SmallCapMedia.com - Gold - Oil - Diamond

Located in an old placer gold district in the northwestern corner of British Columbia, this project -- in which Muskox may earn up to a 100% interest -- is already producing very encouraging exploration results. And in a secular bull market for gold bullion and gold stocks, alike, these compelling results are already galvanizing the attention of the investment community. These key factors make the company worthy of special consideration by SmallCapMedia.

For instance, Muskox ( www.muskoxminerals.com ) drilled two new reconnaissance holes late last year and the assays produced some notable numbers. A 5.56-metre intersection in the first hole produced an average of nearly 15 ounces of gold per ton, helped considerably by a spectacular zone in the upper portion of the zone. In addition to that intersection, the first hole yielded four more rich layers that were a combined 6.7 metres thick and yielded gold assays exceeding one ounce per ton.

The second hole also produced encouraging but far more modest gold values. That hole was drilled 70 metres to the southwest of the first one and was designed to test a separate target in a different sector of the fault zone.

Muskox’s president, Dr. Roger Morton, is understandably enthusiastic about the assays from the first new hole drilled into the Yellowjacket property.

"Our initial investigation of the Yellowjacket system has yielded new and highly encouraging data,” he stated upon the announcement of the assay results.

“Now that we have a clearer idea of the bonanza-style gold mineralization, our continuing drill program will progress on a surer footing," he added.

Muskox can earn a 100-per-cent interest in the project by making a series of cash payments of up to $2.59-million over the next seven years, including the expenditure of $750,000 over the next three years. The merit of the play seemed to get a bigger shot in the arm earlier this year after Muskox produced some promising assays. This development has prompted the company to accelerate its plans to thoroughly explore the property.

It did not take long for Dr. Morton and Muskox to raise their sights in a big way. Early in March, Muskox got to work on a Cdn. $2 million private placement, which was completed before the month was out. The cash is allocated for a more ambitious exploration program on the Atlin-area property, which -- not coincidentally -- now carries a budget of Cdn. $2 million. (As an aside, SmallCapMedia is always impressed with an exploration junior that puts its money into the ground, rather than into lavish offices and other frills.)

Now might be a good juncture to also point out that the Yellowjacket project also benefits from surprisingly amenable infrastructure despite its seemingly remote location, about 200 kilometres to the southwest of Whitehorse, not far from the Yukon border. The claims can be reached by an all-weather road running from Atlin, about nine kilometres to the west of the property. Even though Atlin has a population of less than 500, it is still a handy source for many exploration supplies, while the much larger city of Whitehorse is just a few hours away by road. Furthermore, the property is situated among gently undulating hills with only its northern and southern extremities bounded by the region’s typically rugged mountain topography.

Meanwhile, the bulk of the new Cdn. $2 million war chest will be directed at a 7,500-metre drill program that will test the lateral extent and depth of Muskox’s gold-bearing zones (including ones discovered by Homestake Minerals Development, a previous owner of the property.) The new data will allow Muskox to model the deposit in three dimensions and will provide a basis for directing additional exploration in the gold discovery zones. A larger drill rig will also be used, which will provide better recovery and more efficient drilling to aid in the compilation of a statistically reliable gold grade. In addition, some of the money will be spent on a high-resolution airborne geophysical survey, which will help map the structure, which, in turn, helps to identify the gold bearing zones.

Late in March, Muskox also produced assays from its third hole, which was drilled into the Yellowjacket prospect at a site about 60 metres southeast of the first hole. There were two significant intersections, including one that produced an assay of 0.76 oz/ton of gold over an intersection of 2.5 metres. With drilling ongoing as of late April, SmallCapMedia believes that a steady stream of assays in the weeks and months ahead will keep the play newsworthy.

By way of a little background, there is no doubt that the Yellowjacket property is favourably situated in gold territory. Gold was first discovered along Pine Creek in 1897 in the immediate vicinity of Muskox’s property and the region was a hot placer gold region for some time. In fact, at the height of the prospecting boom near the turn of the last century, there were over 10,000 Gold Rush itinerants living in the former town of Discovery, about 12 kilometres east of Atlin.

Much of the placer gold activity had petered out by 1950, but some of the sites continued to yield significant gold quantities well into the late 1980s. The total production from the deposits is unclear, but it is believed to be in excess of one million ounces. In spite of the placer activity, there was little mining activity directed at the unmapped gold zones that were first noted more than 100 years ago. The only known lode gold producer in the region was the old Imperial Mine, which ran for a short time around 1900.

Interest in the gold potential of the Yellowjacket property sprung up in the early 1980s, when some local prospectors staked the area containing the current property and optioned the ground to Canova Resources and Tri-Pacific Resources. In the mid 1980s, the two companies undertook a program of geophysics, along with some drilling, and in 1986, Homestake Mineral Development optioned the property.

Homestake got busy in a hurry, with more geophysics and an ambitious drill program that saw 23 holes probed into the prospect. Results were mixed, with 12 holes producing gold assays that ranged from anomalous to potentially economic. Just a single one-metre intersection produced an assay of more than one ounce per ton, although a second one came close and three of the holes delivered gold assays of more than one-third of an ounce per ton -- all over intervals that ranged from one to three metres thick.

Nonetheless, Homestake seemed encouraged by the results of its 1988 drill program, and another round of drilling was recommended to further evaluate the gold discovery zones and to further understand the geology of the mineralized structure. However, changes in Homestake’s North American exploration focus intervened and the property was ultimately returned to the prospectors.

Regardless, Homestake had made solid progress, suggesting the possibility of a viable economic discovery. The company’s drilling and assaying indicated a wide fault zone that trends toward the east-northeast and lies below a rich placer gold deposit. There had been a limited amount of drilling along the fault for a distance of several kilometres, but the bulk of Homestake’s testing was concentrated on a strike length of about 230 metres long. It is in this mineralized horizon, frequently called the Main Zone, where Muskox’s current drill program had initially been focused in the hopes of confirming Homestake’s initial promise.

The limited number of assays completed by Muskox appears to have already topped what Homestake’s drills had been able to muster. Dr. Morton says that the company’s continuing investigation of the Yellowjacket discovery zone at Pine Creek is yielding highly encouraging data on the scope and potential of this mineralized system. And with its drills busily turning away, Muskox should have a ready supply of assays to support its story line for some time to come.

A shrewdly managed company, Muskox also understands the importance of diversifying its exploration activities. The company also has a very promising project about 60 kilometres south of Kugluktuk, in southwestern Nunavut. This venture constituted Muskox’s key project when the company went public in the late 1990s. It involves an intriguing geological feature known as the Muskox Intrusion, which is up to 20 kilometres wide and more than 90 kilometres in length and occupies a triangular, trough-shaped chamber that extends to a depth of about two kilometres.

The Muskox Intrusion was discovered in the 1950s by Inco Ltd., when the major nickel mining company was flying over the area and noticed rusty zones of sulphide rocks running for many kilometres across the tundra. The company subsequently drilled over 100 holes to test those gossans in the late 1950s, and at least two of the holes delivered worthwhile assays. One hole produced about 5.5 metres of 7.6% copper, 3.2% nickel and a 16-gram-per-tonne kicker of precious metals. The second hole yielded 9.2% copper, 3.5% nickel and 22 grams per tonne of precious metals over a 1.13-metre interval. Nevertheless, Inco abandoned the property without attempting to delineate the mineralized body.

The Geological Survey of Canada next tested the feature with three deep holes in the 1960s, which confirmed that the intrusion exceeded a depth of two kilometres. A subsequent significant drill program did not occur until the 1980s when Equinox Resources and International Platinum collared 46 holes, coming up with a 13.74-metre intersection that assayed at 4.8% copper, 2.0% nickel, with 5.8 grams per tonne of precious metals. Once again, the play was abandoned without any attempt to establish a resource.

Muskox was next to take on the challenge with its own exploratory drilling over the past several years which has yielded some of the most promising assays to date. They include a series of high-grade intersections over some encouraging intervals and were impressive enough to attract the participation of a deep-pocketed major mining company. Early last year, Anglo American Exploration (Canada) Ltd. -- an exploration arm of the South African/British mining powerhouse, Anglo American plc. The option deal suggests that Anglo American is very serious about the potential of this project. It allows the renowned gold producer to earn up to a 75% interest in the property if it carries Muskox to production. The arrangement also requires the expenditure of $11.5-million in exploration by the end of 2007 for Anglo to earn an initial 51% interest. That should keep a steady stream of news coming from the play while Muskox commits the bulk of its treasury to delineating more vein system-hosted bonanza gold zones at Pine Creek property.

On the corporate front, the management of Muskox includes a number of veteran mineral explorers who also have extensive experience at running public companies. Dr. Morton has been a director of Muskox since 1999 and the company’s president since early in 2003. Educated in England, Dr. Morton has had a geological career spanning over 40 years and covering exploration, consulting and management, along with a lengthy academic career. Dr. Morton became a professor of geology at the University of Alberta as far back as 1967, and although he retired from teaching in 1995, he remains very active, running a number of companies and serving as a director of several others.

Muskox’s board of directors also includes two of its former presidents. Bill Dynes became a director of the company in 1999 and he served as its president from the fall of 1999 until Dr. Morton took the helm last year. Now the company’s vice-president of exploration, Mr. Dynes had been a project geologist with Canamera Geological for the eight years prior to his addition to Muskox’s team.

Experience has been a key to the success Mr. Dynes has had in his career. He got his geological start with the global mining heavyweight Noranda Inc., in the mid 1970s as an assayer at the company’s Boss Mountain mine but subsequently worked as a prospector, which gave him extensive experience in the hunt for precious metals and diamonds in Canada’s North. That success prompted Mr. Dynes to go back to school as a mature student to earn a geology degree and his academic life has been equally successful as well; he is now working on a master’s degree.

The other former president still on Muskox’s board is Andrew McGucken. He had been in charge for a year prior to Mr. Dynes and he has been a director of the company since 1997. Mr. McGucken also has a Canamera past and a lengthy history of managing public companies. He was general manager of Canamera through the mid 1990s and he is president of New Meridian Mining Corporation. As well, for the past 17 years he has been president of Premier Metals.

From a technical perspective, Muskox’s share price established a pronounced uptrend in the weeks following the mid February announcement of very encouraging initial assay results from the Yellowjacket gold project. It spiked on good volume to a peak of Cdn. $0.45 before most recently settling back into a $0.25-30 price band. This development suggests that the stock is poised for a news-driven breakout.

However, with about 78.68 million shares outstanding (approximately 129.21 million fully diluted), the onus is on Muskox to continue to deliver exciting news as a catalyst to higher share price valuations. This would entail continuing to produce bonanza grades from its Yellowjacket gold discovery, while Anglo American commits serious money to finding a world-class polymetallic discovery at the Muskox Intrusion Property. Accordingly, SmallCapMedia believes that Muskox represents good balance of risk and reward and is relatively undervalued considering the calibre and potential of its two mineral projects.