| | Murray,
Idaho, an historic gold mining district in northern Idaho, was awakened from a
long slumber when New Jersey Mining Company began exploration at the Golden Chest
mine in 2004. The Golden Chest is located 2 kilometers east of Murray. In 2004,
the Company completed at 150-meter exploration ramp on the Katie vein from which
it is now mining gold ore at a rate of approximately 350 tonnes per month. Ore
is shipped to the New Jersey mill in Kellogg for processing. Concurrent to the
mining operation, the Company has completed two phases of successful exploration
drilling on the property.
Golden Chest, road and North Idaho setting |
The Company's land position at the Golden Chest covers an area of 500
acres. About 230 acres is held through a mining lease with Metaline Contact Mines
that calls for a sliding scale Net Smelter Royalty (NSR), and the remaining area
is held through a similar mining lease with a private corporation and unpatented
claims owned by NJMC. The NSR requires NJMC to pay a minimum of 3% of the net
smelter returns to the lessor. An additional NSR ranging from 1% to a maximum
of 3% is payable if the price of gold reaches certain trigger points as adjusted
by the Consumer Price Index (CPI) with June 2003 as the base. For example, using
the March 2006 CPI, the gold price trigger point for an additional 3% royalty
is $598/ounce. Management is excited about the Golden Chest’s potential
to host a million-plus ounce gold deposit for several reasons:
| 1. Drilling of the Idaho vein indicated higher gold
grades at depth. The table below shows drill intercepts drilled by NJMC into
the Idaho vein and a hanging-wall vein through the latest phase of drilling completed
in late 2005. |
Hole
Number | From
(meters) | To
(meters) | True
Thickness (meters) | Gold
Grade (grams per tonne) | Comments | | DDH04-06 | 177.6 | 192.8 | 10.90 | 5.50 | Idaho
vein | | DDH05-02 | 166.8 | 171.1 | 3.87 | 5.30 | Idaho
vein | | DDH05-03 | 190.0 | 198.0 | 4.89 | 10.32 | Idaho
vein | | DDH05-04 | 198.9 | 200.3 | 1.10 | 3.78 | Idaho
vein | | DDH04-06 | 172.0 | 172.5 | 0.40 | 7.27 | Hanging
wall vein | | DDH05-04 | 109.0 | 110.3 | 0.99 | 10.06 | Hanging
wall vein |
The intercepts into the Idaho vein listed
in the table are all below the No. 3 Level which is the lowest known level on
the Idaho vein. About 40 meters of strike length on the Idaho vein is represented
by the four drillholes listed above. The Idaho vein has a strike length of at
least 275 meters on the No. 3 Level.
2. Sulfide mineralogy of gold-bearing veins
is not refractory. Conventional flotation processing of Golden Chest ores
at the New Jersey mill facility achieves an average gold recovery of 94%. Laboratory
testwork indicates that the bulk sulfide concentrate produced by the flotation
circuit can be leached in a conventional cyanidation circuit and achieve 97% recovery
without expensive oxidation pre-treatment methods such as pressure oxidation or
roasting. | 3. Very little deep drilling has been done
in the Murray District to explore for deep-seated Coeur d'Alene-type gold veins.
Veins in the Coeur d'Alene Mining District are known for their continuity over
thousands of feet in depth which leaves the potential for a significant tonnage
of ore to be found at depth on the Idaho vein. Historic gold production
from the Murray district totals over 300,000 ounces of gold of which more than
200,000 ounces were from placer (stream) deposits. The Golden Chest was the largest
lode producer in the Murray area and produced 65,000 ounces of gold from narrow
high-grade veins, primarily in the late 1890's. Newmont Gold Co. spent about $500,000
on an exploration program in the late 1980's. Their work identified an inferred
geologic resource of 230,000 ounces. Newmont dropped the property, apparently
because it did not meet their criterion of 1 million ounces of open-pit resource.
Many of Newmont's drillholes were stopped short of their projected intercept of
the Idaho vein.
View of the Katie Vein (White Quartz) on 965 Sublevel
showing the intense folding associated with the vein | Exploration
Plans Plans for the Golden Chest are two-fold. First,
as many as a fifteen offset holes from DDH04-6 in order to extend the gold mineralization
of the Idaho vein so that a gold resource can be calculated. Also, drill several
exploration holes into other promising targets on the property. Once a significant
gold resource has been defined on the Idaho vein, an underground ramp would be
driven for further development and exploration. Geology
Resources Gold mineralization is associated
with a thrust fault. Gold-bearing quartz veins are hosted by folded siltite-argillite
and quartzite of the Prichard formation. Two types of veins are found are the
Golden Chest: banded veins and massive veins. The banded veins consist of white
quartz with thin planes of dark gray argillite that may be partly replaced with
sulfides. The other type of quartz veining is massive and typically quartzite
hosted. Sulfide minerals found in the massive veins are pyrite, sphalerite, galena
and chalcopyrite. Resource calculations for the Golden Chest are presented
below. Ounces shown for the Katie-Dora are contained ounces and the recovery expected
should be 93% according to production data from the New Jersey mill.
| Ore
Reserves/Resources | | Classification | Area
| Metric Tonnes | Gold
Grade:
Grams per Tonne | Ounces
| | Proven & Probable | Katie-Doria
Ramp | 5,870 |
13.0 | 2,4545
| | Mineralized Material * | Open
Pit | 1,066,956 |
1.39 | - |
| *
This category is not recognized by the SEC. A pre-feasibility study was completed
by the Company on the open pit using a $500 gold price. Also, more in-fill drilling
would be required to insure the continuity of gold mineralization. |
More information on the Golden Chest can be found in the Company's
Annual Report on Form 10-KSB. |
