Thorunn Howatt
Northern News Services

Yellowknife (June 12/02) - Gold fever is in the air in Yellowknife.

Canadian Zinc Corporation plans to spend about $1 million at the Damoti Lake gold project, located 192 kilometres (120 miles) by air north of the city.

The company announced last week it won't be working at its Prairie Creek zinc mine close to Nahanni National Park this season and plans to focus on the Yellowknife project instead.

With gold priced at more than $320 an ounce, it's easier for exploration companies to entice investors to gold projects.

"We will probably spend about $1 million this year," said Canadian Zinc's Malcolm Swallow, explaining that if the program goes as planned there will be a helicopter-transported rig on the site this summer.

The company has a rig lined up for the end of this month, as well as a tent camp with a few geologists. In the winter, the Colomac ice road will be conveniently close.

A 1,500-metre, all-season airstrip is located at the former Colomac mine site, 32 kilometres (20 miles) north of Damoti Lake and a winter road is periodically established into the Colomac site.

Heavy equipment can be brought in to Damoti Lake via the 288-kilometre ice road from Yellowknife.

Canadian Zinc acquired an option on the property last March. It covers 11,516 acres in 11 claims.

"The property is currently owned by a company called Doublestar Resources," said Swallow.

An option agreement has Canadian Zinc spending $2.4 million on the property over four years to earn a 50 per cent joint venture position. It also has to make annual lease payments over four years totalling 100,000 shares and $170,000.

In the past, about $14 million was spent by other companies to explore the property.

"Right now the zinc market is down and our shareholders require us to do something to enhance shareholder value," said Swallow.

Most of the financing is in place for Damoti but, "We have funding going ahead right now and that's up to a million dollars, the majority of which is flow-through," said Swallow. Exploration companies are required to spend flow-through share money within two years after share issuance.

"Our reasons for getting back into it is our activities at Prairie Creek are fairly stalled based on our ability to get permits at the moment," said Swallow.

The zinc mine has been held up waiting for permitting from the Mackenzie Valley Land and Water Board. Zinc prices are also fairly low at 34 cents.

"So if you say to people 'I've got this great zinc mine I really want you to put some money into it,' they look at you like you are slightly crazed."