Kenai Resources Ltd.

Kenai Resources Ltd.

September 21, 2010 20:00 ET

Kenai Resources Starts Drilling at Hope Butte and Albisu Secures Key Gold Project in Brazil

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 21, 2010) - Kenai Resources Ltd (TSX VENTURE:KAI) ("Kenai") announces that drilling at its Hope Butte, Oregon gold project located just west of the Idaho border is scheduled to commence around the end of September. Kenai's immediate drilling program of approximately 3,000 metres is designed to replicate the results and the mining potential recorded at Hope Butte in the 1996 to 2000 period by Chevron Resources and its joint venturers, and to advance Hope Butte to NI 43-101 status. To this end, four initial holes are being drilled by twinning Chevron's prior results, including several very high grade intercepts. Assay results from the initial drilling at Hope Butte will be released as soon as available.

Kenai also advises that, following the completion of the initial drilling at Hope Butte, the rig will be remobilised for a planned 1,000 metre drilling program at the Albisu farm-in exploration project in northern Nevada. This program is currently anticipated to commence during November. The Albisu gold project was drilled by Chevron Resources in 1979 and 1981 and Western Energy Development Corp. ("WEDC") followed up with four core holes in 2008 to twin Chevron's AL-14 drill hole that reportedly intercepted 6.5 meters at 6.2 gram per tonne ("gpt"). The WEDC holes confirmed the gold zone by intercepting 1.6 meters of 12.46 gpt and 8 meters of 1.94 gpt. To date WEDC has drilled a total of 3,729 meters of core at Albisu in 2008 and 2009. That drill program defined a mineralized stockwork sulphide-quartz-calcite zone that is up to 73 m thick. Gold values range from 14.6 gpt over 1.8 meters to intervals between 3 and 32 meters of 0.2 to 0.5 gpt.

Kenai Entry to Brazil via Strategic Joint Venture with Gold Anomaly on its Sao Chico Gold Project

Kenai has executed an Option Agreement with Gold Anomaly Limited (ASX:GOA) for Kenai to acquire 50% of the Sao Chico gold project in Brazil, by funding project exploration ahead of a possible decision to acquire equity in the project, with key terms as under:

  1. Kenai has an 18 months option to acquire 50% of Sao Chico following an advance to GOA of A$1m and committing to provide A$2m project funding, these funds will be in the form of a loan from Kenai to GOA until exercise of the option. If Kenai does not exercise the option, the loan funds advanced will be repaid to Kenai by GOA.
  2. Kenai has a further option to acquire further 25% by payment to GOA of A$1m and committing to provide A$1m project funding.
  3. GOA has right to continuing participation at 25% level or can sell 25% to Kenai based on US$30/oz for attributable CIM Mineral Resources gold ounces plus US$60/oz for attributable CIM Mineral Reserves gold ounces at that time.
  4. Kenai to pay a 10% Net Profits Interest (NPI) for 5 years to GOA over Kenai's attributable interest, whether at 50% or 75%.

Kenai's objectives in this transaction are to undertake local and regional exploration and development, over the tenement area covering 1,416 hectares, initially targeting one million gold ounces in the 56 hectare core area, the site of extensive prior garimpeiro surface workings. Kenai's project funding is to generate the necessary data to accelerate a Mining Lease application.

Kenai will assume the role of project manager, utilizing existing GOA personnel as well as its own personnel. The focus is on fast tracking initial gold production and defining a NI 43-101 compliant mineral resource. GOA has been planning the commencement of production by the end of 2010 at the rate of 20,000 gold ounces per annum. Production is planned from an expected high grade gold deposit using a minimal capital cost, low operating cost gravity recovery operation. On exercise of the Option, Kenai's participation will be as an incorporated joint venture with GOA, covering GOA's rights under contract with the local garimpeiro landowner. This landowner has recently been granted a 12 month trial mining permit or GUIA, with a possible 12 month extension to the permit, during which time a feasibility study for a full scale project is planned to be completed. As Greg Starr, President of Kenai is also a Director of Gold Anomaly; the intended transaction may be determined by the TSX Exchange as a non-arms length acquisition. 

About the Sao Chico Gold Project, Pará State, Brazil:

The Sao Chico project is located 340 kilometres south-east of the major city of Manaus. It lies within a prominent north-west to south-east trend in Brazil's Tapajós Mineral Field, exploited over only the past 30 years by a gold rush of some 500,000 garimpeiros, ie artisanal alluvial miners, for the production of unofficially estimated 20 to 30 million ounces of gold. With little underground mining expertise, the garimpeiros were urged by government to consolidate their claims and joint venture with established mining companies. The field has had little modern exploration undertaken.

San Chico is in cleared low grade farming land adjacent to the Transgarimpeiro Highway, at a road distance of about 350 kilometres or 8 hours' drive from the regional city of Itaituba, to the north-east. Light aircraft from Itaituba service Sao Chico via two local airstrips. 

Extensive surface mining has been undertaken by garimpeiros at Sao Chico for over 20 years, with minor underground workings in primary rock which occurs at less than 20 metres depth. There are several sub-parallel gold-bearing coarse grained quartz/sulphide veins, with a strike length so far known of 1000 metres. 

Investigations by GOA to date have determined the following:

  • Veins weathered up to around 10 metres depth, free dig by excavator to the depth of oxidation.
  • Underground sampling by GOA along about 70 metres of drives from a 20 metre deep shaft in free-standing primary rock, with average gold grades of 15 g/t, from over 100 samples. 
  • Good metallurgical recoveries, both by gravity and cyanidation methods.

Current plans are for delivery during October of a 100 tonnes per day capacity, integrated gravity processing plant, which will allow commencement of the GUIA trial mining at the permit rate of 50,000 tonnes per annum by year end. There are abundant local water supplies and ample tailings dam capacity.

From its due diligence investigations, Kenai considers there is excellent potential at Sao Chico for delineation of NI 43-101 mineral resources of sufficient tonnage and grade to support a substantial gold project operation. An independent NI 43-101 report is currently being prepared for the project.

The Tapajós gold region is situated in the south-central part of the vast Amazon Craton, which is divided into two, the Guyana Shield north of the Amazon River and the Brazilian Shield, with its nucleus as the Archaean greenstone-granitoid terrane, south of the Amazon. As shown in the appended regional geology plan (, Sao Chico is in the same geological unit, the intrusive Parauari Suite, as the Tocantinzinho (TZ), Palito and Sao Domingo projects. TZ is a major gold project acquired for CAD$122 million in July 2010 by Eldorado Gold (TSX:ELD, ASX:EAU). In June 2010, ELD acquired 26.8% equity in Serabi Mining plc, the AIM-listed company which owns 100% of the Palito underground mine. From Sao Chico, the TZ project is 54 kilometres north-west and Palito is 23 kilometres east north-east.

Kenai Chairman Daniel Kunz said today, "Kenai is pleased to be joint venturing with Gold Anomaly on the Sao Chico project. We are committed to bringing the project into production in the short term and have expectations of defining a significant resource at Sao Chico leading to a long term mining project. Kenai has negotiated a deal structure that overall is low-risk in terms of financial exposure in the event that our positive expectations for Sao Chico are not realised during the Option Agreement period."

GOA Non Executive Director Tom Fermanis said today, "We believe our shareholders will view this agreement as favourable. The agreement with Kenai injects funds into the Sao Chico project, fast tracking production and exploration, and should a JORC or CIM NI 43-101 compliant resource be developed at Sao Chico, both GOA and Kenai will share in the upside. Kenai are targeting a potential million ounce deposit, potentially enabling GOA to benefit from a strong cash flow from the project. The agreement with Kenai will enable GOA management to fully focus on developing its flagship Crater Mountain project in PNG".

About Kenai Resources:

Kenai is a Canadian company focussed on precious mineral project exploration and development, towards early significant gold production. In addition to the Albisu, Nevada, advanced gold exploration project, Kenai's principal project assets are the wholly-owned Quartz Mountain and Hope Butte gold projects in South-Eastern Oregon, both located in Malheur County, close to the Oregon border with Idaho. All three of these projects are epithermal gold projects.

Kenai's current gold resources from the two Oregon projects, aggregating approximately 500,000 contained gold ounces, are summarized as follows:

Project   Tonnes   Grade   Ounces Au   Status/Classification
Quartz Mountain   15,050,200   0.80 g/t Au   352,667   Indicated Resources, NI 43-101 compliant
Hope Butte   5,000,000   0.91 g/t Au   146,300   Historical, not NI 43-101 compliant


  1. For Quartz Mountain, resources above a 0.34 g/t cutoff with silver converted to gold equivalent using a ratio of 49.5:1 silver to gold. Metallurgical recoveries were not considered. Indicated resources are as reported in an independent November 2006 NI 43-101 report, posted on SEDAR at that time.
  2. The Hope Butte resources are considered historic in nature, do not comply with current NI 43-101 standards, have not been verified by the Company and therefore should not be relied upon. It is uncertain if further exploration will result in the discovery of an economic mineral resource.

Shares Outstanding: 31,231,734

On behalf of the Board of Kenai Resources Limited

Daniel Kunz, Chairman

Forward-Looking Statements: Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed and elsewhere in the company's periodic filings with Canadian securities regulators. The economic viabilities of the resources estimates discussed in the release have not been established and may not be. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The company does not assume the obligation to update any forward-looking statement.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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