Brancote boosts its stake in Argentine gold deposit

United Kingdom-based Brancote Holdings is boosting its ownership of the multi-million-ounce Esquel gold project in southern Argentina to 74% by acquiring the 14% stake held by Australian businessman Kerry Packer.

Under the proposed deal, Brancote will issue 15.2 million of its shares to Packer’s holding company, Consolidated Press International, in return for a further 14% interest in Minera El Desquite (MED), the operational vehicle for the Esquel project. Packer will become Brancote’s largest shareholder, with a 19% stake.

Esquel is a joint-venture partnership between Brancote, as operator, and a private group of investors consisting of the Miguens Bemberg family and Packer. The project comprises 433 sq. km in Chubut province, close to the Chilean border in the foothills of the Patagonia region, and is 10 km north of the provincial town of Esquel at an elevation of 1,200-1,400 metres. The town of 30,000 offers national grid power, gas supply, abundant water and road access.

The project centres on a near-surface, low-sulphidation, epithermal high-grade vein system that extends over 2.4 km. The core area is at the southern end of Cordon Esquel and measures 3.5 km north-south by 1.5 km east-west. The western boundary is marked by the north-south-striking Antonia vein system, whereas the Pinnacles-Ungoliant veins define the eastern boundary. The massive vein system containing Galadriel, Galadriel Sur, Football Field and Julia cuts diagonally across the core area in a northeast direction.

In addition to these major veins, there are numerous others, both singular and in swarms, throughout the core area.

A fourth round of drilling, completed in June, was aimed at upgrading the resource of the Football Field zone, a 550-metre-long area that sits between the southern extension of Galadriel Sur and the northern end of the Julia vein systems. The Football Field area was previously estimated to contain an inferred resource of 1 million oz. gold and 1.3 million oz. silver in 4.2 million tonnes grading 7.69 grams gold and 10 grams silver at a cutoff grade of 2 grams gold per tonne. Almost 18,000 metres of drilling were completed during the first half of the year.

Using the same cutoff grade of 2 grams, Brancote has added 797,600 oz. gold and 1.5 million oz. silver to the measured and indicated categories, which now total 12.9 million tonnes grading 7.67 grams gold and 13.6 grams silver; this is equivalent to 3.2 million oz. gold and 5.6 million oz. silver. However, the project’s total resource has diminished 5% from the previous estimate, owing to a fall in grade to 7.16 grams gold from a previous 8 grams, based on a 2-gram cutoff. Total resources now stand at 15.6 million tonnes grading 7.16 grams gold and 12.8 grams silver, or 3.6 million oz. gold and 6.4 million oz. silver. Three-quarters of this resource averages 10.67 grams and 18.2 grams silver.

Prefeasibility

By lowering the cutoff to 1 gram gold, the total resource rises to 3.8 million oz. gold and 6.9 million oz. silver in 19.3 million tonnes grading 6.06 grams gold and 11.1 grams silver. Engineering consultant Pincock, Allen & Holt (PAH) of Denver, Colo., produced the updated resource estimates and is completing a prefeasibility study, due at the end of October. Certain areas of the resource require further delineation before a full feasibility study can be undertaken. This will be addressed in a follow-up program, to begin in mid-November.

The areas of concern include the southernmost part of the Julia vein, where existing holes are now interpreted to have stopped short of the high-grade core zone, and in the vicinity of a 73-metre intercept averaging 15.2 grams gold where a 120-metre gap has only minimal drill data. There were also areas of the Galadriel vein that were not drilled, owing to the severity of the terrain.

Open pit

Conceptual development plans envision an open-pit operation utilizing conventional carbon-in-leach (CIL) processing. Initial metallurgical tests on drill core from the Galadriel and Galadriel Sur yielded gold recoveries of 92-94% from the vein material. Silver recoveries ranged from 68% to 78%. Recoveries from mineralized wallrock were lower than those from the vein material, ranging from 60% to 67% for gold and 34% to 47% for silver. Using a blend of 90% vein material and 10% wallrock, recoveries were 92% for gold and 70% for silver. Brancote says further metallurgical tests on drill samples from the Football Field zone are comparable to the initial work.

Brancote’s own in-house studies show robust numbers for the Esquel project. The junior estimates production cash costs, including royalties, will be below US$100 per oz, with capital costs expected to come in under US$100 million.

Field exploration this past season has focused on areas north and south of Galadriel-Julia vein. At the Elena Centro zone, a second pass of mapping and sampling has identified a closely spaced swarm of narrow veins up to 1.9 metres wide and carrying grades of up to 40 grams gold. A fence of reverse-circulation (RC) drill holes will test this zone during the next stage of exploration drilling.

Some 7,000 metres of RC drilling are planned for the upcoming field season. Most of this will be directed at upgrading the existing resources at La Joya del Sol and Huemules zones. The neighbouring La Joya del Sol property was picked up in 1998 from Sunshine Mining & Refining (ssc-n). A year earlier, Sunshine had completed shallow drilling on four of 16 known veins, resulting in a preliminary resource of 1.1 million tonnes grading 5.8 grams gold and 39.5 grams silver, equal to 209,000 oz. gold and 1.4 million oz. silver. The original discovery at La Joya del Sol is just 3 km north of the Esquel project.

The Huemules concessions cover a former gold mine in the Cordon de Rivadavia range, some 25 km northwest of Esquel.

Brancote trades on the London Stock Exchange at 1.25 in a 52-week range of 2.35-111. On the closing of the Packer deal, Brancote will have 79.7 million shares outstanding.