Barrick doubles Alto Chicama resource estimate (July 10, 2002)

Infill drilling by Barrick Gold (ABX-T) on the Lagunas Norte deposit has more than doubled the inferred resource at the 185-sq.-km Alto Chicama property in north-central Peru.

The resource now stands as 122 million tonnes grading 1.85 grams gold per tonne, equivalent to 7.3 million contained ounces of gold.

In April, Barrick announced what it called “a significant gold discovery” at Alto Chicama, and reported an in-house estimate of 55 million tonnes of inferred material running 1.95 grams gold per tonne, equivalent to 3.5 million contained ounces. The estimate was based on 45 holes spaced an average of 200 metres apart and a cutoff grade of 0.35 gram per tonne.

The new resource is based on 172 diamond drill holes spaced an average of 100 metres apart. To ensure a conservative estimate, the cutoff grade was raised to 0.5 gram gold for the oxide material and to 0.75 gram for sulphides. Gold values were capped at 20 grams.

The 7.3-million-oz. resource was calculated so as to be consistent with the initial resource estimate, including only material within a 50-metre radius of each hole. Barrick’s head of exploration, Alex Davidson is confident further infill drilling will add to the already identified ounces.

The resource comprises 107 million tonnes of oxide material running 1.8 grams gold per tonne plus 17 million tonnes of sulphides averaging 2 grams gold. The newfound gold is predominantly in the form of oxide mineralization. There does not appear to be any transitional material.

The oxide mineralization hosted by volcanics overlies oxides in sediments and is controlled largely by lithology. The volcanics form a skin over the sediments, and also occurs as breccia pipes. Some of the sulphide mineralization is higher-grade, with intersections running as high as 9 grams gold over 45 metres.

Mineralization begins at surface and extends as deep as 300 metres in some areas. The zone measures about 1,600 by 750 metres and remains open to the south and southeast.The high-sulphidation epithermal deposit exhibits grades and gold-rich surface outcroppings similar to those at the major’s Pierina property, 175 km to the south.

Bottle-roll and limited column test on the oxide ore has returned recoveries of 85-95%. More work is required on the sulphides, which have so far returned recoveries of less than 50% from bottle roll tests.

Randall Oliphant, Barrick’s chief executive, said, “Based on expanding the resource and positive metallurgical testing, we appear to have another Pierina on our hands.”

So far, Barrick has spent about US$10 million at Alto Chicama. The major plans on spending US$35 million by the end of the year, up from the previously increased US$20 million.

Infill drilling with nine drill rigs currently onsite will close the effective drill hole spacing to 70 metres, good enough to bring the resource to indicated status. Barrick plans to sink another 200 holes by year-end. Another 2 or 3 rigs will be added for extension, condemnation and exploration drilling.

Exploration drilling will target areas to the south and southeast of Lagunas Norte. Previously, 15 holes 3 to 3.5 km south of the deposit returned up to 1.6 grams of 54 m and 1.7 grams over 18 metres. The rigs will also test un-drilled areas with surface gold showings and alteration similar to Lagunas to the east and west.

Plans also call for more environmental, metallurgical and engineering work.

The company will begin the permitting process this year and expects to complete a feasibility study on Lagunas Norte in 2003.

Barrick, which turned out to be the only bidder to a tender by Peruvian state-owned Centromin in early 2001, can acquire Alto Chicama by completing a feasibility study. The company has easily eclipsed the deal’s US$6-million spending requirement.

Also under the deal, Barrick must pay Centromin a $2-million royalty advance credited against Centromin’s 2.51% net smelter return royalty once a positive production decision is made.

Alto Chicama is situated 140 km east of Trujillo on the Peruvian coast. The property is road accessible via a 2 to 3 hour drive. The property lies about midway between Pierina and Newmont Mining‘s (NEM-N) 51.35%-owned Yanacocha gold mine. Peruvian-based Compania de Minas Buenaventura (BVN-N) holds the remainder of Yanacocha.

In other news, credit rating agency Standard & Poor’s has announced that under a decade-old policy it will replace all foreign-based entities on its S&P 500 Index with U.S.-based companies in a bid to make the index, “a more useful benchmark for tracking large-cap U.S. equity market performance.”

The change affects five Canadian companies including Barrick and fellow gold miner Placer Dome (PDG-T). Nickel miner Inco (N-T) and aluminum giant Alcan (AL-T) will also be shown the door. The changes take effect at the close of business on July 19.

Oliphant told the audience of a conference call on July 10, “We acknowledge that this may have some short-term impact on our share price, but we believe over the long term it will have no impact on the overall evaluation of our company. The fundamentals of the company are stronger than ever.”

Oliphant regards the deletions from the index as a buying opportunity for the companies that have been impacted.

Barrick’s pending removal from the S&P 500 outweighed the good news from Alto Chicama in early trade on the Toronto Stock Exchange on July 10; the stock was off $1.40 or 4.75% at $28.10. By mid-afternoon, the stock had regained some ground and was trading at $28.90, off 60 from its previous close.

Barrick’s second quarter financial results are due to be released on July 25, 2002.