Q: You have mentioned the “Chute Zone” in recent communications and I understand it was a topic of discussion during last week’s Annual Meeting. What are the real implications of this discovery?
A: Thank you for the question. The Chute Zone is one of the most substantial and significant findings in our most recently published NI 43-101 Technical Report (the “Report”).
Overall, the Report, published in January 2013, declared a mineral resource estimate of Measured and Indicated Resources containing 1,824,000 ounces of gold and 17,100,000 ounces of silver, for a total of 2,150,000 gold equivalent ounces, and an estimate of an Inferred Resource containing an additional 870,000 gold equivalent ounces. The Report also includes an additional 200,000 gold-equivalent ounces outside of the modeled area, in the Historical Resource Category.
Since 2008, the Company’s geologists have recognized the enhanced grades of precious metals when northeasterly striking mineralized structures intersected the Silver City fault zone. We have now identified a specific, wedge-like, structurally bounded zone that hosts significant gold and silver, that we are calling the ‘Chute Zone’.
Comstock geologists believe that the structural intersection and geometric shape of the Chute Zone is similar to highly mineralized zones that were historically mined in the Comstock District as bonanzas (that is, the 1878 definition of bonanza grade ore: > 0.5 ounces of gold per ton and 10 ounces of silver per ton). There were 33 mined bonanza ore zones located along the Comstock mineral belt. The historic production records relating to these bonanza deposits account for most of the 8.2 million ounces of gold and 192 million ounces of silver produced during 1859 thru 1962 from the world class Comstock Mining District (Bonham,H.F., and Papke, K.G.,1969). See a summary of the Principal Bonanza Deposits of the Comstock Lode below.
(Principal Bonanza Deposits by R. Carrington)
Further regarding the Chute Zone, Behre Dolbear stated, “this intersection zone hosts elevated grades of gold and silver that consistently average 0.095 ounces of gold per ton over drill intercepts of 45 to 270 feet and has mapped dimensions of 100 to 150 feet by 100 feet by 450 feet”(p. 4). Although early in its development, and still open to further resource development on most sides and at depth, the Chute has already quantified almost one-half a million tons of mineralized material. The following picture shows a map draped over topography, showing the historic Justice (top left, in green), historic Woodville (top center, in green), & the Chute (center stage, in gold) zones in plan view.
Geology Map Draped over Topography
The following picture depicts the same Chute Zone (yellow) in 3D:
The following table 7.2 (extracted from the January, 2013 NI 43-101, Behre Dolbear) lists selected drill hole intercepts located within the Chute Zone.
(Selected Chute Zone Assay Results)
The next pictorial is a scale-to-scale, looking west, cross sectional view of the historic Con Imperial Bonanza (far right, blue shape), Crown Point Bonanza (lighter blue shape, left and deeper than the Con Imperial) and the Belcher Bonanza (blue shape, farther left and deeper than the Crown Point Bonanza) after R.G. Carrington (2003 & 2011).
These historic mine shapes of the northerly-located bonanza deposits illustrated by the upper cross section are compared in a lower cross section that depicts mined geometric shapes of the historic Justice and Woodville (southern most bonanza mined on the Comstock mineral belt) and the Chute Zone as depicted by our geologists and extended engineering teams.
This comparison shown above was chosen to display the perceptual similarities of dip angle and spatial distances between each of the selected historic Comstock bonanzas (Con Imperial, Crown Point and Belcher) to the near perfect correlation to the dip angle and spatial distance separating the Justice (far right green shape lower cross section), Woodville (positioned left and deeper than the Justice) and Chute Zone (colored yellow). The red coloring on the drill holes of the lower cross section represent assay values equal to or greater than 0.05 ounces of gold per ton. The green shapes are stopes of historic mined zones.
The Woodville shaft operated in the Woodville bonanza zone from 1872 to 1875. During this time, 7076 tons of material were mined, as documented in “Nevada' Metal and Mineral Production 1859 thru 1940.” The specific dimensions that we believe represent the Woodville bonanza were estimated by reviewing the historic underground workings, giving us a volume of approximately 25 feet by 25 feet by 150 feet. The reported production from just over 7,000 tons of material was almost $8 million of gold and silver equivalent, in today’s dollars.
When you consider that the current mining operation sends approximately 4000 tons a day to the crusher (slightly over half the volume of the Woodville bonanza), you can appreciate the enthusiasm of the geologic team, that this Chute Zone, a highly mineralized structural intersection, could host a similar bonanza grade pocket with in an already defined, larger resource.
The discovery of the Chute Zone is the result of many months of hard work, drilling, analysis and interpretation by the geological team. The geologic team hopes to gain a deeper understanding of the controlling geologic attributes of the Chute Zone, allowing for even more efficient identification of such structures in future exploration campaigns along the Comstock.
As Behre Dolbear concludes in the exploration developments section: “Based upon the structural controls of the newly discovered higher-grade Chute zone, CMI has recognized structural similarities in higher-grade zones at Dayton and other mineralized areas within the CMI property position. Expectations are high that further drilling at the appropriate azimuth will allow for important extensions to these higher-grade zones” (Behre Dolbear, 2013, Technical Report on the Comstock Project, p.49).
The team is currently assessing how best to mine this ore body, as it represents the first real opportunity for an underground development. We have already asked our engineers and consulting engineering firms for conceptual designs of underground mining options, as shown below.
(Conceptual Decline Design)
The primary goal of the 2012 drill program was definition drilling for the mine plan. Discovery of the East-side Chute Zone represents the potential for an expanded mine plan and potentially, an underground mining target on the Comstock. We will be working diligently to assess the economic parameters for making this exciting discovery part of a tremendous expansion for our mine planning and operations. The Chute Zone discovery and development is tremendously rewarding for our team. Quantifying such a significant resource, on just a fraction of our land position, provides us with significant confidence in the long-term future of the Lucerne Mine and our overall resource goals.
Best Regards from the Comstock,
Corrado De Gasperis
President & CEO
 Gold equivalent ounces were calculated using January 31, 2013 London PM prices of $1,664.75 per ounce of gold and $32.03 per ounce of silver, as published by kitco.com. This resulted in a ratio of 51.97 ounces of silver per equivalent ounce of gold, without taking into consideration the relative recoveries of gold and silver. The Company’s current estimates for heap leach recovery are 70% for gold and 45% for silver.
Statements contained in this blog, which are not historical facts, including statements about plans, goals and expectations regarding businesses and opportunities, new or existing business strategies, capital resources and future financial results are "forward looking" as contemplated by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, including, but not limited to, changes in government regulation, generally accepted accounting principles, taxation, competition, general economic conditions and geopolitical conditions. Accordingly, actual results may differ materially from those projected or implied in the forward-looking statements.