Otis Gold achieves continued success at the Kilgore gold project

Otis Gold (CVE:OOO) has been developing its flagship Kilgore gold project in Clark County, Idaho for the past four and a half years with much success, growing the Mine Ridge deposit and delineating several additional targets during this period.
The company's president and CEO, Craig Lindsay, says Otis is actively moving the planned open-pit project toward production, achieving "significant drill success" in the last years.  Otis has drilled almost 20,000 metres at Kilgore since 2008.
The Mine Ridge deposit, which is open to the north, northwest and southeast, is a wide, near-surface structure. The last holes from the site in 2011 pulled between 114 to 118 metres in gold mineralization, starting 6 metres from surface, at the northern end of the deposit, says Lindsay.
Indeed, last October, the mineral exploration company said it hit 0.89 grams per tonne (g/t) gold over 114.3 metres, including 1.10 g/t gold over 80.8 metres in hole 11 OKC-258; and 0.89 g/t gold over 118.8 metres, including 1.65 g/t gold over 36.5 metres in hole 11 OKC-259.
To follow up on these results, the company completed a soil sampling program, and in January, said it extended the strike line of Mine Ridge by another 400 metres, which has yet to be tested, says Lindsay.
The 266 sample results on the North Soil Grid section displayed strong linear gold-in-soil anomalies, tracing the extension of the Northwest Fault for at least 400 metres to the northwest.
But perhaps one of the greatest strengths of the project is the metallurgy, says Lindsay, something on which investors tend not to focus.
In the mid 1990s, Lindsay notes that Kilgore was going to be Echo Bay's next production story, but a drop in gold prices to well below $300 per ounce halted the process.  At the time, Echo Bay completed extensive column leach metallurgy tests, achieving "very good" recovery rates, says Otis Gold's president.
Otis followed up with additional column leach tests using 1/2” crush material in late 2010, yielding similar results, and this year, started column leach tests using 1.5” crush material. Lindsay says that the larger the crush size, the less processing and crushing of rock is required, which helps decrease capital costs, thereby boosting economics.
This is because at Kilgore, instead of having to crush down the ore to a finer size, which Lindsay says many ores require to get a robust recovery, could potentially operate on run of mine material - sharply reducing capital costs.
Results on the latest metallurgical work are expected shortly.
The entire Kilgore project, which is 100 percent-owned by Otis with no underlying royalties, has two to three million ounce gold potential, with the latest NI 43-101 resource delineating 487,000 ounces of indicated and inferred gold.  The company is now working on a new estimate that will incorporate all the drilling through 2011.
The project is spread across 5,130 acres in southeastern Idaho, 60 miles north of Idaho Falls, and is accessible by road around 32 miles northeast of the town of Dubois and 15 miles east of Interstate Highway 15.
The asset boasts good infrastructure, with power to the bottom of the property and a railhead within 15 miles, and was given a "clean bill of health" by a third party environmental scoping study in 2010.
Lindsay says that an important achievement for the company this year was the addition of 1,880 acres, boosting its land position at Kilgore by 58 percent and giving the miner flat land that is appropriate for heap leach processing.
"We didn't really have an area before for future potential mine processing activities," adds Lindsay.
The land was acquired through the direct staking of federal lode mining claims, and an application submitted to the State of Idaho.
Next up for this year, and assuming capital is available, Otis plans on drilling another 7,000 metres on its Mine Ridge deposit, completing the NI 43-101 resource update and initiating a scoping study. Twelve-month environmental baseline studies will start this summer, with the company having engaged a contractor for the task.
Other targets at Kilgore include Gold Ridge, where there has been no historic drilling whatsoever, and Prospect Ridge, which saw its first discovery hole in 2011. Both targets are on strike with the Mine Ridge deposit and have very similar geological signatures.
These targets are permitted for drilling, but Lindsay says this will not be started until there is enough capital to fund the program. The final target at the project, which is of lower priority, is named Dog Bone Ridge, an area that features geophysical targets three to five times the size of the Mine Ridge deposit.
"This is a critical year for the development of Kilgore, and we are more excited today for this project than we have been at any other time," remarks Lindsay.
"With a friendly permitting regime in Idaho, very favourable environmental characteristics, good infrastructure and excellent leachability, Kilgore has the potential to move quickly toward a production scenario."
Indeed, Idaho is a hot mining region, with the Thompson Creek (NYSE:TC) molybdenum mine in the central part of the state, and large open pit phosphate mines in the southeastern portion. Formation Metals (TSE:FCO) also recently permitted its Idaho cobalt project, while Midas Gold (TSE:MAX) is on track to permitting its six million ounce gold discovery in the southwestern portion of the state.
From a permitting point of view, Kilgore is very, very manageable," Lindsay adds.
The company, with $1.9 million in the bank as at the end of the first quarter, runs a "tight ship" with Lindsay at the helm, who has a 20-year background in corporate finance and investment banking.
Prior to founding Otis, Lindsay was a founder and CEO of Magnum Uranium Corp, which was subsequently sold to Energy Fuels Corp. (TSE:EFR), and he spent five years as a VP in the corporate finance and investment banking group at PricewaterhouseCoopers.
"With our current low valuation," says Lindsay, "any fundraising right now would be extremely dilutive."
"We are therefore looking at alternative ways to raise funds, including through potential joint venture partners, and we have already been approached by a number of companies," he advises.
Otis is focused on its five Idaho projects, which includes the early-stage Hai and Goldbug projects, where work this summer will aim to better define drill targets and potentially add to their land position.
The 1,360 acre Oakley gold project, which consists of 107 federal lode mining claims and several Utah state leases in Cassia County, Idaho, has  an NI 43-101 inferred resource of 235,000 gold ounces on one of its targets.
Lindsay says the company is also looking for a partner to help develop this project.
Otis Gold counts Mitch Bernardi as its chief geologist, and John Carden as its consulting geologist, who were both formerly with Echo Bay Mines and each have more than 30 years experience in the mining industry.
The company's shares closed Friday at 16 cents on the TSX Venture Exchange.