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Contango Ore’s Exploration of Lucky Shot

by Scott RhodeNov 27, 2023Magazine, Mining

Alaska Business

Hatcher Pass Road exists because of gold mining. On the Palmer side of the backcountry route through the Talkeetna Mountains, Independence Mine State Historical Park preserves a relic of gold production from the ‘30s, ‘40s, and ‘50s. Even earlier, starting in the ‘20s, miners extracted ore from shafts penetrating slopes around the headwaters of Willow Creek, on the other side of the pass.

The Willow Creek mining district ranks as the third-largest lode in Alaska, yielding 19 tonnes of gold during its active era. Subsequent activity has been more sporadic, however, with brief interest in the late ‘70s and early ‘80s falling short of a full-scale revival.

The latest effort comes from Contango ORE, a Texas-based company with exclusively Alaska mining interests. The president and CEO, Rick Van Nieuwenhuyse, contrasts Contango ORE’s serious exploration with the fleeting attention paid to Hatcher Pass by oil and gas companies like Enserch Corporation. “They were flush with lots of petro dollars, and a number of the oil companies decided to get into the mining business,” he says. “Within about three or four years, they all decided to get out. It’s a very different business.”

Van Nieuwenhuyse credits Full Metal Minerals with some good work in the ‘80s, defining the Coleman segment with 150 holes drilled. However, he says, “It wasn’t really a full effort, and was really sort of half thought through. I think it was more of a promotional story than anything else. But the drilling they did was good, solid drilling.”

Until miners acquire X-ray vision, they must drill to locate veins of precious metal within mountains of solid rock. “The only way to get a sample is to drill a hole,” Van Nieuwenhuyse says. “You want to use a large enough diameter drill steel to ensure that you’re getting a good quality sample. If you start too small, you tend to get poor recoveries.”

Each borehole is a shot in the dark. Luck determines not just whether gold is in the ground but whether the drill can intercept a high enough concentration to justify investing in production.

Contango ORE is aiming at Lucky Shot, the name of the gold vein underneath Box Mountain Ridge. Thorough geologic modeling stacks the odds in the company’s favor.

Two for Contango

Crumbled adits, or mineshaft entrances, are visible on the hillside from Hatcher Pass Road near its highest crossing of Willow Creek. These structures are the surface signs of the Coleman, Lucky Shot, and War Baby mines. All three tap the same layer of Box Mountain Ridge.

“It’s the same vein; there’s a fault that offsets it,” Van Nieuwenhuyse explains. Because each has its own adit, the mines have different names; the one in the middle gives its name to the whole project.

The Lucky Shot project sits on 360 acres of patented mining claims—private land surrounded by 7,865 acres of state-owned land. Contango ORE has a lease on the Lucky Shot Project from the underlying owner, Alaska Hardrock Inc., and through its subsidiary Contango Mineral Alaska has 100 percent ownership of the peripheral state mining claims. Across the valley, Contango ORE also has a 100 percent interest in the Gold Bullion project, another site that’s been idle since the ‘80s.

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The company’s flagship project in Alaska, however, is a minority interest near Tok. Contango ORE has a 30 percent stake in the Manh Choh mine, located on Tetlin tribal lands. The majority partner in the joint venture is Kinross Gold, the operator of the largest gold mine in the state, Fort Knox.

A groundbreaking ceremony on August 30 marked the start of operations at Manh Choh. “The construction phase has been achieved on budget and on schedule,” Van Nieuwenhuyse declared. “At this point, mining operations primarily consist of pre-stripping activities, with any ore encountered to be stockpiled for later transport by road haul trucks to the Fort Knox mill for processing.”

Manh Choh, designed as an open pit mine, is expected to operate for four to five years, extracting at least 1.2 million ounces of recoverable gold. That would be about twice as much as the 600,000 ounces produced over several decades from the Willow Creek district, nearly half of that total from Lucky Shot itself.

Manh Choh is not yet in the production phase, which is still a year away. Van Nieuwenhuyse explains, “Mill modification activities continue at the Fort Knox mill with an emphasis on completing outdoor activities before winter arrives. The project continues to be on track to achieve commercial production in [late] 2024.”

The ore density of the gold resource at Manh Choh averages 4 grams per tonne. By comparison, the historic output of the underground mines in Willow Creek was reportedly at least 30 grams per tonne. A higher grade is necessary to warrant the greater expense and slower progress of hard-rock mining.

Initial Results

Geology is a language Van Nieuwenhuyse understands well, having studied the science in Belgium, where he was born. He also worked overseas for Vancouver-based Placer Dome before the mining company was taken over in 2005 by Toronto-based Barrick Gold (one of the developers of the Donlin Gold project in the Upper Kuskokwim region; the other partner, NOVAGOLD, was led by Van Nieuwenhuyse from 1999 to 2012).

Alaska is where he grew up, though, so the CEO keeps Contango ORE focused northward. While based in Houston, Texas, the company’s exploration prospects are all in Alaska. Contango ORE holds a 100 percent interest in approximately 137,280 additional acres of State of Alaska mining claims. Three of its projects—Eagle, Hona, and Triple Z—are adjacent to Manh Choh; one other, the Shamrock project, is along the Richardson Highway between Delta Junction and Fairbanks.

A resident of Fairbanks has direct oversight of Lucky Shot. Chris Kennedy, formerly general manager of the Pogo underground gold mine near Delta Junction, is Contango ORE’s general manager for Lucky Shot. Kennedy also previously served as president of the then-Council of Alaska Producers [now rebranded as Alaska Metal Mines].

Canadian companies still play a role in Contango Ore’s exploration at Lucky Shot. For surface drilling, the contract goes to Cyr Drilling International of Winnipeg, Manitoba. Major Drilling Group International, based in New Brunswick, conducts underground drilling (in addition to exploration for Graphite One near Nome).

The company completed more than 12,500 feet of underground drilling from twenty-nine holes bored from a tunnel first excavated in the ‘80s by Enserch Corporation. In its initial Technical Report Summary filed this year, Contango ORE estimated its indicated Lucky Shot mineral resource of 226,963 tonnes, at a grade of 14.5 grams per tonne.

Van Nieuwenhuyse says further infill drilling ought to clarify the scope of the resource. “The current drill spacing, on the Lucky Shot segment in particular, is not dense enough to result in a substantial amount of indicated resources, but future drilling is planned to convert much of the reported inferred to indicated resources,” he says.

The area in general is considered underexplored, so Contango ORE believes there is good potential to delineate additional exploration targets on the Lucky Shot Project lease. Van Nieuwenhuyse says, “We are very pleased with this initial resource at Lucky Shot and are planning a follow-up surface and underground drill program to augment resources sufficient to begin mine planning.”

Fan Shot Plans

Contango ORE initiated surface drilling this fall to extend the exploration program. “We will complete as much surface drilling as we can safely accomplish from this single drill pad on top of Box Mountain Ridge before winter weather conditions shut us down,” Van Nieuwenhuyse says. “Future drilling of approximately 12,000 meters (39,000 feet) from underground at Lucky Shot is expected to be undertaken in 2024.”

The company will use a drill pad to drill a series of twelve to fifteen holes totaling approximately 9,800 feet in a fan pattern to in-fill and extend the Coleman Segment of the Lucky Shot vein. According to the Technical Report Summary, the Coleman Segment contains an estimated 95,092 ounces of indicated gold resource averaging 15.6 grams per tonne. That segment is the target of surface drilling.

“We set up a single, large 30-by-30 [foot] drill pad—a pretty substantial drill pad. The plan is to drill a whole series of fan shots from that single pad… to get a good spread on the drill intersections,” Van Nieuwenhuyse says. “Spread your hand open with your fingers apart, and (if you had six fingers) it would show what our plan is: drill from a near-vertical hole to a near horizontal hole and everything in between, getting a 15- to 20-meter spacing from the drills in a fan profile.”

Underground exploration will likely resume next April. The objective is to identify 400,000 to 500,000 ounces of gold resource that Contango ORE can then develop a mine plan around.

Mutual Benefit

For now, Contango ORE is focused on the exploration stage. If reviving Willow Creek gold mining becomes feasible, that decision will come later.

To the extent that Van Nieuwenhuyse is looking ahead, he can rule out using a gold mill that was built in Willow to crack gold out of ore but never used for that purpose. If anything, ore might be trucked north of Fairbanks for milling. That’s what Contango ORE is doing at Manh Choh: trucking ore about 250 miles from the Tok area to the established infrastructure at Fort Knox mine.

“We have a partnership with Kinross on Manh Choh, and they’re processing the ore there. That’s certainly an alternative we’ll take a look at,” Van Nieuwenhuyse says. However, “Depending on the quality and the grade of deposit, and how much we find, we may also take a look at building our own facility. I have no idea where that would be, at this point.”

He’s aware of the controversy that the Manh Choh trucking plan has engendered. In August, Kinross Gold hosted a safety fair featuring a new ore hauling truck that its contractor, Black Gold Express, will use at Manh Choh. Protesters attempted to blockade the truck to draw attention to the increased traffic, projected at about sixty trips per day, up and down the Richardson Highway.

Hatcher Pass Road isn’t built for that level of traffic. It can barely handle seasonal tourist traffic to Summit Lake State Recreation Site overlooking the Willow Creek valley. In the grand scheme, recreation is an ancillary use of the road.

Van Nieuwenhuyse observes, “I find it funny that roads that were built by miners and become useful for other purposes, then turn around and say, ‘Well, you can’t mine on ‘em.’”

If the Lucky Shot vein pencils out for gold mining, Contango ORE would have to share Hatcher Pass with everyone else. Van Nieuwenhuyse endorses a mutually beneficial approach.

“We recognize that’s an area that a lot of people visit; it’s a beautiful area, so it’s very understandable why,” he says. “I think the key thing is always safety, so if there is more traffic on the road, then we would advocate for improving the road.”