In September 2017, Metallic Minerals entered into an option agreement to acquire a 100% interest in 26 miles (36.4 km2) of creek and bench mining rights (the “Property”) along the Australia Creek drainage, a tributary to the Indian River, in the Klondike gold district near Dawson City, Yukon. In parallel with this acquisition, Metallic has entered into a production royalty agreement with an experienced alluvial mining operator with respect to a 2 mile (2.8 km2 ) portion of the Property (Lower Australia Creek). Under this agreement, the operators will have exclusive rights to mine the Lower Australia Creek property, in exchange for a 12% royalty on all gold production payable to Metallic. The property is road accessible and is presently permitted for alluvial gold production. Mining equipment has been mobilized to the site to commence test work in September for the remainder of the northern field season. The alluvial mining operators are expected to make a decision regarding production, with respect to these Lower Australia Creek claims, in early 2018.
Australia Creek is part of the historic Klondike gold district that is estimated to have produced over 20 million ounces of gold since its discovery in 1898. Australia Creek and its benches are now recognized by Yukon Geological Survey as an eastern continuation of the highly-productive Indian River drainage, which is the largest placer gold producing area in the Yukon. Mining on the Indian River began in the late 1970s and has produced about 250,000 ounces or more than 40% of all placer production in the Yukon through 2015. With the expansion of larger-scale, open-pit operations, production on the Indian River has doubled since 2010 and accounted for 46% of the Yukon’s total placer gold production in 20151.
Despite extensive mining activity nearby, Australia Creek itself was never historically mined due to its importance as a source of water and hydro-electric power for supporting the broad scale, floating dredge operations that were being conducted in the area by Yukon Consolidated Gold Company (YCGC) which operated in the Klondike Region between 1920s and 1960s. The dams on Australia Creek have been removed with only the historic diversion channels now remaining. YCGC did limited exploration churn drilling at the mouth of Australia Creek, but no further exploration up the drainage. The mouth area is being actively mined at present and auger drill holes on Lower Australia Creek have returned values in the gravels similar to other parts of the Indian River, with initial test pits in 2015 to 2017 confirming the presence of alluvial gold.
The opportunity for Metallic Minerals will be to build a portfolio of production royalties from its holdings in the Klondike region, which can potentially generate internal cash flow from royalty payments that can be used towards the Company’s exploration activities in the Keno Silver and McKay Hill Projects. The first production royalty on Lower Australia Creek covers just a fraction of the remaining total Australia Creek holdings and the Company expects to secure additional production royalty agreements with other experienced alluvial mining companies over time.
1Yukon Geological Survey (“YGS”) Yukon Placer Mining Industry Report 2010-2014