December 6, 2007

Greetings investors!

In recent issues I’ve invoked the infamous Hemlo word a few times in connection with a gold discovery by Kodiak Exploration, listed on Canada’s TSX Venture exchange.

I want to provide a little more background on Kodiak and what it has cooking in the Hercules claim group outside Thunder Bay in northwestern Ontario.

But first I’d like to explain what Hemlo was (and is!)

The world-class Hemlo deposit was the major gold discovery in Canada during the 1980’s, and is still responsible for almost one third of Canada’s annual gold production.  As a mineral resource, it contains 22 million ounces of gold. The average gold grade for the main deposit is 7.7 grams per tonne.  Almost twenty years after its discovery, there is still no consensus on its genesis. 

Hemlo is located in north-central Ontario, Canada, near northern Lake Superior, approximately 260 km east of Thunder Bay. Kodiak’s Hercules property comprises 300 square kilometers, about 120 kilometres to the northeast.

The Hemlo deposit was discovered by a company called International Corona and a Vancouver mining promoter named Murray Pezim, or ‘the Pez’ as many including myself knew him.

Pezim was an on-again, off-again winner/loser on the wild and woolly Vancouver Stock Exchange until Hemlo put him over the top for good.

The true value of the Hemlo gold deposit eluded early prospectors. It was finally discovered in 1981 after prolonged exploration of the area since 1944 and of the entire region since the 1890’s.  Poor surface expression and a general lack of geophysical signature were the main reasons for exploration difficulties.  Furthermore, early drill holes punched into a barren section between eastern and western segments. 

It was a rough ride for the early investors in International Corona, because the majors were not interested in them after drilling on several showings returned poor results. Moreover, the property had an atypical geological setting which did not conform to the conventional quartz-vein-type gold deposits exploited in the past.

Pezim ignored the skeptics and continued to promote Corona and raise funds for a drill program outlined by geologist David Bell. The industry finally took notice after 76 drill holes and an exploration expenditure of $2 million returned some grades. Boy, what a cliff hanger of a story! 

Corona eventually secured Teck Corporation as a partner in developing the David Bell mine. Teck also backed Corona’s legal battle with Lac Minerals for ownership of an adjacent property. It was generally thought that Corona had little chance of success, but, in August of 1989, Teck and Corona were awarded control of the rich Williams mine that Lac had built in the Hemlo camp.

Although Pezim eventually lost control of Corona, the Hemlo camp continues to provide economic benefits for the people of Canada; the three gold mines there account for the bulk of Canada’s gold production.

I`ve always believed that other gold deposits on the scale of Hemlo existed in the region, and would eventually be discovered. The only reason they haven`t been found was the lack of sufficiently high gold prices to drive extended and widescale mineral exploration of the region.

Cont.