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San Luis, Peru
San Luis Technical Report
Location and History
The San Luis Project in central Peru is a high-grade gold-silver project located approximately 25 kilometers (16 miles) northwest of Barrick Gold Corporation’s Pierina gold mine, and can be accessed by two all-weather roads. We currently hold a 55% interest in the project through our joint venture with Esperanza Silver Corporation and have elected to increase our interest to 70% by funding costs required to complete a feasibility study for the project. Thereafter, we will have the right to increase our interest in the joint venture to 80% by funding costs to place the project in production.
Following the discovery of the San Luis quartz vein system in 2005, the joint venture focused on securing a sizeable land position in the area, applied to the local and national governments for exploration work permits, and established a work camp on the property. The property now encompasses over 25,000 hectares of mineral concessions. In 2006, systematic trenching and channel sampling was carried out on the westernmost vein, known as the Ayelen Vein. A definition drill program was started in September 2006 and continued through August 2007. During that time 27,025 meters of drilling was completed in 161 diamond drill holes.
This drilling was focused on the Ayelen Vein and confirmed the down-dip continuity of the bonanza grade mineralization. A number of other veins were also targeted, some of which returned ore grade intersections that require follow-up. Significant drill intersections from the 2007 drill program on the Ayelen Vein include hole SL–01, which contained 29.5 feet averaging 37.4 ounces silver per ton and 1.08 ounces gold per ton (9.0 meters averaging 1,281 grams silver per tonne and 36.9 grams gold per tonne), and hole SL–60 which contained 16.4 feet averaging 19.0 ounces silver per ton and 0.63 ounces gold per ton (5.0 meters averaging 650.7 grams silver per tonne and 21.6 grams gold per tonne).
A new area discovered and tested in 2007 was the BP Zone, a 12-square-kilometer (5-square-mile) area which exhibits copper porphyry exploration potential. Three of the four holes drilled in the BP Zone intersected highly altered volcanics with anomalous copper, gold and silver values covering a very wide area. The fourth hole, SL-13, intersected 45 meters from surface that averaged 0.53% copper, 62.7 grams per tonne silver, and 0.02 grams per tonne gold.
Geology
High-grade gold and silver quartz veins are hosted within Tertiary-age andesitic volcanic rocks of the Calipuy Formation. Six separate, subparallel veins have been identified so far, with individual veins having strike lengths ranging from a few hundred meters to more than 2,000 meters. Vein widths are also variable, ranging from less than 1 meter up to more than 10 meters. Mineralization within the veins is typical of classic quartz-adularia or low-sulfidation epithermal systems, which include major precious metal deposits such as El Peñon in Chile.
The BP Zone represents a different type of mineralization, potentially a large-tonnage copper porphyry similar to those being mined in Chile and the western United States. The initial drilling confirmed the existence of an extensive porphyry alteration system that has locally generated ore grade values in precious and base metals.
Community Relations
The Joint Venture is engaged in a proactive program of community relations. A large part of this program involves regular meetings with local community leaders and officials. Land access agreements were successfully negotiated with the local communities, and these agreements formed an integral part of the environmental submissions for the work permits.
Project Scope and Plans
Exploration in 2008 will be directed to excavating underground levels on the Ayelen Vein in order to test the continuity of the mineralization and provide information for a feasibility study on the economics of developing a mine. The feasibility study will be undertaken in the second half of the year. Other vein targets will be mapped and sampled in detail, and it is expected that several of these will warrant testing by diamond drilling. A large geophysical program will be completed over the area left untested on the BP Zone. This geophysical program along with mapping and prospecting will provide the additional basis for a follow-up drill program testing for porphyry style mineralization on the BP Zone.