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Message: Underworld Resources: Best New Gold Discovery in Canada / Kinross 10%
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Underworld Resources: Best New Gold Discovery in Canada
By James West
MidasLetter.com Thursday, May 7, 2009
Ninety kilometers south of Dawson City in Canada's Yukon, Underworld Resources (TSX.V:UW) has made a significant gold discovery that is sufficiently impressive to induce Kinross Gold (NYSE:KGC, TSX:K) into holding nearly ten percent of the company.
Its not difficult to understand why Kinross is interested. Underworld's 100% controlled White Gold property in Canada's Yukon is one of the best ever for the territory, and probably the best new discovery in Canada of the last year or two. Together with the adjacent Black Fox property, approximately 100 square kilometers of terrain accessible by air, road and barge are currently being explored.
HISTORICALLY PROLIFIC YUKON
Yukon has a rich mining history. Mining has continued to be the cornerstone of the Yukon economy from the famous Klondike gold rush of 1896/98 to the present day, although the territory has experienced several "boom-and-bust" cycles as metal prices have risen and fallen over the years.
The first reported exploitation of metals in Yukon pre-dates European settlement. The aboriginal people are known to have mined native copper nuggets in the White River area of southwest Yukon to fashion arrowheads and to trade. Prospecting for placer gold by white settlers began soon after the first reported discovery at Fortymile in 1850.
The discovery of gold on Rabbit Creek in the Klondike district by George Carmack, Tagish (Dawson) Charlie and Skookum Jim on August 16, 1896 sparked the world's biggest 'gold rush'. Placer gold mining remained the mainstay of the Yukon economy from the time of gold rush until the early 1920s. Following rises in the price of gold, placer mining was again important from the 1940s to the 1960s, and from 1974 to today. Currently, small family-run gold placer mines operate each summer, with annual production of approximately 100,000 troy ounces. The total recorded fine gold production from 1885 to date is about 12.5 million ounces, valued at US$4.4 billion at today's prices.
Why is now a good time to look at Underworld?
DRILLING TO BEGIN IMMINENTLY
"We're looking at drilling a minimum of thirty, but more likely closer to forty holes in the Golden Saddle Zone starting this week," said Vice President of Exploration Rob McLeod. "We're looking at a very large bulk-tonnage open pittable scenario that nevertheless has very good grades of gold, consistently 4 to 6 grams per tonne."
Last year's drill program of the Golden Saddle zone saw many excellent intercepts, and nearly every hole contained some degree of gold mineralization. Highlights of those results are as follows:
The company also drilled two holes into the Arc zone 1 kilometer south of the Golden Saddle, of which one assayed 28.5 meters grading 1.18 grams per tonne gold, and the second hole, 600 meters away, returned 1.47 grams per tonne gold over 29 meters. The Arc zone mineralization remains open in all directions.
Besides these developing targets, there are an additional 4 zones of interest on the White property that have shown anomalous to somewhat higher grades of gold mineralization in soil geochemical testing that will see some preliminary exploration drilling over the coming months.
Immediately south of the White Gold property is the Black Fox property, which has been subject to placer mining for over 100 years. The company is planning to test the Thistle Creek area on the Black Fox property following grab sample results assaying from 0.6 grams per tonne as high as 10 grams per tonne gold.
THE TECHNICAL TEAM
Underworld's exploration team combines the discovery track record of Adrian Fleming with the northern Canadian expertise of Rob McLeod.
Fleming gained fame as a member of the team that discovered the Porgera Gold Mine in Papua New Guinea, which currently ranks as the world's seventh largest known gold deposit. He was the regional exploration manager for Placer Dome in Sydney, Australia, and was instrumental in the discovery and/or development of major discoveries such as Australia's Big Bell Mine, Gross Rosebel Mine in Suriname, and the Hope Bay Gold Project in northern Canada.
Rob McLeod is a highly technical, creative and innovative exploration geologist. He has over twelve years of post-graduate experience in mining and mineral exploration, working for a variety of major and junior mining companies. His exploration strategy is a multi-tiered approach, including: conceptual geologic ideas with prospecting, early-stage project advancement focusing on discovery, and advancing mid-stage projects towards feasibility. As an exploration geologist and project manager at Miramar s Hope Bay project, he was part of the team that discovered the Naartok deposit, as well as expanding and delineating the Boston and Doris deposits. He was previously Vice President of Exploration for Atna Resources and is currently a director and advisor to several junior exploration companies.
According to Mr. McLeod, "Adrian has a tremendous discovery record. Since I met him working on the Hope Bay project, we've always had a strong urge to team up and Underworld Resources in the outcome of that desire".
THE STRUCTURE
All important to the staying power of a company is the frequency and methodology of its capitalization. What makes Underworld so attractive is that they have made this great discovery right out of the chute, which means a lower cost of discovery per ounce over time, and less dilution relative to ounces of gold in the ground per share. "We're very happy with share structure," commented Rob McLeod. We made a conscious decision not to finance the company with any warrants since going public. We've have 27.5 million shares outstanding and 30 million fully diluted, with $4 million in the treasury. We did a $3 million flow-through financing in October 08 during the worst of the market sell-off, which became free trading two months ago. The stock is now trading at 55 cents per share, with management holding 20% and institutions in Canada and the U.S. holding about 28%.
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