Eagle Plains | Yellowjacket Gold Mine

Yellowjacket Gold Mine | (Gold)

Eagle Plains was in a good financial position at the onset of the financial crisis in the third quarter of 2008 with approximately $6 million in cash and investments. Management, adhering to their business model and mantra of "Crisis Creates Opportunity" began prospecting for an opportunity that would create value for the shareholders..

The search revealed an opportunity to review a gold mining project 9km east of Atlin, B.C. that had been developed by Prize Mining Corp. Undercapitalized, Prize mining was receptive to the potential of a joint venture arrangement. Upon completion of a lengthy due diligence campaign, it was found that a partnership would be of great benefit to the future of the project as both sides brought complimentary assets to the table. On April 6, 2009 Eagle Plains and Prize Mining announced the execution of a formal agreement to form a joint-venture. For more information regarding this, please see our news release announcing the joint-venture arrangement to produce gold at the Yellowjacket project.

Location

The Yellowjacket Gold Mine Project is located 9km east of Atlin, B.C. Mining operations are focussed around the Yellowjacket Zone which gives the project it's name.

Access, Supplies and Electricity

The Yellowjacket Zone is accessible year-round by all-weather road. The claims lie along the Pine Creek valley which is an historic and continuing placer gold producing area. Basic supplies and material to support mining activity can be readily sourced out of Atlin, and specialty services may be secured in Whitehorse, Yukon, located 180 kilometres north via Highway 7 and the Alaska Highway. Hydro-electric power has been recently established to within three kilometres of the property boundary.

History and Geology

The Atlin placer camp ranks as the second largest producer of placer gold in the province. Mining has been the economic mainstay for the town of Atlin since the discovery of gold on Pine Creek in 1897. The mineralized zone at the Yellowjacket underlies significant historical surface disturbance. Downstream topographical features have rendered Pine Creek a “low-value” fish habitat.

Gold mineralization at Yellowjacket zone consists of coarse gold hosted in quartz stockworks and silicified zones in brittle volcanic and altered ultramafic rocks. Gold mineralization occurs along a prominent fault structure which is interpreted to control the distribution of placer gold reported in the area. There are three zones of interest within the Yellowjacket Joint Venture, the Yellowjacket zone, Rock of Ages zone and the Gold Run zone. Current mining operations are focussed on the Yellowjacket zone. The Rock of Ages and Gold Run zones remain as excellent exploration targets as they have similar geophysical signatures as the Yellowjacket and are also located in the producing and historic placer workings. They will be the focus of future exploration work. Click here for a map of the Yellowjacket Gold Project zones.

In 1983, local area prospectors staked the Yellowjacket Property, and subsequently optioned the property to Canova and Tri-Pacific Resources. During 1984 and 1985 these companies conducted programs of ground geophysics, rotary and diamond drilling. In 1986 Homestake Mineral Development Company optioned the property from Canova and from 1986 to 1988 initiated programs of mapping, reverse circulation drilling and diamond drilling (52 holes totaling 8,057 metres).

At the completion of this program, Homestake reported a resource estimate of 453,500 tonnes grading 10.26 g/t (Schroeter, T.G. and Pinsent, R.H; BC Ministry of Energy and Mines Open File 2000-2: Gold Production and Resources in BC (1858 - 1998). (Though these estimates are considered by Eagle Plains and Prize management to be relevant, they were prepared prior to the institution of National Instrument 43-101 standards. Their reliability has not been confirmed, but will constitute a target basis for future exploration work).

Recent Exploration

Prize Mining (formerly Muskox Minerals) optioned the property in 2003 and from 2003 to 2006 drilled 57 holes for a total of 6,873 metres. A number of impressive intercepts were encountered during drilling, with values ranging from “no significant results” to grades as summarized below:

Drillhole	Interval	Width	Grade
YJ03-01	13.95m to 19.51m	5.56m	513.5 g/t Au
YJ04-07	48.85m to 54.45m	5.6m	40.1 g/t Au
including:	53.95m to 54.45m	0.5m	588.9 g/t Au
TW05-02	10.67m to 12.79m	2.12m	853.0 g/t Au
including:	10.67m to 11.58m	0.91m	2,397 g/t Au
TW05-02	20.05m to 41.50m	21.45m	11.5 g/t Au

The general area encompassed by drilling covers approximately 300 metres x 100 metres, with the deepest mineralized intersection encountered at 140 metres. The deposit appears to be open along strike in both directions and to depth.

The Yellowjacket Zone coarse gold mineralization has a pronounced “nugget effect” where adjacent samples within the same mineralized zone can have widely varying gold values. This prompted Prize in 2006 to proceed with a bulk-sampling program in order to evaluate the deposit in an economic framework. Prize engaged a number of prominent engineering, metallurgical and environmental consultants to carry out permitting, pit design, mill design and fabrication work. Regular consultation was made with the Taku River Tlingit First Nation (“TRTFN”).

Mining
Excavation activity commenced in 2007 under a 10,000 tonne bulk sample permit. A modern milling facility was constructed, and includes a 1000 kW generator, ball mill, SAG mill, feeders, pumps, conveyors, three Knelson concentrators, magnetic separator, Diester and Gemini tables and an on-site assay laboratory. Test work indicated preliminary recoveries of 81%, with ore head-grades of approximately 9.0 g/t gold. Test work done on the rock units excavated from the pit have found them to be non-acid generating.

Capitalization

As of the summer of 2008 there had been approximately $14 million spent to capitalize the Yellowjacket gold mine which brought the project to the stage of producing gold.

The first gold bar was poured on site during the summer of 2008, weighing 6.8kg. Approximately 700 ounces were poured during 2008 as a result of processing a portion of the bulk sample.

Project Goals for 2009

Eagle Plains and Prize Mining presently intend to meet the following objectives during 2009 pursuant to the joint venture agreement:

•	compile all existing geological, geophysical, environmental and engineering data into a GIS database
•	remove liens and encumbrances on the property
•	complete application for BC Small Mines Permit (up to 75,000 tonnes per year)
•	complete modifications to existing mill facility
•	resume milling of stockpiled ore
•	dewater existing pit
•	commence expansion of existing pit
•	commence commercial production with target of 35,000 tonnes throughput during Q3
•	explore possibilities for year-round custom milling
•	study feasibility of connecting to newly established hydro-electric facility
•	design and execute exploration program for future expansion

Joint Venture Terms

Under terms of the Letter of Intent, Eagle Plains will purchase a 40% interest in the project by providing $2,000,000 CDN in working capital. These funds will be used to clear existing liens and obligations on the property, in addition to completing upgrades of the existing mill facility and covering costs related to engineering, permitting and environmental compliance. Eagle Plains will in turn receive 60% of all net proceeds of production up to $2,000,000, at which time it will revert to a 40/60 working interest. Eagle Plains will have the option of increasing its working interest to 60% by making payments to Prize totaling $2,000,000 by the sixth anniversary. It is expected that commercial production activity will commence by the third quarter of 2009. The joint venture remains subject to regulatory approvals and other customary conditions, including the execution of the definitive purchase and joint venture agreement.

Updated February 1, 2010