SOMBA K'E/YELLOWKNIFE
It's been a positive year for the Yellowknife City Gold project as its principal owner, TerraX Minerals Inc., successfully uncovered multiple previously undiscovered gold deposits, despite 75 years of exploration in the area.

TerraX Minerals president and CEO Joe Campbell goes over his company's plan for 2016 exploration at the Yellowknife City Gold project during a public engagement session held at the Yellowknife Ski Club on Jan. 13. - Meagan Leonard/NNSL photo

Situated approximately 15 kilometres outside the city, the project is focused on the Yellowknife gold belt - a northern extension of geology which previously hosted both Giant and Con mines.

In August, a new vein was discovered 50 kilometres away and parallel to sections explored by the company in 2014. Samples obtained ranged from 21.4 to 129.5 grams per tonne.

In September, it also received channel sampling results from the southern and eastern sections of the Herbert-Brent Shear which returned results of 10.2 grams per tonne in six metres in the south and 2.23 and 4.05 grams per tonne in 15.3 and six metres respectively in the east.

On Jan. 5, the company said final results from the summer surface exploration program had confirmed three new areas with replacement-style mineralization including 108 and 35.2 grams per tonne in the newly discovered Pinto South vein and plentiful quartz veins in the JED area west of Barney Shear at 133.5 grams per tonne.

TerraX president and CEO Joe Campbell said these grades are substantially better than those currently being mined by major players in the gold industry.

"The major gold companies in the world right now are usually mining what we call sub-gram ore, less than a gram per tonne of gold," he explained. "What we're seeing in some of our drilling is 2.4 metres at 15 grams, two metres at 10 . so these are very substantial grades."

In 2014, TerraX started exploring the 93.5-kilometre-square property and drilled 4,000 metres on the Crestaurum and Barney deposits near the centre of the site with results averaging 250.9 grams per tonne and the largest sample yielding 547 grams per tonne. Approximately 7,000 metres was completed by the end of 2015 with another 5,200 expected during the 2016 winter program.

Campbell said the results are "extremely encouraging."

Company finds funding

Unlike many other exploration projects in the territory which have gone into hibernation due to a lack of available capital investment, TerraX has been able to generate enough funding to ensure work continues to the end of 2016, said Campbell - this is partially due to the site's favourable location close to two former mines and an urban centre.

"There's an appreciation in the industry for projects that have good infrastructure and have excellent geology," he said. "When things get tough, those projects tend to still be able to attract money, whereas more remote exploration ideas are much harder to get money for."

Last year, TerraX received $2.8 million in financing, with $400,000 coming from investors in Hong Kong and Singapore and $500,000 from Yellowknifers. Quebec-based Virginia Mines also purchased a 10 per cent interest in the project and a grant of $80,000 was provided through the Department of Industry, Tourism and Investment's Mining Incentive Program. Since December 2012, the company has raised approximately $13 million.

During a public engagement session Jan. 13 at the Yellowknife Ski Club, Campbell said 2015 exploration spending totaled $3.4 million with $2.6 of that diverted toward Yellowknife-based suppliers, employees and service providers. The 2016 budget is expected to be $3.1 million. Later this year, Campbell says he will be approaching investors once again.

What's next

Going forward, TerraX commenced its winter drill program in January which will focus on areas beneath or requiring lake access. He said they are hoping to have their resource estimate completed by the end of the first quarter of 2016 but completion of exploration is a "moving target."

Despite TerraX's success, Campbell said he hoped market conditions for gold would have improved in 2015, but says they still have not reached favourable levels.

"I'd like to say gold is doing better, but it's not," he said. "Over the last four years, there's been a steady decline in the price of gold and that has not yet turned around."

He emphasized their financial position will leave them in good standing to the end of next year but if the current climate continues, Campbell said he estimates they might have to slow things down.

"The end of 2016 comes pretty quickly and this is an industry that does not generate cash until it has a mine," he said. "That's a major concern if we don't see the turnaround I'm expecting - it (will) be a hard job to get that money."

Even if all goes according to plan, Campbell says, the project is still eight to 10 years from being ready for production. He said they still have to finish the exploration phase and do an economic study to determine if there is a large enough resource to justify a mine. Then they have years of permitting processes after that.

"Given the constraints of the exploration that we can do, the economics that we have to carry out and the regulatory processes that we have to go through, it's not feasible to think of anything for at least five years."

Giant's shadow looms over project

TerraX president and CEO Joe Campbell says the company has received positive support from the territorial government throughout the duration of its exploration, but there continues to be negative perception surrounding the project by some in the community due to the legacy of contamination left by Giant and Con mines. He said this is something they expected when they signed on to the initiative, but are working to address.

"There has been a considerable amount of concern about how you run a project that's different from how the mines in the past were run (and) how they were left," he said. "That's something we have to wear."

He said all they can really do is continue to raise awareness about the drastically different standards in place today and the important role those mines played in Yellowknife's early economy and still do today.

"Those two mines sustained a city for decades and they continue to sustain the city to some extent through the clean-ups that are going on . there's many people who are now making their livelihood out of the clean-up of those mines," he said. "The cold hard fact is really the only significant economic driver outside of government for the territory is the mining industry."