TORONTO (miningweekly.com) – Canada-based mineral explorer Otis Gold plans to weigh in on a burgeoning gold mining revival in the US state of Idaho, as it moves its flagship Kilgore gold project up the value curve.

Founder and CEO Craig Lindsay told Mining Weekly Online in Toronto that he expects the mining-friendly state, where there currently are no active producers, to see a revival in gold mining.

Idaho has a long history as a significant silver and gold producer, and today, large miners such as Coeur d’Alene and Thompson Creek have operations there.

Lindsay said about ten gold miners were currently engaged in moving various brownfield and greenfield gold projects to production, with Midas Gold leading the pack with its seven-million ounces contained in three projects.

Otis is currently focused on the Kilgore gold project, located in Clark County, which Lindsay believes has the potential to hold up to three-million to four-million ounces.

The Kilgore project was previously operated by gold majors such as Placer Dome, Pegasus Gold and Echo Bay Mines.

From 1993 to 1996 Echo Bay planned to put the Kilgore deposit into production and the company had an internal initial engineering assessment completed. The assessment found the deposit comprised of 11-million tons grading 1.28 g/t.

Importantly, Lindsay pointed out that Echo Bay had planned to mine the deposit when the price of gold was about $300/oz. This augers well for Otis’ plan to mine the deposit, as the gold price has risen by about 450% from the $300/oz levels to $1 634.70/oz on Thursday.

Otis Gold got involved with the Kilgore project in 2008, and to date had drilled about 20 000 m in the main Kilgore deposit area.

The project currently has a National Instrument 43-101-compliant indicated resource of 27.3-million tons grading 0.59 g/t for about 520 000 oz of contained gold, and an inferred resource of about 20.2-million tons grading 0.46 g/t for about 300 000 oz.

Lindsay said the bulk of the 60 000 m of historic drilling on the deposit was focused on the main deposit, but, owing to the deposit being hosted in a volcanic epithermal system, chances are other clustered deposits would be found.

Indeed, to the north of the Kilgore deposit the company had found a potential continuation of the deposit, which is closer to surface and where the intercepts are becoming thicker.

The Kilgore deposit currently comprises an area of about 1 km long and 600 m wide, with the deposit located from surface to about 250 m down. The deposit remains open to the north-east, the north-west and the south-east.

Metallurgical testing to date had proven the deposit to be nonrefractory and not crush-size sensitive. This would translate into reduced capital expenditures as the potential exists to develop a run-of-mine column heap leach operation, with recoveries of about 85%.

Combined with a low strip ratio for the hillside openpit, the lower recoveries would be partly offset by low operating expenditures, Lindsay explained.

Otis Gold plans to complete a preliminary feasibility study by the first quarter of 2014.

The most significant challenge would be to secure financing, Lindsay said; however, the company is in a strong position to internally finance operations through to the preliminary-economic-assessment stage. He added that a greater level of investor confidence was returning to Idaho, and the fact that the Fraser Institute had named Idaho as the fifth most favourable mining jurisdiction contributed to this. 

Meanwhile, the company in January signed a joint venture agreement with Lateral Gold on its Oakley project, which has an existing inferred resource of 235 000 oz of gold. The agreement allows Lateral to earn up to an initial 70% interest in Oakley in exchange for a combination of cash, property expenditures and Lateral shares.

The company’s TSX-V-listed shares closed at 11.5 Canadian cents apiece on Thursday, after taking an 8% slide during the day.