Paron Gold Project - Peru
Department of Ancash, North Central Peru
Technical Summary and Exploration Programme
June 2006
Summary
The Paron gold project, based on estimations completed in 1994 and 1996 has an existing gold resource of between 200,000 and 250,000 ozs grading around 3g/t Au with Ag credits of +8 g/t. A large proportion of the resource outcrops and consequently the strip ratio in any mining operation is expected to be negligible.
A study undertaken by Barrick Mines in 2000 determined that the known mineralisation at Paron has a global resource potential of 2,390,000 ozs at a grade of 1.1 g/t. This study suggested that the grade had the potential to be higher than 1.1g/t with better drill sample recovery.
The mineralisation at Paron is low sulphidation epithermal in origin, and based on 5 samples metallurgically tested to date, leaches in conventional circuits with recoveries of +88% in fresh rock.
Latin Gold have an option to purchase 100% of the project, including a royalty, with total payments of $US1.9 million ($US9.50/oz under the current base case resource estimate).
The project has had limited regional exploration and in the view of Latin Gold presents an excellent opportunity for a substantial increase in resources through the discovery of both primary and structural repetitions to the existing mineralisation.
At the same time the project represents an unparalleled opportunity for Latin Gold to fast track the potential development of the existing 200,000 – 250,000 oz gold resource.
Option Details
Latin Gold has an option to purchase 100% equity in the Paron gold project.
The owners of the Paron property are Minera Yanamina S.A represented by Mr Raul Jaimie Berrospi Bordias and Mr Fernando Alfonso Berrospi Bordias.
The total option consideration is $US1.7 million and payable in 5 tranches over a period of 16 months, with an initial payment of US$40,000 for purchase of the option.
This payment was made on 21 April 2006.
- Payment 2: $200,000 is payable on 21 August 2006.
- Payment 3: $300,000 is payable on 21 February 2007.
- Payment 4: $200,000 is payable on 21 May 2007; and
- Payment 5: $960,000 is payable on 21 August 2007.
Barrick Gold, who through a Peruvian subsidiary reviewed and reported internally on the property in the year 2000, have a 5% net smelter royalty on the Paron gold project which Latin Gold has the right to purchase for US$200,000 at the commencement of production.
Location and Access
The Paron project is located in north-central Peru in the department of Ancash, approximately 16km east of the town of Caraz.
It is located 40 km to the north and 120 km south respectively of Barrick Gold's ("Barrick") Pierina (210 MT @ at 1.1 g/t for 7.5 million ounces) and Alto Chicama/Lagunas Norte (255 MT @ 1.1 g/t for 9.1 million ounces) gold mines.
Access to the project is via 448kms of paved highway from Lima to Caraz. From Caraz to Paron the road is unsealed but suitable for 2 wheel drive vehicles.
Latin Gold are currently employing a work crew to undertake manual improvements to this track.
Physiography and Climate
Paron lies on the western flank of the Cordillera Blanca at around 3,200 metres. The town of Caraz is situated at 2,500 metres.
In the project area topography is steep with hillsides between 38-45 degrees in gradient. The local vegetation consists of brush and cactus, which is indicative of a semi-arid environment.
The rainy season, which extends from November through to April, is not severe enough to restrict exploration and potential mining activities.
Exploration History
Paron has over 100 small artisanal pits and short tunnels (adits) up to 15 metres in length distributed over the prospect area. There is at least one additional adit of more substantial length which has caved but will be re-opened by Latin Gold if possible.
Local knowledge suggests that much of this artisanal work began with Portuguese miners in the 1600's and continued to the late 1890's.
No production records are available but production is assumed to be small and was concentrated on the exploitation of high grade pockets of gold mineralisation.
Between 1994 and 1996 Paron was explored by Compania Acuarios Minera y Exploradora who completed regional and prospect sampling, reopened some of the historic adits, developed 3 new adits and completed 7 diamond drill holes in 1994 and 55 diamond holes in 1995.
Some metallurgical test works was also completed, and show that the ore leaches in conventional circuits with recoveries of +88% in fresh rock.
In 2000 Compania Minera Barrick (Barrick) reviewed the project area.
Regional Geology
Paron is contained within a northwest trending belt of complexly folded and faulted, Late Mesozoic marine sediments intruded by Tertiary batholithic rocks of granodioritic composition. The oldest rocks in the region are Cretaceous quartzites, shales, and minor coal seams.
The Paron mineralisation is hosted by a batholith of monzo-granitic composition, and the emplacement of this batholith has been structurally controlled with intense mylonitic textures adjacent to the faulted contacts.
The faulting at Paron is thought to have provided the conduit for the hydrothermal mineralising solutions. This is supported by additional gold bearing systems located northwest and southeast of Paron.
Prospect Geology and Mineralisation
The Paron gold resource lies on the side of a 38-42 degree dipping hillside which reflects a low angle normal fault. This fault zone has been intersected by drilling at the base of the scarp where it consists of a heavily gouged zone some 15 metres thick.
The mineralisation at Paron is low sulphidation epithermal with alteration characterised by multi-stage silicification and chalcedonic to cryptocrystalline quartz veining and sericitisation of the monzonite host. Silica crackle breccias and microbreccias which are also characteristic of epithermal gold systems occour throughout the project area.
The alteration is tabular in shape and extends over an area 550 metres long with widths ranging between 80 and 350 metres. The thickness ranges from 2 metres to greater than 40 metres.
The quartz sericite alteration hosts the ore grade gold intersections. Where the alteration assemblage grades to quartz-sericite-chlorite and then chlorite-hematite, the grades of mineralisation decrease significantly and range between 10ppb and 500ppb.
The mineralised area contains up to 5% pyrite with lesser amounts of sphalerite and occasional chalcopyrite. The gold mineralisation however appears to post date the sulphide mineralisation as photomicrograph studies indicate the gold is contained as sub-micron particles along fractures within the pyrite. This is further supported by metallurgical test work which indicates that the gold is readily leachable, regardless of the sulphide content.
Providing a significant control for mineralisation is northeast fracturing. These fractures appeared to have been followed by the artisinal miners in search for higher grade pockets where oblique structures meet.
Resource Estimations
Based on the work completed by the previous explorers the Paron prospect can be divided into 3 zones –
- the central zone which is the higher grade and contains the bulk of the existing resource estimate,
- the eastern up slope zone and western down slope zone which are lower in grade, and
- the colluvium/alluvium zone which is located at the foot of the scarp and is the direct result of post Tertiary weathering of the main prospect area.
Acuarios Minera y Exploradora commissioned two resource estimates during their exploration of Paron. These resource estimates are not JORC compliant and were termed Indicated under the nomenclature used in the mid 1990's. They have not been verified by Latin Gold.
AME (1994)Western Zone: 2,900,000 tonnes grading 2.57 g/t Au and 15 g/t Ag for 240,000 ozs
Colluvium Zone: 202,000 tonnes grading 1.67 g/t Au for 10,800 ozs
Total Resource: 250,800 ozs
AME (1996)
Western Zone: 1,978,000 tonnes grading 3.16 g/t Au and 8 g/t Ag for 201,600 ozs
Colluvium Zone: 202,000 tonnes grading 1.67 g/t Au for 10,800 ozs
Total Resource: 212,400 ozs
Barrick (2000) – note this was a potential estimate, not a resource.
Western and Eastern Zone: 67,500,000 tonnes grading 1.1g/t Au for 2,390,000 ozs
Metallurgical Studies
Bottle roll leach tests were carried out by Acuarios Minera y Explorada on 3 composite drill core samples (nominal 10 mesh) and 2 underground samples (80% minus 12.5 mm) retrieved from the adits.
This work was completed by McClelland Laboratories INC, of Nevada.
This test work indicated that the majority of Au was recovered in less than 24 hours with overall recoveries averaging 84% after 96 hours.
Importantly, the test work on two samples which contained over 50% of unoxidised material returned recoveries of 91.0% and 86.9% respectively. This suggests that leaching of the sulphidic ore, which may represent around 60% of the eventual reserve, is commercially feasible.
The following table summarises the results of the metallurgical testwork.
|
Sample Type |
Drill |
Drill |
Drill |
Adit |
Adit |
|
Sample Number |
#1 |
#2 |
#3 |
4730 |
4731 |
|
Extraction-% of Total |
|
|
|
|
|
|
in 2 hours |
21.6% |
26.4% |
35.6% |
40.4% |
17.2% |
|
in 6 hours |
40.9% |
63.1% |
70.2% |
72.9% |
48.4% |
|
in 24 hours |
54.7% |
83.1% |
82.9% |
86.8% |
78.2% |
|
in 48 hours |
60.5% |
88.1% |
86.9% |
89.9% |
82.0% |
|
in 72 hours |
61.9% |
90.8% |
88.1% |
91.7% |
85.2% |
|
in 96 hours |
62.6% |
91.0% |
88.1% |
92.3% |
86.9% |
|
Extracted - g/t |
1.61 |
2.43 |
1.78 |
6.171 |
1.817 |
|
Tail Assay - g/t |
0.96 |
0.24 |
0.24 |
0.514 |
0.274 |
|
Calculated Head - g/t |
2.57 |
2.67 |
2.02 |
6.685 |
2.091 |
|
Cyanide consumed - Kg/t |
0.08 |
0.16 |
0.07 |
<0.05 |
0.76 |
No sample
descriptions are currently available to explain possible reasons for the poor
leach recovery of drill sample #1.
The metallurgical report suggested it may be feed size related and that a longer
leach time would not significantly increase recoveries.
Resource Definition
A priority of the initial exploration programme over Paron is to better define the grade and tonnage potential of the existing higher grade central zone, as well as test the potential of the global mineralised area.
Although Barrick estimate the global potential grade as being only around 1.1 g/t this still represents an exploration target of high potential, which can be explored in conjunction with closer, more detailed evaluation of the higher grade zone. This is because the total resource has only been lightly drilled and Barrick suggested in their report that the grade could be boosted by better drill sampling controls.
Prior to the first drilling programme an extensive surface channel sampling programme, in conjunction with as much underground sampling that can be carried out by re-opening the historic adits, will be completed.
This work is expected to provide an invaluable data base of the tabular mineralised trends as well as greater understanding on the grade distribution and alteration controls.
The drilling programme, which could be both reverse circulation and diamond (subject to rig availability and drill site access) is planned to commence immediately once governmental approvals have been obtained.
Exploration Upside
By modern standards Paron is relatively unexplored. Whilst the work completed to date has probably outlined to a reasonable degree the boundaries of the known mineralisation no work appears to have been carried out to test for upside relating to faulted continuations or indeed or repetitions at depth within the hanging wall.
In addition no exploration has been carried out to explore for what is expected to be a significant hydrothermal pipe.
These targets alone justify a significant exploration effort.
Fault Extension TargetThe western extent of the Paron mineralisation is truncated by a normal fault. Although the throw of this fault is not known, exploration to test for the possible down faulted extension within the footwall block is regarded as an easily explored target with significant upside. An exploration analogy is Porgera.
Drilling for this target will be carried out at the base of the scarp with a series of vertical and angle holes stepping back west and drilled easterly to intersect the fault.
At the same time drilling from the base of the scarp will be drilled to the east to test for potential repetitions of the Paron zone within the hanging wall and contained within splay faults off the main fault.
A secondary target of this drill programme will be the testing of the grade and westerly extent of the colluvium/alluvium mineralised zone.
There has been limited drilling through the alteration zone to test for repeats of the mineralised zones at depth. Epithermal systems can often show sub parallel repetitions at depth, and in the case of Paron this presents a very attractive target as the known alteration is sub tabular and influenced by micro and macro fracturing with a significant fault the likely conduit for the mineralising fluids.
A drilling programme to test the monzonite at depth (+200 metres) beneath the central and lower grade western zone will be an initial priority.
Hydrothermal PipeNo exploration has yet been carried out to explore for the pipe providing the mineralisation. This is a secondary target as it will require information from the alteration mapping, planned drilling, and possible geophysics in order to narrow the possible target sites.
Conclusion
The Paron gold project contains an existing gold resource of 200,000 – 250,000 ozs. Based on the previous exploration work this resource represents a likely mining opportunity and will be fast tracked to reserve status with the associated commercial analysis of potential production scenarios.
At the same time the Paron project contains considerable exploration potential for the discovery of additional mineralised zones at depth including faulted continuations. As a pure exploration play there are few gold projects that are controlled by junior Australian exploration companies that offer such upside potential.
Latin Gold plan to actively explore the Paron gold project over the coming 12 month period with the initial drilling programmed budgeted to be carried out within the next 4-6 months.
