Benefitting from a $32-million treasury,
The company recently released results from a round of drilling completed near the end of last year on its wholly owned Marlin project in western Guatemala. The latest results confirm that gold-silver mineralization in the 1-to-2-gram-per-tonne range continues along strike for an additional 150 metres southwest of the Main zone. Although the grade appears to be dropping on the west-southwest extension, the mineralized intercepts are longer, indicating that the mineralized horizon is thickening under younger volcanic cover.
Highlights of the 12 holes reported include:
– 102 metres of 1.23 grams gold and 16.6 grams silver in hole 55;
– 99 metres of 1.01 grams gold and 12.6 grams silver in hole 56;
– 88 metres of 1.1 grams gold and 4.6 grams silver in hole 58; and
– 80 metres of 1.57 grams gold and 28.8 grams silver in hole 64.
The drill intercepts are estimated to have a 70% true thickness.
Results are pending for the final six holes, including the most southwesterly one, as well as three stepout holes on the northeastern limits of the Main zone. Since mid-2000, Francisco has completed four rounds of drilling at the Marlin property, totalling 72 core holes (including two twin holes) in more than 7,600 metres. The bulk of the drilling has targeted the Main zone, one of three principal areas of gold-silver mineralization.
The Main zone is the largest and most completely explored area of mineralization, and has been tested with 63 holes along with extensive surface trenching and geophysical surveys. The Main zone consists of a gently west-plunging, near-surface system of mineralization that is associated with multiple south-dipping thrust faults and a sub-vertical feeder fault partially bounding it to the south.
Based on the latest drill results, the mineralized body is 650 metres long and up to 225 metres wide, with an average thickness of 65 metres. Francisco Gold President Randy Reifel says the zone averages a grade of 2-2.5 grams gold-equivalent. The mineralized body continues to be open, both to the west-southwest and to the east-northeast, as well as at depth along a high-grade feeder zone. Reifel believes the Main zone may be comparable in size to El Sauzal in Mexico. The question, he says, is, will it be a 1-million or 2-million-oz. deposit?
Last fall, a detailed induced polarization (IP) and resistivity geophysical survey was completed over a 1,100-by-1,000-metre grid centred on the Main zone. The results defined a broad east-northeast striking resistivity anomaly, open at both ends. There is a direct correlation between the high resistivity and the high-grade portion of the Main zone. Reifel says the IP shows the strength of the silicification and the way the body is dipping.
To the west-southwest, the IP anomaly gets deeper beneath argillic alteration and is offset by a northeast striking post mineral fault. The latest drilling has confirmed the IP results, intersecting the mineralization under 50 to 60 metres of younger cover. The host rocks appear to be gently displaced along strike and downdip by several northeast striking post mineral faults. The southwest displacement is confirmed by hole 61, which returned no significant values.
The IP anomaly extends for another 400 metres past hole 65 (results remain pending), the most southwesterly hole drilled to date. Francisco will continue to step out on the southwestern extension of the Main zone when drilling resumes later this month.
Reifel also intends to put a hole into Ajel, 1 km west and on strike with the Main zone. The high-resistivity anomaly at Ajel is comparable to that associated with the high-grade area of the Main zone.
The Marlin property lies 250 km northwest of Guatemala City in the Department of Huehuetenango and within the municipality of San Miguel. The property is accessible by a series of dirt roads, originating off the Pan American Highway, near the town of Huehuetenango, 30 km east of Marlin.
The project area lies at an elevation of 1,800-2,200 metres in a moderately populated area where vegetation is dominated by small shrub trees.
The Marlin project is part of a package of properties held by Montana Exploradora de Guatemala. It is situated south of a major structural trend in western Guatemala and in a geological province that contains mainly Tertiary volcanic rocks. Montana Exploradora was founded in the summer of 1996 and initially funded by Montana Gold, a private Vancouver-based exploration company with which Randy Reifel was affiliated.
Reifel and his private group of investors believed the largely unexplored Guatemalan district presented a ripe geological setting capable of hosting large epithermal-type gold and silver deposits. The Marlin project sits 20 km south of the regional east-west-striking Cuilco-Polochic fault and west along the projected strike of the Motagua fault, which represents another sub-parallel regional fault structure. The deep-seated Motagua and Cuilco-Polochic fault systems form the boundary between the North American and Caribbean plates.
Regional exploration has focused used on a young volcanic arc and the postulated western extension of the Motagua fault. After several years of extensive grassroots exploration, the Marlin prospect was discovered in December 1998 by two Guatemalan geologists, Alberto Galicia and Carlos Chiquin, who identified precious metal mineralization in a roadcut along the crest of a 1.5-km-long ridge.
Initial follow-up work identified gold-silver values in quartz veins, stockwork and zones of brecciation exposed in limited windows through the overlying post-mineral cover. A surface sampling and hand trenching program initiated in late 1999 confirmed the existence of widespread, near-surface, high-grade gold-silver mineralization. The area of interest extended eastward from the Los Cochis zone, past the Main zone to the Don Tello showing.
Due diligence
In a 150-by-150-metre core area of the so-called Main zone, two 140-metre-long hand trenches running east-west and two 160-metre-long north-south trenches returned an average grade of 11 grams gold and 110 grams silver per tonne. In 2000, after hiring Rescan Engineering to undertake a due-diligence review of the property, which included resampling the trenches, Francisco Gold acquired privately owned Montana Gold for an initial payment of 650,000 shares. A further payment of 1.4 million shares will be required should the company succeed in defining 1.5 million proven and probable ounces gold-equivalent.
Before drilling started in the summer of 2000, Francisco completed an extensive program of mechanized trenching in an expanded 400-by-250-metre area of the Main zone. Systematic sampling confirmed the previous grades. Additional trenches were also dug across portions of the Don Tello and Los Cochis corridors. Two 1.5-metre-deep hand-dug trenches along Los Cochis, 500 metres northwest of the Main zone, returned 24 metres of 4 grams gold and 14 grams silver. Several new hand trenches completed in the fall of 2001 have further extended the known strike length of the corridor to 900 metres. The new trenches range from 2 to 22 metres in width and assayed up to 9.5 grams gold-equivalent.
The last two holes of the most recent drill program tested the Los Cochis target. Assays are pending. Depending on the results of these two holes, which are reported to have cut “significant intervals” of mineralized breccia and quartz stockwork, Francisco intends to drill a fence of holes along the Los Cochis corridor.
The Marlin project lies in a regionally extensive belt of Tertiary and Quaternary volcanic rocks overlying highly deformed metamorphic basement rocks. Two major units are present at Marlin: a lower well-stratified sequence of coarse volcaniclastic and subordinate pyroclastic rocks, and a plagiocl
ase-hornblende porphyritic andesite, dubbed the Marlin complex, that overlies the volcaniclastics. Both the volcaniclastic sequence and the Marlin complex are cut by narrow andesite dykes in several parts of the project area.
Contrasting styles
The Main zone of mineralization, as described in a summary report prepared by Alain Charest, vice-president of exploration, and Peter Lewis, a geological consultant, shows several contrasting styles. In upper parts of the system, high gold and silver values occur in two settings: thick, quartz vein fragment-rich tectonic breccias forming moderately to shallowly south dipping tabular bodies; and stockwork vein systems in Marlin complex rocks lying between these breccia bodies.
In lower parts of the system, mineralization occurs in more steeply dipping stockwork zones in the volcaniclastic sequence. At both levels, a central core of strong silicification grades outward into a broad zone of argillic alteration. Oxidation typically extends 50 to 100 metres below surface. The latest drilling on the southwestern extension is hitting a transitional sulphide zone of mineralization. The highest precious metal values hit to date are said to occur along the volcaniclastic and andesite contact, particularly where the contact is stratigraphic or intrusive and cut by faults.
Selected higher-grade drill intercepts from the Main zone include:
– 24 metres of 12.92 grams gold and 257 grams silver in hole 3;
– 35 metres of 8.87 grams gold and 112.7 grams silver in hole 15;
– 79 metres of 3.81 grams gold and 113.6 grams silver in hole 17;
– 106.5 metres of 3.07 grams gold and 74.5 grams silver in hole 21;
– 61 metres of 6.03 grams gold and 93.5 grams silver in hole 23;
– 44 metres of 5.41 grams gold and 38.5 grams silver in hole 32; and
– 35 metres of 5.17 grams gold and 91.8 grams silver in hole 36.
The style and distribution of the mineralization appear to reflect the influence of several stages of faulting, prior to, during and following the mineralizing event.
Good recoveries
Metallurgical bottle-roll tests on core oxide samples indicate recoveries of better than 89% for gold and 75% for silver. Tests on the transitional sulphide material indicate 87% for gold and 70% for silver. “It’s quite clean,” says Reifel. “There is no arsenic, mercury or antimony.”
The Don Tello-Tomates corridor contains a sheeted vein system that outcrops 100-200 metres south of the Main zone. It has been traced with mapping, chip sampling and six drill holes for more than a kilometre strike length and a width of 5-25 metres.
Since early January, Francisco’s geologists have been in the field carrying out mapping, geochemical rock and stream-sediment sampling around the Marlin project. In December, a new gold prospect, Los Chocoyos, was found 7 km southeast of Marlin. The prospect is an epithermal, low-sulphidation mineralized system that covers an area of 200 by 600 metres. The area contains numerous quartz veins and stockwork hosted in strongly argilized volcanic rocks. Preliminary chip sampling has returned up to 3.5 grams gold, with a quarter of the samples exceeding 0.25 gram.
Also, regional reconnaissance has identified three other gold prospects within a 60-km radius of the Marlin property. At San Bartolo, 30 km southeast of Marlin, crews uncovered a 1.5-km-long quartz vein structure. Channel sampling across the zone, which ranges between 5 and 20 metres, yielded values of 1 gram gold and 173 grams silver.
The newly discovered Jesse prospect, 45 km south of Marlin, appears to be an epithermal, low-sulphidation target, with outcrop exposure covering 500 by 200 metres. Initial sampling has returned anomalous gold of between 0.2 and 1.1 grams.
Thirdly, a large zone of hydrothermal alteration covering 10 sq. km has been found west of Marlin. Widely spaced surface samples have yielded anomalous values up to 0.5 gram gold.
Follow-up drilling is due to start in mid- to late February, with another 20-30 holes planned. The focus will be on extending the resource of the Main zone to the southwest and further testing the Los Cochis corridor, pending results of the two recently completed holes.
El Sauzal
In 1997, Francisco took advantage of a frothy market and raised $29.5 million in a special warrant financing on the back of drill results from its El Sauzal project in Mexico’s Chihuahua state. The warrants were priced at $29.50 apiece.
With the subsequent fall in the price of gold, El Sauzal slipped off the radar screens of most, but Francisco has continued to advance the project and is in the process of finishing up a final feasibility study. By the middle of this year, Reifel expects El Sauzal will be ready to move forward to a production decision.
The final feasibility study of an open-pit, milling operation is due to be completed by AMEC Simons Mining & Metals in April at a cost of $1.5 million. El Sauzal is a high-sulphidation, epithermal gold deposit containing a proven and probable oxide reserve of more than 1.6 million oz. in 16.3 million tonnes grading 3.47 grams gold. The total resource, based on a 0.5-gram cutoff, stands at 51.4 million tonnes grading 2 grams gold, or 3.3 million oz.
The resource estimate was calculated by Mine Reserves Associates of Wheat Ridge, Colo., using 187 diamond drill holes totalling 27,250 metres and 1,560 surface channel samples that were mostly collected from areas of restricted drill access.
AMEC has agreed to capital and operating costs for a 6,000-tonne-per-day operation that will produce an average of 200,000 oz. gold per year over a mine life of at least 7.5 years. Reifel estimates it will cost US$100 million to develop the project, with cash costs coming in at about US$100 per oz.
Final bulk-sample metallurgical tests have exceeded preliminary recoveries. A composite of 30 samples taken from three bulk samples were tested from 75 to 300 mesh and returned an average gold recovery exceeding 95%. In addition, positive test results suggest El Sauzal’s milling operation could incorporate a dry filter tailings disposal method directly below the mill plant, which would alleviate a lot of the potential concerns arising from the constructing of conventional slurry tailings pond in this vertically challenging terrain.
The feasibility study is also looking at the costs of road access and powerline construction and at the possible savings of establishing a camp on-site. Francisco has signed five separate confidentiality agreements with major mining companies regarding the El Sauzal project. Several of the majors continue to conduct due-diligence reviews of the project and surrounding land position.
Francisco has 16.4 million shares outstanding, or 17 million fully diluted.
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