Unless you are a subscriber to Robert Bishop’s Gold Mining Stock
Report, you may not have heard about this budding uranium
development company. The company’s share price had a healthy
rally after the San Francisco Gold Show, last November, when
Kilgore Minerals (TSX: KAU) was discussed as a potential
takeover candidate. Shares in this little-known minerals company
catapulted from the C$0.50 - 0.60 range to as high as
C$1.13/share by February 6th. Pinetree Capital (TSE: PNP),
itself a red-hot stock whose shares have quadrupled since early
November, announced it had purchased approximately 10.5 percent
of Kilgore Minerals (and if the convertible securities were
exercised, its ownership could reach 12.9 percent).
What is the excitement over Kilgore Minerals? Norman Burmeister
is hardly the promotional type. Even his good friend, letter
writer Robert Bishop, describes the company as non-promotional.
During our interview, it occurred one might think of Kilgore
Minerals as a uranium company inside a gold exploration company.
That should become apparent as you continue reading this. And
the question was posed to Mr. Burmeister, “At the end of this
year, will Kilgore be better known as a gold or uranium
company.” After a long pause, he responded, “The objective here
is to build a mining company.”
Far from the very promotional Howe Street area, where the
majority of the TSX Venture exchange companies have offices,
Burmeister is nearly reclusive in a small town in Wyoming. “It’s
about ten miles to the nearest stop light,” he told
StockInterview. Actually, Dubois, Wyoming where you’ll find Mr.
Burmeister is less than 80 miles away from Yellowstone National
Park. (Keep driving west on US 287, and you’ll be in Montana.)
When we hear a company CEO talking up that he’s going to build a
mining company, the phrase “grain of salt” comes to mind. But a
careful review of Mr. Burmeister’s resume will snap even the
most cynical out of that frame of mind, starting with his
graduation from the Colorado School of Mines as a geological
engineer. (See bio snapshot at the end of the article.) He’s
found and developed a gold mine, found deposits, sold them to a
major company. Been there, done it, and now he’s ready for
something even bigger.
Kilgore Mineral’s Uranium Projects
Now, Burmeister has got three gold and 12 uranium properties.
The uranium properties are convincing, and the company plans a
drill program on one, in Nevada. “We are in the process of
permitting one property for a summer drill program. It’s a
Nevada property that was drilled out by Utah Mining and
Construction, which became a division of General Electric. It
subsequently became Pathfinder Mines, when GE was ordered to
divest their uranium mining and producing facilities.” He’s
referring to the company’s 46-claim Mountain West property in
Elko, Nevada. One might suspect the hand of Dr. Dieter Krewedl
in this property selection. Dr. Krewedl was vice president of
exploration for Pathfinder in 1990 - 1995 (and also serves on
the board of directors of Strathmore Minerals).
“It’s not the largest property in our portfolio, but it’s
handy,” Burmeister said humbly. “It’s in a good jurisdiction in
Elko County, Nevada. It’s something that we can get permitted
and move forward. It’s a relatively low cost type of operation.
It’s something we think our company with our resources can
advance significantly within a budget that isn’t going to commit
the company’s entire resources.” Burmeister believes the Nevada
uranium asset may have a good grade. “It’s near surface with
essentially a low stripping ratio, so it could be mined with a
slot type of mining operation,” he explained. When a deposit is
relatively shallow, the slot type mining method can be used,
similar to how a quarry is mined.
His two Wyoming properties in Crook County, comprising 122
claims, were previously drilled by different major companies in
each of the three claim blocks. Homestake Mining drilled over
3,000 holes as late as the mid 1980’s on the 48-claim New Group
block. In one area alone, within a 40-acre tract, over 250 holes
were drilled (about six holes per acre). Bethlehem Steel’s 2
claims in the Oshoto Group consist of an admittedly a small
property. “But it is right in the center of what was developed
in the late 1970’s,” Burmeister insisted. The joint venture,
between Bethlehem Steel and a California-based oil company, did
a successful test ISL operation on the property in 1979. As they
were winding down the test, and evaluating the results, they had
to contend, as did many other uranium exploration companies,
with the public outcry after Three Mile Island.
Another uranium property block, the 72-claim Wood Group, was
also extensively drilled, by Homestake and Pioneer Nuclear. It
is estimated several hundred holes explored the property, and
115 holes were drilled on one 160-acre tract. Burmeister hinted
his uranium package was still being assembled. The company’s
website notes, “The Company will continue its efforts on the
location and acquisition of historic data associated with its
portfolio of uranium properties.”
What tickles Norman Burmeister’s fancy about this area? “It is
the Inyan Kara group,” he said. His leases are part of a much
larger package. “There is roll front Cretaceous sediment that
surrounds the Black Hills. We have properties on northern part
of the system in Montana, we have properties on the western
flank, and this is in addition to lands on the roll front on the
eastern flank of the Black Hills.” And what makes this
important? “It’s the equivalent to the stratigraphic unit that
has been highly productive in the Powder River Basin,” explained
Burmeister. “It’s also been productive at its southern extremity
in South Dakota in the Edgemont District.”
Others have been announcing uranium leases in Wyoming, and the
state has become a hotbed of claims announcements in recent
months. How did Kilgore Minerals come across these? “We came by
some information in a package of data we purchased that included
the definitive location of the roll front,” explained
Burmeister. “I don’t think that information was widely known.
That’s why these leases were not picked up in the past. I think
folks didn’t know where that roll front was. That roll front was
defined by a major uranium company with over 15 years of
exploration in the area, having drilled I don’t know how many
thousands of reconnaissance drill holes of these things, like
one per square mile, over several counties: northeastern
Wyoming, southeast Montana, and western South Dakota. That
information led to the definition of the roll front where these
uranium deposits occur.” With that said, Mr. Burmeister is
quietly confident.
The Kilgore Gold Project
But which project gets Norman Burmeister talking breathlessly?
Ask him about the company’s Kilgore gold property in
southeastern Idaho. “I’m very excited about this project,” said
Burmeister. “It was a property that was very high on Echo Bay’s
list. At the time they were active, Echo Bay was one of the
major gold explorers of the world. They had a very large budget.
This was one of their top projects, possibly even their top
project.” Indeed, Echo Bay had drilled 122 holes (82,987 feet of
drilling) in 1994-96, and bought out Placer Dome for 100 percent
ownership of the property. The collapse of junior gold
exploration in 1997 led to the project (and all Echo Bay
projects) being shelved. Kennecott, Placer and Pegasus each
drilled the gold property between 1983 and 1994. Kilgore Gold
(wholly owned subsidiary of Kilgore Minerals) acquired
100-percent ownership of the property, after the exploration
industry had contracted. The smart buy at the bottom of the
cycle, which is what Norman Burmeister did.
During 2006, the main show for Kilgore Minerals will likely be
the summer drilling program on the Kilgore gold property,
comprising 150 unpatented claims over an area of approximately
4.7 square miles. The technical report (National Instrument
43-101) was filed on the property by G.H. Rayner and Associates,
which estimated 218,000 ounces of gold indicated and 269,000
ounces of gold inferred. To ascertain that estimate, nearly 200
diamond and reverse circulation drill holes for more than 126,
000 feet were completed. Major gold companies spent more than $8
million to bring this property to this level of understanding.
As a resource, less than 500,000 ounces is a small deposit.
However, a drill intersection, during the summer 2004 drill
program, struck a 10-foot section averaging 0.465 ounces/tonne
or 14.5 grams per tonne gold. Designated the “Elsa Zone”
discovery hole, the intersection found that gold sample more
than 4,600 feet from the 487,000-ounce gold resource.
A preliminary structural investigation by Stanton W. Caddey, a
highly respected geological consultant, concluded in an October
(2003) report:
“The Kilgore prospect area represents a high quality gold
project, much of which remains to be drill tested. Most the
previous drilling was focused along a peripheral or satellite
segment of the main hydrothermal system…. The primary
exploration potential is for a bonanza, epithermal, gold-rich
vein system localized along the major N60W-trending McGarry
Canyon NW fault zone and subordinate faults in the area referred
to as Dog Bone Ridge… Exploration potential at the Kilgore
property for more than doubling the present gold resource with
further exploration drilling is regarded as excellent.”
In May 2004, Mine Development Associates of Reno, Nevada
completed a scoping level update of Echo Bay’s 1996 initial
engineering assessment of the Kilgore project. Neil B Prenn,
P.E., agreed this is a large epithermal gold deposit, hosted in
volcanic and sedimentary rocks, and the resource is hosted
within quartz stockwork and in silicified sedimentary rocks. In
reviewing Echo Bay’s work, he observed that instead of
calculating a reserve for the property, they described an
“estimate with high confidence, the potential mineable part of
the resources,” at 10.087 million tonnes, averaging 1.28
grams/tonne, containing 417,000 ounces of gold. The engineer
concluded, “The project appears to have reasonably attractive
economics if the ‘potentially mineable material’ can be doubled
at $375/ounce gold price.”
Burmeister believes the best is yet to come. His summary of Echo
Bay’s previous drilling was simple and to the point, “They were
focused on a low-grade open pit occurrence, which is very nice.
It has a significant resource. In their enthusiasm to move that
particular aspect of the project forward, I think they did not
have the chance to step back and look at the overall
hydrothermal system, which we have done. Burmeister added, “We
think the best may be yet to come by exploring for a high grade
underground type of operation which is very much in favor these
days.”
The successful drill hole was a blind discovery at 410 feet of
depth. Burmeister clarified, saying “The first hole that we
drilled, we were successful in discovering a ‘blind’ high grade
occurrence of gold beneath the barren sinter.” He realized the
mistake made during the 2004 drill program, “In our enthusiasm
to get our arms around this target area, which we call the Dog
Bone Ridge area, we took enormous step-outs, and never offset
that high grade hole. Subsequent holes were all interesting,
museum quality realgar mineralization and stibnite
mineralization, which are diagnostic of the epithermal model
we’re testing. We got anomalous gold, but we didn’t get any ore
grade material.”
The Dog Bone Ridge area, as determined by geochemistry,
geophysics, geology and structure, is at least 6,000 feet long
and 1,800 feet wide. Burmeister explained his better
understanding of the target area, “We think this is a very
recent geological occurrence, and has not been eroded.
Typically, there is no gold on the surface on these systems. It
comes as the result of boiling. The gold is precipitated out at
that level and does not reach the surface. We’re actually
dealing with a paleo-surface. Our discovery hole was deeper in
the system, below the zone of boiling. So I don’t think the
other drilling we did, the other core holes, they did nothing
but reinforce our interpretation of the system.”
In July, Kilgore Minerals will proceed where drilling left off
in 2004. A recent news release announced, “The summer 2006 drill
program is expected to commence in July with the first holes
designed to offset the Elsa Zone discovery. There are a number
of Elsa ‘look-alike’ definitive targets within the overall Dog
Bone Ridge target area that will also be tested.” How does
Norman Burmeister explain this in layman’s terms? “We’re going
to offset that discovery hole and find out what that’s all
about,” he told StockInterview. “We’ll go about the business of
evaluating that project because it’s all prospective. We were
targeting a projected structural intersection of which there are
many. The success we had with that first hole, it’s not unique
in terms of what we know in the geophysics, the geology, the
structure and the geochemistry. That’s not to say that all of
those targets are going to be successful, but the size of this
system indicates it can host a very significant resource.”
It was an exciting discovery hole, and the summer 2006 drilling
program could spell success if drilling results match
Burmeister’s enthusiasm. In closing, he said, “That hole could
well be right smack in the middle of an ore body. We don’t know
what the orientation of the zone is, because with one hole, it
is impossible to know what the dip and the strike is. We don’t
know if it’s close to true width or we hit it at the high angle.
But, it’s very exciting.”
Stay Tuned.
