s and has produced about 100,000 ounces of gold at an average grade of 0.67 opt, it’s no wonder Winston Gold is eager to use modern technologies to explore and eventually mine the property.
Winston Gold CEO Murray Nye recently told Equities.com that more exploration is required and gold prices are obviously variable, but he is optimistic that a new cut-off grade at Winston’s Montana property could be in the area of 0.08 opt. A cut-off grade is the point at which the ore doesn’t contain enough value to be considered economically viable.
Seizing on Favorable Market Dynamics
A century ago, gold was only fetching about $20 per ounce, so there wasn’t a lot of wiggle room when production costs were around $8.00 per ounce, Nye explained. Most miners had to stick to very high-grade ore.
“Over time, higher gold prices and more efficient mining processes have resulted in a shift of sorts in which gold that was considered low-grade in 1900 can actually be considered high-grade today,” he said.
A quick conversion from opt to grams per ton (gpt) means that the historic average production grade in the district where Winston property is located was 18.99 gpt. Looking at some of the highest grade gold mines in the world based upon 2014 data lends some color to the quality of the gold produced outside of Helena. Klondex Mines’ (KDX:CA)(KLDX) Fire Creek Mine in Nevada tops the list at 44 gpt and Cerro Grande’s (CEG:CSE) (CEGMF) Pimenton Mine in Chile at 11.1 gpt rounds out the top 10.
Nye’s aspirations to achieve a cut-off grade of 0.08 opt, equates to 2.28 gpt gold, a level most miners would be happy to see, much less set as the low-end benchmark.
Recently disclosed drill results by Winston support the premise of high-grade gold at the property in Edna and Custer. Both the two historic veins are open at strike and depth, with Winston presently drilling to better define grades, width, length, etc. to formulate an accurate resource estimate.
The latest 10 holes drilled near the old Custer Mine shaft were highlighted by intercepts of 4.4 feet averaging 18.86 gpt gold and 4.5 feet grading 16.11 gpt gold.
“Our first phase drill program was a great success,” said Nye in the press release on the exploration. “We drilled a total of 33 holes totaling 12,428 ft. (3,788 metres) and have confirmed the existence of two high-grade vein systems on our property.”
The company moved immediately into a second phase of the drill program aimed at expanding the Custer Vein and the historic mine. To the west, additional drilling is being planned outside the Edna Vein that could be a parallel vein that no one knew about before.
Looking Beyond Montana
The drill programs are part of Winston Gold’s aggressive plan to be on pace to produce be producing gold in the next year and a half. There’s little reason to doubt that they’ll meet their target, considering Mike Gunsinger is serving as Director of Operations. Throughout more than 50 years in the business, Gunsinger has a long track record of bringing mines back on line on time and on budget, including the Renabi Gold Mine in the 1980s, which was eventually sold to Barrick Gold (ABX:CA)(ABX) as the major’s first operating gold mine.
The Montana property is only one piece of the growth plan for the company. Winston Gold also owns a similar-type project in southeastern Arizona called the Gold Ridge Property. The property is home to three past-producing gold mines, including the Gold Prince Mine, which produced 22,000 ounces of gold from multiple veins with grades averaging a stunning 11.79 gpt. With 5,862 feet of tunnels across six levels, Gunsinger will likely work his rehab magic there as well as at the Gold Ridge and Dives mines that only saw minimal production.
All the signs point to plenty of gold remaining in the ground controlled by Winston Gold. If it indeed is, with Nye’s business acumen and Gunsinger’s nose for finding and producing it, it’s just a matter of time before it’s being poured into bars.
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