Dutch Gold Resources Inc. (fka DGRI)

[TOUCAN]

Company sees 'very large' gold and silver resource near Rock Creek

By KIM BRIGGEMAN of the Missoulian missoulian.com | Posted: Sunday, February 7, 2010 6:30 am

http://missoulian.com/news/local/article_172b5e7e-13b0-11df-8f79-001cc4c002e0.html

An Atlanta-based gold mining company is eyeing what it calls “a very large open-ended gold and silver system” within two miles of Rock Creek in Granite County.

In a news release targeting potential investors, Dutch Gold Resources Inc. said the Basin Gulch project 16 miles west of Philipsburg could yield more than $3 billion at today’s gold prices, which have soared above $1,000 an ounce in recent months.

A recent resource update by David Brown and Associates “significantly increased the size and quality of the Basin Gulch project in all directions,” Dutch Gold’s chief executive officer said in the Jan. 29 release.

“We are enthusiastic about moving the process forward,” said Daniel Hollis, who called Basin Gulch “a keystone asset of the company.”

“The company is fully committed to the sustainable development of this project,” Hollis said.

Dutch Gold announced last week it expects to file preliminary applications with the Montana Department of Environmental Quality before the end of the month. It also launched a new corporate Web site, www.dutchgold.com, and filed a Form 8-K with the Securities and Exchange Commission to notify investors of the resource update.

Calls to Hollis by the Missoulian were not returned.

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The gold field mapped out by Dutch Gold is in the Upper Rock Creek drainage on both patented and U.S. Forest Service land. The company said new findings reveal an estimated volume of 7.6 million ounces of gold in the “discovery block,” more than a third of it high-grade ore.

Silver content is not included in those numbers, but “in some places on the Basin Gulch prospect, the measured silver was well in excess of 10 opt (ounces per ton of ore).”

“It certainly isn’t a gold mine yet,” said Warren McCullough, chief of Montana DEQ’s Environmental Management Bureau. “What it is, is a long-dormant prospect which appears to be getting reactivated due to higher gold prices.”

McCullough said he’s had no formal contact with Dutch Gold, and doesn’t expect to until the permitting process begins. An exploration license application would entail McCullough’s office inspecting the site and determining a reclamation bond.

Unless the company applies for small miner exclusion, which applies to mines that disturb five acres or less, an operating permit application “would probably be a fairly lengthy and very public process,” McCullough said.

“That’s why I’m urging everybody to take a deep breath and not get too excited about the giant gold mine, because they haven’t even applied for an exploration license,” he said.

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According to the Dutch Gold Web site, geologist Rauno Perttu discovered the gold in Basin Gulch and will lead the project as Dutch Gold’s chief operating officer.

“We expect to be good stewards of the resources of the state of Montana, and look forward to a positive relationship with the DEQ,” Perttu is quoted as saying.

McCullough said Perttu was running the drilling at Basin Gulch in 1997 when McCullough visited the site to assess one of the cultural resources – a “very long placer ditch, which would have brought water to the gold workings” a century or more ago. The project, like many others in the late 1990s, dried up.

In November of 1998, Montanans passed an initiative banning cyanide leach mining. That made it difficult to develop large open-pit gold mines.

“It took a lot of exploration right off the table,” McCullough said.

Recovery testing indicates that underground mining at Basin Gulch could be profitable now, Dutch Gold said.

“Much of the gold appears to be free (not encapsulated), and was quickly recovered in leach tests,” the prospectus said. “This suggests that it could be recoverable by simple flotation.”

The price of gold in U.S. markets reached a record high of $1,217 in early December. Though highly volatile, it closed at $1,066 on Friday – $152 higher than a year earlier. It’s a stark contrast to prices 10 years ago that hovered under the $300 mark.

Other factors have also entered into making Basin Gulch “an exciting exploration target” once again, according to Dutch Gold.

“Attitudes toward mining have improved in Montana,” the company’s prospectus on Basin Gulch reads. “Discovery and development of very large and very profitable underground mines, primarily in Nevada, have made formerly disdained underground mines very attractive to mining companies.”

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Gold mining activity is picking up in Montana, McCullough said.

“This is the eighth project I can think of where people are either re-entering old high-grade gold mines and trying to develop new resources there, or they’re putting down new mine workings aimed at developing deposits that have been drilled,” he said.

“The wave of mining in Montana in the immediate future seems to be relatively small-scale, high-grade gold deposits. Because of restrictions on the technology we have gotten away from the idea of large, low-grade open pits.”

There’s an active gold mine at Garnet ghost town, and another at the eastern foot of the Continental Divide in Marysville, where the famous Drumlummon Mine is being reopened. Others in various stages of development are in the Butte Highlands, Silver Star, Elkhorn and Norris.

“In some of those projects, people are actually there, they’re underground now in old workings or they’re driving new workings toward targets they’ve identified,” McCullough said. “Or in the case of Elkhorn, it’s proposed, it’s been approved, but they haven’t come up with the financing and the reclamation bond.”