Underworld hits ‘magic threshold’

Underworld Resources, already the darling of Yukon's mineral exploration community, won more accolades this week at the Mineral Exploration Roundup in Vancouver.

Underworld Resources, already the darling of Yukon’s mineral exploration community, won more accolades this week at the Mineral Exploration Roundup in Vancouver.

The company’s discoveries at the White Gold District, about 100 kilometres south of Dawson City, are responsible for triggering the territory’s biggest staking rush in the last decade.

The latest excitement comes from Tuesday’s announcement that Underworld has reasonable grounds to believe it’s sitting on more than 1 million ounces of gold.

“Many exploration companies strive for the magic threshold of 1 million ounces,” said president Adrian Fleming. “And lots never make it.”

Mike Burke, head of Yukon’s mineral services branch, concurs as much.

“In two years, to drill off a resource that’s now at 1 million ounces is a pretty successful program. It’s something that happens quite rarely anywhere. It’s not easy to find these things.”

And that’s only counting “indicated” resources, in which geological guesswork has been corroborated with drill samples. There’s an additional 600,000 ounces of gold that’s believed to be on Underworld’s properties that currently has the lower, “inferred” classification.

Equally exciting is the high grade of what is currently Underworld’s biggest gold deposit, Golden Saddle. Samples there reveal 3.2 grams of gold per tonne of rock.

“That’s very good grade,” said Fleming. “There are many open pit gold mines, all around the world, that make good money on two grams per tonne.

“A gram is about $30. So each tonne of rock at 3.2 grams is about $100. In the Yukon, to dig it up and process it probably costs $30 to $40. So that’s a significant profit,” he said.

“The costs are obviously higher and we are a bit remote. But you’re looking at a very good grade, potentially, open pit mine.”

The next step for the company will be to conduct an engineering study that will look at the economic feasibility of building a mine. It’s expected to be complete by the end of March.

And next summer, Underworld plans to conduct another aggressive round of drill sampling, with a focus on their Arc deposit.

“My hope is we’ll be able to make another discovery, which would be our third discovery in the Yukon in very short order,” said Fleming.

Underworld’s claims were staked in 2003 by Shawn Ryan and Cathy Wood of Dawson City. After collecting 7,000 soil samples, the couple optioned the property to Underworld in 2007.

Ryan and Wood received the Prospectors of the Year award at the Roundup this week.

Without hiccups, a mine could open by 2014, said Fleming. But don’t expect Underworld to be the one operating it.

The company, established in 2006, is a junior that specializes in exploration work. “We don’t have the in-house experience to build a mine,” said Fleming.

When juniors make a promising strike, they are typically bought out by a bigger, multinational mining company.

“It’s just a matter of time before someone says, ‘We’ll pay you 50 to 60 per cent more than the current stock price,’ and we might be prepared to consider that,” said Fleming. “That’ll make all our shareholders happy, including my wife.”

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