Three years ago, when Patagonia Gold (LSE:PGD) upped sticks and migrated wholesale from Argentina’s Chubut province to the southern province of Santa Cruz, it seemed they had left behind them not only several promising exploration projects, but an astonishingly high grade gold resource at the Huemules mine. It was small, yes – but with bonanza gold grades in multiple drill cores ranging from 100+ g/t through 460 g/t all the way up to 2,338 g/t, it seemed a pity to have to walk away from it when the Chubut provincial government slapped a mining ban on the Western side of the province.
Grades like that don’t turn up more than once in a lifetime! Do they?
But nothing daunted, Patagonia Gold made a fresh start in the mining-friendly province of Santa Cruz. That fresh start involved securing from Barrick Gold (NYSE:ABX) – for 30 million shares and a small up-front cash payment - an entire portfolio of partially developed projects in the Western portion of the prolific Deseado Massif. This region of the province had been ravaged several years before by volcanic fallout following the eruption of Mount Hudson in Chile, when the massive sheep ranches which had provided a rich living for the region’s people were blanketed with ash and starved, literally, out of existence.
At that time, the mineral potential of the Massif had just begun to emerge. Gold had been discovered at Cerro Vanguardia, and by the 1990s, Anglo Gold (now AngloGold Ashanti (NYSE:AU)) were developing what became the region’s first mine. As the geology became better understood, the potential of the Massif to host significant epithermal gold and silver deposits was recognised.
Subjected in the geological past to “pull-apart” tectonics, the Precambrian basement rocks and Permian sedimentary layers which overlie them had developed large predominantly NW-SE lying fault systems. It was through these faults and weaknesses that subsequent volcanic activity forced up Jurassic-age rocks which spread out to form the Chon Aike and Bajo Pobre systems. These formations host most of the Massif’s gold and silver, which is found in low-sulphidation veins, veinlets and stockwork formed as hot mineral-bearing fluids – which then cooled and solidified - were driven up from below into faults and fractures.
Thanks to this prolific distribution of mineralisation, much of which is contained in recognisable structures, the Deseado Massif now hosts four operating mines, several significant mines-in-the-making, and a wide array of development and exploration projects.
A fruitful terrain for Patagonia Gold to have entered, then, in early 2007 – and they lost no time in digging in. Work already carried out by Barrick spared them first and second pass exploration on three key projects, and within weeks of the acquisition, the company were reporting their first assay results from the northernmost of these, at Lomada da Leiva.
71,000 metres of drilling and six months later, an NI43-101-compliant resource was announced for Lomada da Leiva, comprising 235,000 ounces of gold, two thirds of which is at measured and indicated status. Having set their sights on short-term cashflow, the company have since moved ahead swiftly, and scoping studies and metallurgical testing have shown the viability of an open pit operation with a heap leach process route using run-of-mine ore, (i.e. straight out of the pit, with no crushing) to generate some 20,000 ounces of gold a year in the short term. Operating costs will be low, at around $300 per ounce, and full project cash flow over the initially-calculated 7 year mine-life is estimated at approximately $64 million at $850 gold versus a capital cost of $8.5 million.
Once fully operational, Lomada da Leiva will render Patagonia Gold virtually self-funding as they progress with development on other key projects, but in the meantime, a trial mining operation is poised to commence. Awaiting only final permitting, the trial is designed to test the effectiveness of the heap leach process route and verify its environmental credentials. Expenditure of under $2 million will establish a single leach pad loaded with a 6 metre layer of gold-bearing ore, - some 50,000 tonnes - generating around 2,500 ounces of gold after irrigation. Contingent on permitting, a further three 6-metre layers of run-of-mine ore an be stacked, providing sufficient gold, at 80% recovery, to finance much of the cost of the main heap leach operation due for construction later this year.
Meanwhile, 150km to the south east, Patagonia Gold had also swiftly mobilised to La Manchuria, a promising silver-gold prospect lying within the same NW-SE structural corridor as producing mines at Mina Martha to the south and Huevos Verdes in the north.
The mineralisation in the Main Zone at La Manchuria is contained in a “package” of narrow, almost vertical, high-grade quartz-adularia epithermal veins, surrounded by more disseminated gold and silver in the host rocks. The veins lie in rhyolitic rocks near to the surface, and continue into the more favourable andesitic flows below, giving potential for wider veining at depth. Drilling commenced in early 2007, and some 95 diamond drill holes have now been put into the Main Zone – many returning bonanza grades of up to 212 g/t gold and 5,920 g/t silver – and an initial resource statement is expected before the end of H1.
But the star of the show was the El Tranquilo licence block, where the Cap Oeste prospect, along with several other promising – but undrilled - targets, lay in a series of NW-SE oriented “corridors” running parallel to each other. Trenching and mapping identified almost a kilometre of mineralised breccia (broken rock “glued” back together again by the intrusion of other materials) filling a SW-dipping fault in volcanic rocks at Cap Oeste, which was interpreted as being a “high level” epithermal system – i.e. one in which little surface erosion has occurred and the lowish grades encountered near surface can be expected to increase with depth.
Once drilling commenced, the very first hole returned a 5m intersection at 28.7 g/t gold just 50m down. By the turn of the year, 50 holes had been drilled, several returning bonanza values of gold and silver, and what was intended to be a single campaign, followed by reassessment, just kept on going…
The depth of the fault-hosted breccia – which dips steeply to the SW - was established down to at least 100m, and mapped strike length increased to approximately 6km, with the mineralisation – now predictably named the Bonanza fault – remaining open to both north, south and at depth. Almost continuous resource drilling since then – more than 150 holes in total - coupled with surface work and scout drill holes up and down strike - has established a mineralised structure over 6km in length, with a depth extension down-dip to at least 370m.
Contained within the 1.2km central portion of the structure are 655,932 ounces of gold equivalent (more than 13 million ounces of silver plus 388,000 ounces of gold), 88% of which is at measured and indicated resource status. Micon – who produced the NI43-101 resource statement – believe the structure to represent a viable open pit mining operation, and scoping studies are under way.
They also recommended that efforts should be made to establish the full extent of the system, and accordingly, the company followed up on two scout holes drilled earlier into a geophysical anomaly at the southernmost end of the mapped strike, at Cap Oeste South East – COSE.
Starting at the bottom, drilling moved up strike, with the results showing an improvement in grade as they progressed. And it was in Hole 13 – deliberately positioned a little further upstrike - that the “once in a lifetime” event struck again last November. For at 208.3 metres down hole a 4.10 metre intersection of the breccia showed – literally, with visible gold and ruby silver mineralisation - exceptionally high grade gold and silver values, averaging 561.6 g/t Au and 28,523g/t Ag, with a sweet spot of 0.85 metres @ 2,104.6g/t gold and 107,648 g/t silver.
To add another generous dollop of icing to the cake, further drilling upstrike at COSE has intersected more high grade mineralisation, predominantly in double and triple figures, culminating in Hole 27, which hit another super-bonanza intersection in the same brecciated gold/silver mineralisation of over 1.60m of 1,284.15 g/t gold, accompanied by 3,977 g/t of silver. Drilling continues…and cliché though it may be, one is tempted to add “Watch this space!”
So “once in a lifetime” can happen more than once.
Luck? Some may say so. But MD Bill Humphries disagrees: “Once again, the sound methods and systematic approach to exploration by our highly skilled geological team has led to the discovery of another exciting high grade shoot on the Cap-Oeste Bonanza Fault structure.” Not to mention the exciting high grade shoot that the very same team also encountered at Huemules…
The view of Humphries and his long-term sidekick Richard Prickett – validated by exploration results from all over Cap Oeste and its neighbouring corridors – is that this is a major gold/silver camp with potential for many millions of ounces.
The market doesn’t believe them. Yet.
The author holds shares in Patagonia Gold