Barkerville Gold Mines Ltd

VANCOUVER — The British Columbia Securities Commission (BCSC) has halted trading in Barkerville Gold Mines (BGM-T) because the much-anticipated technical report on its Cow Mountain deposit is not up to standard.

The company filed the National Instrument 43-101 technical report on August 13, hours before the deadline, and 45 days after announcing in a press release that the Cow Mountain deposit in central B.C. hosts 10.6 million indicated oz. gold at 0.154 oz. per short ton.

The BCSC, which waited almost two weeks after the initial press release before forcing Barkerville to caution investor on the reliability of the data, came down far more swiftly this time. The commission halted trading on Barkerville’s stock before market open on August 14, stating that “the report was not prepared in the required form,” and that trading will remain halted until the company files a compliant technical report.

The technical report establishes a somewhat different resource estimate than was outlined in the press release, splitting what was an entirely indicated resource into both indicated and inferred. Cow Mountain is now estimated to contain 57 million indicated tonnes grading 0.116 oz per short ton for 6.6 million oz. gold and 30.3 million inferred tonnes grading 0.189 oz. per short ton for 5.7 million oz. gold. The report, unlike the previous release, also shows a capped resource, coming in at 57 million indicated tonnes grading 0.075 oz. per short ton for 4.3 million oz. gold, and 30.1 million inferred tonnes grading 0.107 oz. per short ton for 3.2 million oz. gold.

The BCSC released no further details as to how exactly the report, prepared by geologist Peter T. George, was non-compliant, but others have raised their own concerns on the contents.

Garth Kirkham, chairman of the best practices committee at the Geological Society of Canadian Institute of Mining, Metallurgy, and Petroleum (CIM) said in a phone interview that the report misses on a number of criteria, and overall is very thin on details.

“First and foremost, it does not comply with CIM best practices, which, when you’re doing a 43-101, that is a requirement,” Kirkham said, noting that the methods, the validation and verification of data, and a whole checklist of things don’t comply.

For Kirkham though, the biggest source of concern is the sample data on which the resource was based. He sifted through the lengthy sample database in the report that apparently backed up the resource, and found that while the database shows roughly 125,000 foot-long samples, only 22,355 samples were plugged into the Amine software George used to calculate the resource.

The hundred thousand or so samples that George did not incorporate into the software show a grade of -1 in the database. That means a lack of information on the sample, which often happens because the field geologist did not send the core to be assayed because it was obviously not mineralized. But that does not mean the -1s don’t need to be factored in.

“He’s ignoring the -1s, so he’s only giving any weight or credence to the assay data that is zero or above,” Kirkham said. “He’s smearing the positive data into where there’s negative data.”

“It’s not just an error, it’s tantamount to selective reporting,” Kirkham continued. “You can’t just say all those -1s, all the stuff that we didn’t sample, actually is mineralized. If that’s the case then you best substantiate that. And he doesn’t.”

Besides discounting the likely presence of extensive waste rock in the deposit, by using only 22,355 samples, George has established a multi-million oz. indicated gold resource using only 22,355 feet, or 6,814 metres, of core sample data.

And those 22,355 samples are potentially even less representative, with Kirkham noting that George has split up assay intervals from their original lengths into the one-foot intervals, basically reverse compositing them. The result, for example, are that a high-grade five foot interval grading 9.26 grams gold is split into five one-foot intervals in a row grading the same, a two-foot interval carrying 91.89 grams gold split into two one-foot intervals grading the same, and a three-foot interval grading 52.80 grams gold split into three separate one foot intervals grading the same. The split not only boosts the overall sample size number, but potentially skews the results.

“He’s actually taking intervals of 4, 5, and 6 ft and making them all a one. So he’s actually artificially creating data,” Kirkham said.

Kirkham also raised concerns over how George came to his overall grades of 0.116 oz. per short ton indicated and 0.189 oz. inferred, noting that the average of the reported grades don’t add up.

“If you take all of that composite data, and put it into excel, and not even include the -1s, and just do an average, I get 0.085 oz. per ton. You can’t get a higher value than your data,” Kirkham said. He thinks George might have given higher-grade samples a higher weight, but as with elsewhere in the report, there is a lack of information about methodology.

As to any measures the CIM might take, Kirkham said the institute is there to set the standards, not to enforce them, but they are working with the BCSC on what action to take. Kirkham, who is also involved with the Professional Engineers and Geoscientists of BC, said that association has yet to address the issue, but it is on their radar.

Meanwhile geologist Brent Cook of the Exploration Insights newsletter, who was one of the few in the industry to publicly raise concerns over the initial resource estimate press release, has also found red flags in the actual report.

“What I’m seeing, what I think he’s doing, is essentially an unconstrained estimate,” Cook said. “Without constraining the high-grade, you’re kind of pushing the grade out into areas where either there is no data, or the data’s been ignored.”

Cook cautioned that he has yet to analyse the report in detail, choosing to wait for his weekly newsletter to provide more commentary on the matter, and generally taking a reserved tone.

“I’m not criticising what he’s done, these are just red flags to me that need to be explained,” Cook said.

For Cook, those red flags include the fact that bench number 3950 in the report contains almost 3 million oz. gold for roughly 45% of the overall unconstrained indicated resource and 58% of the inferred.

“That is odd, and I’m not exactly sure how that happens,” Cook said.

He also pointed to the sensitivity of that bench, which drops down to 895,000 oz. indicated and 837,000 oz. inferred once the resource is capped.

“That’s a real red flag as well. When you drop in the top-cut, you loose 37% of your ounces. That’s a lot,” Cook said.

Overall, Cook said that, like Kirkham, he found that overall the report was missing important details that made it tough to go back and reconstruct what’s been done.

With the BCSC also deciding the report is lacking, Barkerville Gold Mines will remain halted until more answers are forthcoming. In the weeks leading up to the filing date the company’s stock price climbed from around 70¢ to close at $1.22 on August 13, where it will stay until the company complies with BCSC requirements.

Frank Callaghan, president and CEO of Barkerville, has not responded to multiple requests for comment.