Kilgore Gold Project Update
May 4, 2010
Vancouver, B.C. - Otis Gold Corp. (“Otis” or the “Company”) is pleased to provide an update of recent developments concerning the Company’s Kilgore Gold Project (“Kilgore”), Clark County, Idaho.
Upcoming Drilling Program
In 2010, Otis plans on drilling up to 8,000 metres at Kilgore. Of this total, 6,000 metres is planned at the Kilgore Mine Ridge deposit and resource area and 2,000 metres is planned at Dog Bone Ridge. The latter constitutes a highly prospective drill target that has been the subject of both historic drilling and a successful 8.5-line km CSAMT Survey completed by Otis in November 2009. It is located approximately 1,400 metres southwest of the deposit.
Otis has signed an agreement with Timberline Drilling Inc., of Coeur d’Alene, Idaho to supply two core rigs to drill at Mine Ridge. Drilling will be on a 24-hour basis, with approximately 6,000 metres spread between a minimum of 30 holes located throughout four quadrants encircling the deposit’s central Mine Ridge area. Drilling is designed, in part, to convert inferred resource material into the indicated category and to drill in-fill and step-out holes to both upgrade the current resource and to test for further resource expansion, as well as closure, where the deposit remains open. Part of the drilling will also focus on in-filling and off-setting higher-grade historic intercepts near and along the Cabin Fault and its contact with an adjacent Tertiary rhyolite dome, the possible source of mineralization for the Kilgore gold system. The program will also concentrate on off-setting and extending to the south higher-grade intercepts found by Otis during its 2008 and 2009 drilling of the Mine Ridge deposit core target area. A drilling contract for work at Dog Bone Ridge has not yet been finalized.
Cost of the drill program at Kilgore is estimated to be US$2.5 million. Results from the drilling will be released as they become available.
Mine Ridge Pre-Feasibility Study
Otis has initiated activities required to complete an independent Pre-Feasibility Study on the Mine Ridge deposit. Highlights of the study will include resource delineation, deposit engineering, infrastructure review, and cost assessment work, as well as the results of current detailed metallurgical testing and the upcoming approximately 6,000-metre resource drilling program for 2010. Completion of the study is scheduled for March 2011. Otis is currently reviewing proposals from several independent consulting firms and expects to confirm the appointment of a primary contractor by June 2010.
Craig Lindsay, President and CEO of Otis commented, “Initiation of the Pre-Feasibility Study at Kilgore marks a major milestone as we move towards a commercial production decision.”
Metallurgical Testing at Mine Ridge
As a first step toward the completion of the Independent Pre-Feasibility Study, four bulk samples representing typical Kilgore deposit ore types and bulk-tonnage grades were delivered to McClelland Laboratories, Inc., Sparks, Nevada on April 15, 2010 for bench-scale metallurgical testing. The samples range between approximately 190 and 250 pounds of split HQ-3 size core material, with estimated overall average grades in the 0.76 grams per tonne Au (g/t Au) to 1.80 g/t Au range. Scope of the contracted work includes sample preparation and head grade analyses, bottle roll tests, screen size fraction analysis, and column leach tests for each of the four samples. Results and a report of all findings are estimated to be available in 5 months.
Historically, deposit metallurgy is considered excellent based on favorable results of bottle roll and column leach tests performed in 1995 and 1996 by Hazen Research, Inc., Golden, Colorado on Echo Bay Mines drill core and RC cuttings. All bottle roll tests resulted in greater than 90% gold extractability and showed that the mineralization is not refractory. Column leach tests indicate 94.3% recovery on oxidized material (-1/2” crush size) and 86.9% on mixed/partially oxidized material (-1” crush size), material types which together comprise the bulk of the deposit. As noted in a 2002 Rayner and Associates and Van Brunt NI 43-101 compliant report on the property, the extraction of 86.9% gold on mixed material after 75 days of leach time is excellent and suggests that even coarser crush sizes may also lend themselves to favorable extractability, thus enhancing deposit economics.
Mine Ridge NI 43-101 Compliant Resource
Between 1983 and 1996, a total of 122,257 feet of drilling in 190 holes was conducted on the Kilgore Project by Bear Creek, Placer Dome U.S., Pegasus Gold, and Echo Bay Mines with the goal of defining a +1 million once bulk-tonnage, open-pittable gold deposit. A number of 43-101 non-compliant resource estimates were computed on the bulk-tonnage mineralization by Placer Dome U.S. and Echo Bay Mines. These estimates indicate a global resource of between 561,000 and 706,000 ounces of gold contained in the deposit depending on the cutoff grade used and the Company conducting the estimate (see Otis News Release dated June 10, 2008). These estimates, which are based on the above noted drilling, are mentioned for historic and reference purposes only, the issuer is not treating them as current mineral resources, and they are not to be relied upon. Subsequent to these estimates, in 2002 Rayner and Associates and Van Brunt conducted a NI 43-101 compliant resource estimate on the Kilgore bulk-tonnage deposit at a cutoff grade of 0.010 ounces per tonne gold (opt Au). Their estimate comprises 218,000 ounces of drill-indicated gold (7.043 MM tons @ 0.031 opt Au) and 269,000 ounces of inferred gold (9.661 MM tons @ 0.028 opt Au).
In 1996, Echo Bay Mines completed an internal Initial Engineering Assessment on Kilgore, planning to put the deposit into production as an open pit. Some 10.1 MM tons of material at a grade of 1.28 g/t was identified as being potentially minable. Capex was estimated at $31.6 (US) million, cash costs at $222 (US)/oz, and the mine life at 6.6 years (based on a production rate of 4,000 tons per day, or about 45,000 ounces of gold per year). They did not proceed due to the low gold price, which at the time was less than $300 (US)/oz, and also because of their deteriorating financial position.
Recent Otis drill results (see Otis News Release dated March 23, 2010), in combination with other significant high-grade and bulk-tonnage intercepts recorded for a number of the Company’s other holes drilled in the Kilgore deposit Mine Ridge core target area during 2008 and 2009, indicate mineralized thicknesses and average grades that are noticeably greater than those constituting the majority of the historic Kilgore NI 43-101 compliant resource. As a result, Otis expects that there is a strong possibility to increase the overall size, grade, and economic viability of the deposit. A new NI 43-101 compliant resource estimate at Mine Ridge will be completed following completion of this year’s drilling.
About the Company
Otis is a resource company focused on the acquisition, exploration, and development of precious metal deposits in Idaho and Nevada, USA. Otis is currently developing its flagship property, the Kilgore Gold Project, Clark County, Idaho.
ON BEHALF OF THE BOARD
“Craig T. Lindsay”
President and CEO
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