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Special Report

British Columbias Golden Triangle

A corner of Canadas western-most province hosts one of the richest mineral belts in the world. Few investors yet appreciate the enormous value of that region

British Columbia, long recognized for its exceptional mineral wealth, is regaining prominence among mining investors. Canada in general is looking increasingly attractive as the mining industry faces mounting challenges in many jurisdictions around the globe.

Many parts of the province are highly prospective for minerals, but one region stands out: An area of northwestern British Columbia referred to as the Golden Triangle has produced enormous precious and base metal wealth over the past century. Rich gold and silver mines near the port city of Stewart established the potential of the region. The rich Eskay Creek mine 90 kilometers north of Stewart demonstrated the much larger potential of the region. Red Chris, another 100 kilometers north, is now in development.

An enormous amount of exploration work over several decades outlined numerous large precious and base metal deposits. For a host of reasons, the area went quiet before those mines could be developed. BCs Golden Triangle has come alive again, with at least five world-class mining projects headed toward production.

Having already delivered millions of ounces of gold and tens of millions of ounces of silver, the region ranks as an important mineral district. Yet, that production represents only a tiny fraction of the metal now known to be hosted in the district.

Two exploration companies, with adjacent claims, have outlined an astonishing 130 million ounces of gold, 800 million ounces of silver and 20 billion pounds of copper. Both of those companies are now working toward feasibility studies. Combined production from those two proposed mines is projected to exceed a million ounces annually, with a nearly equivalent value of silver, copper and other metals.

While those advanced-stage projects have generated valuations at the billion dollar levels, other companies sitting on similar geology still trade for pennies a share. A couple of those companies are on the track of important discoveries.

This issue and the next issue update the companies that we have been following in this region and also introduce several new companies. One of these companies has a large market value, but trades for less than $15 per ounce of gold in reserves. Other companies to be introduced have large property positions in areas favourable for new discoveries and trade for pennies a share, offering huge upside potential.

A Long History of Mining

Northwestern British Columbia was first explored in the late 1890s by prospectors on their way to the great Yukon-Alaska gold rush. High-grade gold and silver discoveries were made and exploited on a small scale over the next several decades. The town of Stewart, a seaport, became the focal point for exploration in the region. A number of exceptionally high-grade discoveries were made just inland from that town.

Many of the major mining companies explored that region for base metals from the 1950s into the early 1970s. The Granduc copper mine was developed by Newmont in the 1970s and then acquired by the minerals division of Esso, the Canadian unit of Exxon.

Numerous other discoveries were made, but the remoteness of the region at that time hampered mine development. In the mid-1970s, a left-leaning provincial government scared off the mining industry. At exactly that time, discoveries in other parts of the world attracted mining companies to what seemed friendlier places. Big new mines were developed in Chile, Peru, Indonesia and other places. British Columbia was put on the back burner for the mining industry as vast amounts of money were applied to developing mines in other parts of the world.

The 1980s saw a resurgence of exploration in the Golden Triangle with a focus on gold and silver. This time, the exploration efforts were driven by junior exploration companies. Vancouver had become an international center for mineral exploration financing. One of the companies working in the region, Calpine, had generated some interesting results but was having trouble raising money to continue their work.

The Calpine results attracted the attention of legendary mining promoter Murray Pezim. The Pez, as he was affectionately known, had played an important role in funding the discovery of the Hemlo district in Ontario, which became one of the most important gold districts in the country.

With a strong financial backer, Calpine was able to carry out a comprehensive exploration program. They drilled more than 100 holes that were geologically encouraging, but which would not have attracted the attention of most investors. It was hole number 109 that convinced investors of the significance of the Eskay Creek discovery. That hole, one of the most impressive drill holes of all time, encountered an extraordinary 208 meters that assayed 27 grams per tonne gold and 30 g/t silver.

In short order, the Eskay Creek mine became the fifth largest silver producer in the world, turning out 15 million ounces annually for much of its 14 year mine life. The mine also produced 250,000 ounces of gold annually along with substantial values of base metals, becoming an important part of the growth story that made Barrick the worlds largest gold company.

Needless to say, hole 109 kicked off a frenzy of activity in the district. The staking rush saw the district broken into literally thousands of small claims, with numerous companies each pursuing targets within the bounds of their property. There was a great deal more geological encouragement reported over the next several years. Most of the companies, working on small parcels and with limited budgets, only scratched the surface. Then, the exploration industry ground to a halt in 1997 without another discovery on the scale of Eskay. For several years, the district was quiet.

Re-Activating Past Discoveries

One of the first projects to resurface was Galore Creek, which had been explored by two major companies in the 1960s and 1970s. The modest-sized deposit they outlined was seen to have little value in that remote location. After the project sat idle for years, NovaGold (NG-TSX) bought Galore Creek for $20 million. Further drilling outlined a massive deposit with 12 million ounces of gold, 200 million ounces of silver and 12.7 billion pounds of copper.

Another huge success was the Red Chris copper-gold deposit, located east of Highway 37. Imperial Metals bought the Red Chris deposit in 2006 for $69 million, intending to develop a mine on the modest-sized porphyry copper-gold deposit that had been outlined up to that time. Earlier exploration on that deposit, as with many of the BC deposits which had been explored in prior decades, had tested only the top couple of hundred meters - material within reach of open pit mining as it was then practiced.

Imperial Metals probed beneath the previous drilling, with one of those deeper holes (RC09-350) encountered 152 meters that assayed 4.1% copper and 8.8 g/t gold. That hole completely changed the project and added a billion dollars to the value of Imperial Metals. That mine is now permitted and is under construction. Start-up is expected in 2014, following completion of a power line that will connect Red Chris to the provincial power grid.

That power line is a huge benefit to mine development throughout the region, as BC electric power, generated mainly from hydro-electric facilities, is among the least costly electric power in the world. For many mines, energy is the single biggest cost item.

Over the past few years, there has been a great deal of infrastructure improvement in the area. Paved Highway 37 provides good access into the district. The Eskay Creek access road opened up a big area, as did roads to Snip and Bronson, two other mines that operated briefly. The Galore Creek access road, now more than half finished, is another important aspect of regional infrastructure.

Other discoveries made in earlier decades by major mining companies are now being advanced by smaller exploration companies. Copper Fox (CUU-TSXV) optioned the Schaft Creek copper-gold deposit from major mining company Teck. The deposit was explored in the 1960s and early 1970s. The junior has now earned a controlling interest in the project and is within months of completing a feasibility study on a deposit that is several times larger than before the junior began working on it.

Seabridge (SEA-TSX) and Pretium (PVG-TSX) are both working on deposits that were explored by major companies in decades gone by. The adjacent claims of those two companies host a combined 130 million ounces of gold plus vast amounts of silver, copper and other metals. The combined contained metal value on those two properties, valued at todays prices, is worth an astounding $300 billion. That incredible metal value is hosted within a 12 kilometers circle, representing one of the greatest concentrations of metal value on the planet.

Geology Unlike Any Other

The geological understanding of the Golden Triangle is still unfolding. Geologists are scrambling to understand what created the phenomenal concentrations of gold at the Valley of the Kings discovery of Pretium. Recent drill results include 0.5 meters that carried 41,582 grams per tonne gold (1.6 feet at 1,213 ounces per ton of gold). Another hole hit 2,393 g/t gold 1,605 g/t silver over 10.7 meters (70 ounces gold and 47 ounces of silver per ton over 35 feet). Numerous intersections have exceeded 1,000 g/t,grades rarely seen in gold deposits.

The broad picture, in simplest terms, is that most of British Columbia is made up of blocks of crustal material (terranes) that have been accreted to the coast over a period of hundreds of millions of years. Those terranes include a wide variety of rock types, including metal-rich material derived from the depths of the crust.

Most metal deposits are derived from hydrothermal systems. That is, superheated water, circulating kilometers deep in the crust, gathers metal atoms and then deposits them in particular zones, creating concentrations of metals. Typically, such a system would remain active for hundreds of thousands of years to as much as perhaps a couple of million years. For reasons not yet well understood, the hydrothermal processes in the Golden Triangle were active for much longer, in some areas for perhaps 10 million years. Few areas on the planet have seen such long-lived geological conditions.

That long period of stable mineralizing systems played an important role in creating the high concentrations of metals at Eskay Creek and Valley of the Kings. It is also the reason for the very large and well mineralized systems at Red Chris, KSM, Galore and other porphyry deposits in the region.

Historic work throughout the region in almost every instance started with recognition of metals at surface and then tracked the deposit beneath the surface. Only in retrospect are the geologists putting together the bigger picture and probing what were the geological conditions that created such immense mineral wealth. The next step in this evolving exploration story is to start with the bigger geological story and begin to look for metal deposits that do not stick out of the ground. There is every reason to believe that there are numerous similar deposits that are hidden beneath the surface.

One interesting point to ponder is that many of the discoveries have been made at high elevation, above the tree line, where the rocks are well exposed. In fact, many of the deposits were found where glaciers have only recently retreated, leaving the rocks completely uncovered. It is more than probable that there are additional discoveries waiting to be made under the thick forests that cloak the valleys and lower slopes of the mountains.

As the geological understanding builds, geologists, guided by the regional features, will use geophysics and other tools to probe untested areas. That process is just getting underway and could add enormous value to companies that hold large land positions in this region.

Overcoming the Legacy of Bad Politics

The unease created by the leftist provincial government in the 1970s still hangs over British Columbia. The current business-oriented government is totally supportive of the mining industry, but that message has been slow to reach the mining and investment communities.

In the course of an investment conference last year, at a large dinner table dominated by mining industry professionals, somebody asked what I saw as the most attractive place in the world for mining investment. I replied that British Columbia was at the top of the list.

One of the mining industry people from Toronto guffawed: "When was the last time a mining company got a permit in BC?" he asked. "Last year" I said, and reminded him that the Mt. Milligan project got a permit for a grassroots development without a hitch and is now in development. Copper Mountain was also permitted quickly and is already in production. Since then, the Red Chris project has also been permitted.

Over the past few years, two permit applications were turned down, which attracted a lot of media attention. One of those was actually approved by the province, but then turned down at the Federal level. Both of those mine plans are being revamped to address local issues that created opposition.

The provincial political situation is again causing concern for some investors, with the left-of-center New Democratic Party now leading in the polls and a provincial election coming up. It is now abundantly clear that mining is an integral part of the BC economy. Messing with this job creating industry would be political suicide for any party. The provincial treasury is in good shape, lessening the need for new royalties. The biggest priority is in generating jobs. In fact, the NDP have criticized the present government for not moving quickly enough to grant permits for mine developments which would create much-needed jobs.

Regardless of the attitude of Toronto-based mining analysts, the major mining companies see BC as an attractive place to invest. Xstrata, Freeport-McMoRan, Newmont, Goldfields, Antofagasta and Teck are among the majors actively exploring in the province. Importantly, all are exploring by way of joint ventures with juniors, an approach which has become the norm globally. All of those majors have their eyes on very large deposits which they know the province can produce.

Many jurisdictions around the world are getting crazier by the moment, with expropriations, increased taxes and royalty rates, corruption, civil strife and a host of other problems. BC is looking ever more favorable on so many fronts.

The Golden Triangle and Beyond

In this issue and the next, we are focusing on a portion of the Golden Triangle of northwest BC, and specifically the region to the west of Highway 37 and beginning about 20 kilometers north of Stewart. There is also enormous mineral wealth east of the highway and closer to Stewart, but that is a story for another day. We are also looking at other areas in the province that are generating important discoveries and expect to be reporting on those companies in the near future.

Valuations for exploration companies are generally at dismally low levels and BC companies are no exception. In spite of concerns over the situation in Europe and the host of other bad news that preoccupies the headline writers, the fundamental story for metals has never looked better. The most important factor is that the larger mining companies are continuing to acquire exploration and development companies, and they are willing to pay much more than the values applied by investors. It is worth paying attention to these companies, which can generate huge rewards in a short time.

Company Updates

American Creek Resources
(AMK-TSXV)

American Creek has several exploration projects in British Columbia, the most significant of which is a property adjacent to and on trend with two of the largest gold deposits in the world. Drilling on that property has confirmed that the rich mineral endow- ment on the adjacent properties carries across the property boundary. While that property is exceptionally well located, American Creeks interest in the property is subject to litiga- tion. This highly prospective mineral claim is worth fighting over.

The Treaty Creek property is located just north of the KSM deposits of Seabridge and Pretiums Snowfield and Brucejack deposits. Those deposits host a total of 130 million ounces of gold, 800 million ounces of silver, 21 billion pounds of copper plus molyb- denum and other metals, representing one of the premier concentrations of metal wealth anywhere.

The Treaty Creek property hosts the same rock units and structural features that are related to the vast mineral deposits on the properties to the south. The structural trend appears to continue on to the Treaty Creek property.

Surface sampling and the drilling in 2009 outlined two mineralized zones that look similar to the porphyry cop- per-gold mineralization on the Seabridge property. Drilling by American Creek on the Copper Belle zone encountered 241 meters that averaged 0.8 grams per tonne, ending in mineralization. That grade and width are in line with the resources on the adjacent property.

The GR2 Zone hosts gold, silver and base metals in a volcanogenic massive sulfide (VMS) setting similar to the Eskay Creek deposit, just 15 kilometers to the northwest, which was one of the highest grade major gold-silver deposits. Results of drilling in the GR2 zone included 5.4 g/t gold over 14 me- ters along with silver and base metal values.

Several other areas on the extensive property also have potential to host additional mineralized zones, judging from surface sampling in areas with extensive gossans (that is, areas where metal sulphides have weathered at surface, producing distinctive "rusty" zones).

Those results from surface sampling and an early stage drilling program would be significant in any setting. Located adjacent to and on trend with gold deposits hosting 130 million ounces of gold, the Treaty Creek property is an exceptionally prospective exploration target.

Unfortunately, American Creek has not conducted any work on the property this year or last year as the title has been caught up in litigation. American Creek optioned the property from Teuton Resources (TUO-TSXV) in a deal that allows it to earn up to 60%. Upon meeting the spending and other requirements to vest at 51%, Teuton challenged the spending claims of American Creek. As it became clear that the required earn-in expenditures had been incurred, Teuton amended its legal case to challenge the geoscientific reliability of the results of the work performed. The legal dispute drags on and at the moment, the lawyers are the only ones benefiting from the immense geological potential of the Treaty Creek property.

It seems to me that normal industry practice would hold that if a partner has spent the required amount of money in accordance with the terms of the earn-in agreement, then that should be adequate. However, it is dangerous and futile to try to guess the results of litigation.

This project is clearly worth fighting for. In addition to the enormous geo- logical potential, the property holds considerable strategic value. An important element of Seabridges development plan for its huge KSM project is to construct twin tunnels to transport ore from the open pit mining operation to the processing facility located near the highway. Those tunnels would pass under the Treaty Creek claims.

As part of the ongoing engineering evaluation of the KSM project, Sea- bridge plans to drill geotechnical holes along the proposed tunnel route. That is, the company intends to drill holes to investigate the ground conditions in the area where it plans to put the tunnel. Clearly, those holes will also pro- vide geological information which will be very valuable to American Creek.

Before commencing a $5 billion mine development project, it is clear that the developer of KSM will need to have clarity with regard to the ownership of the Treaty Creek claims in order to establish certainty with regard to the tunnel right-of-way. Aside from any mineral potential on the property, just getting assured access to the tunnel right of way is likely worth more than the combined values of these companies.

While the Treaty Creek property is tied up in litigation, American Creek drilled a few holes last year on its Electrum property, located in a highly prospective region just north of Stewart. Earlier work had identified several high-grade but narrow gold-silver veins. The drilling last year tested the potential for the property to host a bulk tonnage gold-silver deposit. Those initial results fell short of expectations, identifying several zones with good values, but lacking the combination of grade and size to make it economically viable. The presence of gold and silver values over a wide zone is promising, but considerably more drilling would be required to test the bulk-tonnage potential and/or outline some continuity in the higher grade zones.

The company recently sold its 51% interest in the nearby Tide property for $1.5 million cash, providing some working capital. Several other early stage exploration projects in BC have significant potential, but no work is planned at the moment.

Normally, I would not get involved in a company where the value is dependent upon the outcome of a messy litigation. This situation is interesting because of the enormous potential value of the Treaty Creek property, which appears to be related to the same geological system that produced an extraordinary endowment of gold, silver and base metals on the proper- ties just to the south. This situation is highly speculative, legally and geo- logically, but may be worth a shot at prices near the current level.

Price August 22, 2012: C$0.055
Shares Outstanding: 139 million
Shares Fully Diluted: 172 million Market Cap: C$7.65 million
Contact: Investor Relations 403-752-4040

*Update as of September 17, 2012: Seabridge is proceeding with applications to the BC government to permit and construct the proposed Mitchell Treaty tunnels that will link the KSM mine area to the proposed processing plant. Seabridge has requested that American Creek and Teuton reopen negotiations in order to come to an agreement on Seabridge obtaining access rights to proceed through the companys Treaty Creek property.

Click here for the full report

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American Creek Resources

Box 798 53A Broadway North
Raymond Alberta
T0K 2S0 Canada

Contact Information

as of 4:30pm EST Sept 20, 2012

Recent Press Releases
From American Creek:

American Creek Receives Notice of Application from Seabridge Gold Regarding the Mitchell-Treaty Tunnels and Requests to Negotiate Access Rights Through the Treaty Creek Property

American Creek Resources Ltd. is pleased to announce that on late Friday afternoon a letter addressed to both American Creek and Teuton Resources Corp. ("Teuton") was received from Seabridge Gold (TSX:SEA) (NYSE:SA) ("Seabridge") in which Seabridge updated the parties on the advancement of its KSM Project and officially notifying American Creek and Teuton that it is proceeding with applications to the British Columbia Ministry of Forests, Lands and Natural Resource Operations branch under the Mineral Tenure Act, Land Act and Mines Act in order to permit and construct the proposed Mitchell-Treaty Tunnels ("MTT") that will link the KSM mine area to the proposed processing plant and tailings impoundments in the upper North Treaty Creek valley. Seabridge also requested that American Creek and Teuton re-open negotiations in order to come to an agreement on Seabridge obtaining access rights to proceed through the Corporations Treaty Creek property.[...]

American Creek Resources Reports the passing of Advisor Don McKinnon

It is with deep regret that we announce the passing of Don McKinnon, one of the most prominent individuals in Canadian mining history. Don served as an advisor to American Creeks Board of Directors for more than eight years, from the companys beginning in 2004 to his passing. In recognition of his contributions to mining and exploration, Don was awarded PDACs Prospector of the Year, the Order of Canada, the Queens Golden Jubilee Medal, and the Queens Diamond Jubilee Medal. In May of this year he was presented with the key to the City of Timmons, Ontario. Don was highly respected throughout the industry, and American Creek was honoured to have been so closely associated with him.[...]

American Creek Resources Sells Tide Property For $1.5 Million

American Creek Resources Ltd. is pleased to announce that it has sold its 51% interest in the Tide Property, located near Stewart, British Columbia, to 0945473 B.C. Ltd., a Hunter Dickinson Inc. (HDI) company, for the sum of $1.5 million cash. American Creek has retained a right of access over the Tide Property for the purposes of continuing exploration of its adjacent Electrum Project.[...]

American Creek Grants Permission to Seabridge Gold to Conduct Test Drilling Along Proposed Tunnel Route at Treaty Creek

American Creek Resources Ltd. (the "Corporation") reports that it has granted access to Seabridge Gold ("Seabridge") (TSX:SEA) (NYSE:SA) to conduct geotechnical drilling this summer on the Treaty Creek Property along the proposed KSM Project Mitchell Teigen Tunnel route.

The Corporation also wishes to advise that it will post on its website, from time to time and when able, scheduled events related to the litigation with Teuton Resources Corp. over the Treaty Creek Property.

American Creek Resources Ltd. is a Canadian mineral exploration company focused on the acquisition, exploration and development of gold and silver deposits within the Province of British Columbia, Canada.[...]

    

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