Barkerville Gold claims come under increased market scrutiny

BC securities and geoscience regulators are circling Vancouver-based Barkerville Gold Mines Ltd. (TSX-V:BGM) following the company’s release of a much-anticipated report that explains the way Barkerville estimated a gold resource at its Cow Mountain deposit.

On June 28, the company announced an estimate of 10.6 million indicated ounces of high-grade gold at Cow Mountain, however the market has reacted with skepticism. (See “Stock market, BCSC skeptical of Barkerville Gold’s rich resource estimate”– BIV issue 1186; July 17-23.)

Barkerville filed the technical report August 13. The BC Securities Commission (BCSC) hit the company with a cease trade order (CTO) a day later, but hasn’t explained why, beyond a statement that “the report was not prepared in the proper form.”

BCSC spokesman Richard Gilhooley said infractions serious enough to trigger a CTO wouldn’t be cosmetic.

“It’s not for things like headings being in the wrong place [in the report],” he said. “They would have to be material deficiencies.”

He added that the BCSC rarely issues CTOs over technical report deficiencies.

“So far [in 2012] we have issued five CTOs for failure to file technical reports in the required form. Last year, I think we had only two for the entire year.”

Barkerville’s resource estimate was put together by Geoex Ltd. geologist Peter George, who in 2010 worked on a resource estimate for Rubicon Minerals Corp.’s (TSX: RMK) Phoenix Gold project, which was downsized after the BCSC intervened with concerns.

Tony Chong is chief regulatory officer and deputy registrar at the Association of Professional Engineers and Geoscientists of BC (APEGBC).

Chong declined to say whether the association is investigating George but acknowledged that the BCSC’s rejection of Barkerville’s technical report is the kind of situation that rings alarm bells for APEGBC.

“Certainly it’s a kind of indicator that gives rise to, ‘Is there something that is a concern that would jeopordize the public interest here?’”

Chong added that APEGBC and the BCSC have an information-sharing policy on issues that concern the public interest.

Chong said the organization won’t publicize any steps it might be taking to investigate George prior to a complaint passing through preliminary phases to reach a public hearing stage.

“It’s a little early at this point, so, again, I can’t really comment on what direction we’re going to take,” he said. “But we are very serious about ensuring that our members do the right thing by the public and, to that extent, if there are grounds to proceed down the path of the complaint management process, you can be sure that the association will be taking the next [steps].”

While regulators remain tight-lipped about any concerns over Barkerville’s technical report, the chairman of the best practices committee at the Canadian Institute of Mining(CIM) identified one key aspect of the report that’s under fire in the mining community.

“It comes down to how the report deals with waste,” the CIM’s Garth Kirkham told Business in Vancouver. “If you’ve got ore in one place and right beside it is waste, that should be segregated. However, it appears as though that waste has been treated as a large mass of ore.”

He added that, while the BCSC allows companies to make “reasonable” and “realistic” estimates of geological potential, Barkerville has estimated potential of up to 90 million ounces – approximately the world’s total gold production last year and 25 times what was produced in Canada.

“They’re saying that they’ve got this potential on a property that’s four to five times the size of Stanley Park,” he said.

Geologist Brent Cookof mining publication Exploration Insights put his concerns more strongly in a recent report.

“We don’t buy into this estimate,” he wrote, “and Barkerville Gold Mines would do to well to hire a recognized resource estimator to complete a full-blown independent resource estimate and put all questions to rest.”