JUNIOR MINING

After 20 years, California's Mother Lode to finally get new gold mine

The old California Gold-Rush era Lincoln Mine is about to roar back to life as Sutter Gold Mining's flagship mine with the first gold bar scheduled to be poured next year.

Author: Dorothy Kosich
Posted: Monday , 25 Jul 2011

SUTTER CREEK, CALIFORNIA - 

Could the old mines of the 49ers give rise to a modern-day California gold rush?

Much is now being written and broadcast in the California news media and national publications, such as the New York Times, about an historic operation--now owned by a company bearing the name of California gold rush founder John Sutter-that is on the threshold of being the first Mother Lode gold mine to restart in decades.

John Sutter moved to the town that now bears his name, Sutter Creek, in his own unsuccessful effort to find gold after the hordes had over-run his Coloma sawmill, the site of the original California Gold Rush discovery in 1848. He eventually decided to cut his losses, returned to Fort Sutter and never again tried to find gold.

Within about 18 months of the start of the California Gold Rush, some of the 49ers had moved from gold panning to gold mining, sometimes deep underground. The largest of the veins, the Mother Lode, ran from Oakhurst to Georgetown and yielded some $3.5 billion in gold (in today's dollars).

More than 300 mines were working in the Mother Lode by the 1870s to 1880s. Sutter Creek had grown into an important supply point for surrounding mines and mining camps.

Leland Stanford, founder of Stanford University, was a resident of Sutter Creek who had been paid with an interest in the Union Mine to settle a debt at his grocery store. He was so fed up with the losses at the mine that he tried to sell his interest for $5,000.

However, the foreman of what was now the Lincoln Mine talked Stanford into giving the mine one more chance. A rich vein was discovered within the year and yielded $2.2 million in gold between 1860 and 1873. Stanford sold his interest for $400,000 and became a partner in the building of the transcontinental railroad, as well as to serve as the governor and a U.S. senator from California.

Alvinza Hayward would make a go of the nearby Old Eureka gold mine, which yielded $36 million in gold in its lifetime.  Because he was willing to invest enough capital to develop mines in Sutter Creek, Hayward would emerge as the gold country's first millionaire. A few years later, he would become one of the "silver barons" of the Comstock Lode in Virginia City.

Major mines now found in today's Lincoln project area include Bunker Hill, the Original Amador, Wabash, Keystone Consolidated, Lincoln Consolidated, and Center Eureka.

Because of a law banning gold mines during World War II, the Mother Lode mines were idled as years stretched into decades due to the high cost of mining in narrow vein gold mines. Many of them filled with water, making any thought of reviving the old mines costly. From the 1980s on, the Lincoln mine and its surrounding mines changed owners several times.

Modern exploration of the Lincoln-Comet property began in 1983 when Callahan Mining began acquiring properties in the vicinity. Callahan found new gold in the Mother Lodge that had not been associated with past producing mines.

Meridian Gold bought the Lincoln-Comet property and the Keystone property in the late 1980s. In 1989 Meridian began underground development to explore the Comet zone by driving the Stringbean Alley Decline, which has become one of Amador County's top tourist destinations, averaging 50,000 visitors annually.

FMC Gold purchased Meridian in 1990 and sold the Lincoln and Keystone properties to Seine River Resources, which was in a joint venture with U.S. Energy Corp.

U.S. Energy would pursue the permitting of the Sutter Gold Project, which would become the focal point of even more exploration, mainly on the Lincoln and Comet zones.

In 2008 RMB, a subsidiary of South Africa's Rand Merchant bank, bought 49.9% of Sutter Gold from U.S. Energy. RMB would become extremely serious about re-starting the old gold mines situated on a continuous 535-acre block of mining claims in the central part of the 121-mile Mother Lode gold belt. The Sutter Gold Mining Company would eventually emerge.

Properties under Sutter Gold's control include seven historic mines (such as the old Eureka mine) which produced more than 3.5 million ounces of gold,  27% of the historic gold production from the Mother Lode. While Sutter controls 3.6 miles of the Mother Lode in Amador County, 90% of their property remains unexplored.

RMB brought in proven experts in mining development and promotion. David Fennell and James Crombie are familiar names to long-time gold mining investors and North American gold companies. Fennell co-founded Golden Star Resources and moved on to the Hope Bay discovery, which was subsequently acquired by Newmont Mining.

Crombie was an executive at Hope Bay during the Fennell era, and would eventually helm Palmarejo Silver & Gold Resources, which would be acquired by Coeur d'Alene Mines. The two men are now active in Queensland Minerals and Odyssey Resources, in addition to Sutter Gold Mining. Crombie serves as Sutter Gold's CEO.

Allen Winters, a former senior executive at Homestake Mining, directly supervised five domestic operations that were part of the best known California gold mining company in modern history. He is also a director of the Sutter Creek Gold Mining Board.

All five major permits for operations have been obtained. RMB Australia Holdings (RMBAH) announced last month it will provide a secured prepaid gold facility to Sutter Gold in the amount of US$20 million. The proceeds will be used to repay an existing RMB Australia Holdings facility of US$6.5 million, as well as provide 70% of the funding required for the development and construction of the Lincoln Project.

Sutter will deliver 50% of its monthly gold project, or at least 900 ounces per month to RMBAH, which will pay a delivery price of US$950/oz. Total gold production deliverable to RMBAH is limited to 53,027 ounces.

A May 2011 Preliminary Economic Estimate for the Lincoln Mine Gold Project by Mine Development Associates of Reno outlined an indicated resource of 61,000 gold ounces, and an inferred resource of 128,000 gold ounces. The projected estimated capital requirements total US$19,934,000. Operating costs are estimated to total $704/oz.

Several royalties exist on properties within the Lincoln Mine Project Holdings. A blended rate of 4% gross royalty was applied for the PEA.

The project will require 108 employees, who will work seven days per week, 350 days per year, in two 10-hour shifts over a five-year mine life. Fortunately for Sutter Creek Mining, a local contract miner is among several contract miners now under consideration to mine the Lincoln project.

The mill will initially process 200 tpd of ore and is permitted to increase up to 1,000 tpd. It will use gravity and flotation circuits with 96% total recovery. No cyanide or other toxic chemicals will be used in the process. The majority of the concentrates will mainly turned into dore for shipment, while a small percentage will be processed at a yet-to-be determined Nevada mining operation.

The mine is aiming for an annual production of 23,000 gold ounces.

The new mill, which will deliberately be designed to resemble an historic mill, just won local government architectural approval for its design. Mine tailings will be dewatered and returned to the slopes as backfill.

The Lincoln Mine Gold Project is currently being prepared for groundbreaking in September of this year, with production targeted for 2012.

If Sutter Creek Gold Mining's project proves successful, don't look for a new modern day gold rush on the California Mother Lode just yet. It took nearly 20 years to get the necessary permits based on California's tough environmental standards, and secure the funding to actually build the mine. In contrast to other California communities, the town of Sutter Creek and its local governments favor opening a local gold mine in an area hard-hit by unemployment.

Nevertheless, the rebirth of a Mother Lode mine from California's gold rush glory days is something to celebrate, particularly for those who would like to believe that, somewhere, the ghosts of the 49ers must be smiling down on their modern counterparts, pleased to know their 150-year-old-plus mining holes are far from played out.

 

Pictures: Courtesy of the Wells Fargo Archive