Linear puts the pieces together at Campamento

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Tapilula, Mexico — In a market starved for a discovery in early 2005, Linear Gold (LRR-T, LGCFF-O) raised $25 million on the strength of drill results from a new, grassroots, high-grade, gold-silver find in the southern Mexican state of Chiapas.

While drilling a series of anomalous soil targets on the wholly owned Ixhuatan property, Linear intercepted 30 metres grading 11.5 grams gold and 22.6 grams silver per tonne in the ninth hole of the reconnaissance program and the first hole on the Campamento target. When the results of the discovery hole were announced, in June 2004, Linear had been trading below $2.00. By November of that year, Linear had shot up to almost $12.00, after intersecting an average grade of 12 grams gold and 63.7 grams silver over the entire 100-metre length of hole 26, one of 17 sunk in the Campamento target.

A vertically drilled hole, straight into the guts of the system where a “crude pipe-shaped body” is defined, hole 26 has turned out to be the highest-grade hole in the discovery to date. Owing to the depth limitations of the small portable drill rigs being used at the time, hole 26 bottomed in mineralization grading 8.5 grams gold and 78.3 grams silver across the last 2.5 metres. It was later twinned by hole 67, which intersected an average 6.8 grams gold and 64 grams silver down to 194 metres depth, bottoming at 283 metres below surface in a second zone that assayed 3.8 grams gold and 4 grams silver across the last 5 metres.

When drilling first began, Linear was using vertical holes to test what it believed was a sub-horizontal mineralized zone, but the drilling has since evolved to primarily inclined holes into what is now considered to be a structurally controlled, sub-vertical series of mineralized zones of an epithermal nature.

Angled at minus 57, perpendicular to the strike of the zone, hole 71 was designed to test the full width of the high-grade portion of the deposit. It intercepted 194 metres core length (or 107 metres estimated true width) averaging 3.6 grams gold per tonne and 12 grams silver, including an upper 36 metres grading 7.6 grams gold and 20.1 grams silver (at surface), and a bottom 46-metre section averaging 5.3 grams gold and 8 grams silver.

Faced with some steep, challenging terrain in the discovery area, Linear has spent the past year and a half drilling off the new discovery, while seeking to gain a better handle on the controls of the high-grade mineralization. Overall, that mineralization is encapsulated by lower-grade gold mineralization in the 1- to 2-gram range. More recently, data compilation, survey of drill-hole collars for both location and elevation, and re-logging of core and metallurgical work on drill-core samples has been carried out in detail.

Complex body

Results show a highly complex, low-sulphidation mineralized system hosted in tuffaceous andesite flows and breccias, and sandstone units of late Tertiary age. An intermediate porphyritic intrusive body comes right up through the centre of the system.

“It’s a complex-shaped body (porphyritic intrusion) that is not really simple to model in three-dimensional space, but it seems to be intimately tied to the mineralization,” says David Rowe, project geologist. “It’s not always the body that is mineralized, but we often see strong mineralization along the margins of that body. It’s sometimes strongly mineralized and sometimes it’s completely out of the mineralization.”

Higher-grade gold mineralization is locally associated with a stockwork of fine (1-2 mm) clay-pyrite veinlets and disseminations. Near-surface oxidation extends up to 30 metres in thickness. Porphyry-style propylitic alteration (chlorite and epidote) is observed in the system and also elements of an earlier potassic alteration, including secondary biotite.

The mineralized zone is in a highly fractured fault zone striking in a northeast-southwest direction and dipping sub-vertically.

“It’s very rare to see mineralization that is not pretty strongly fractured,” Rowe says.

The highest-grade gold mineralization is associated with a strong calcite-clay-quartz flooding and intense fracturing.

“Any time you see calcite veining in this system it has significant grade,” Rowe explains. “At times, you can find visible gold in the calcite veins. It’s definitely a strong carbonate alteration of the system.”

The Campamento zone is defined over a strike length approaching 390 metres and some of the deeper holes are hitting significant mineralization in the 1- to 2-gram range as deep as 400 to 450 metres.

“There is clearly a strong structural element that is controlling this system, as well as very strong lateral controls,” Rowe says. “Feeder structures are coming up and hitting flatter-lying permeable horizons that are stratigraphically controlled, and possibly structurally controlled to some degree. We see strong feeders and then we see strong lateral controls to the high-grade mineralization in the system.”

Using long angle holes to define the system, stepout drilling on the southern half of the deposit has yielded the following results:

* 150 metres core length (75 metres estimated true width) of 1 gram gold per tonne and 4.3 grams silver in hole 72 — a 50-metre stepout southwest of the high-grade centre;

* 152 metres (90 metres true width) of 1.5 grams gold and 4.7 grams silver in hole 69, which represents a 110-metre stepout;

* 188 metres of core (80 metres true width) grading 1 gram gold and 2.7 grams silver in hole 81, a 125-metre stepout;

* 112 metres (63 metres true width) of 1 gram gold and 6.5 grams silver in hole 74, 140 metres southwest of the high-grade core; and

* 10 metres of 1 gram gold and 5.3 grams silver in hole 75, the southernmost hole, some 265 metres along strike southwest of the core.

Stepping out on the northern half of the deposit, hole 76 intersected 164 metres of 1.3 grams gold and 6 grams silver, including a 42-metre section grading 3.1 grams gold and 13.3 grams silver — 60 metres northeast of the high-grade centre. Collared a further 138 metres to the northeast, hole 77 intercepted 30 metres of 1.1 grams gold and 1.4 grams silver on the northernmost hole to date.

Campamento is characterized by a strong gold-in-soil anomaly with values as high as 1.49 grams over an area 500 metres long and up to 250 metres wide, which is part of a much larger, irregular-shaped, 100+ plus ppb gold anomaly that extends for 1,400 metres in length.

Drilling has also isolated a second, high-grade satellite body to Campamento. Discovery hole no. 9 was drilled right through the centre of this body. Hole 78B was also collared in this zone, intersecting an upper 28 metres of 17.9 grams gold and 25.7 grams silver from 6 to 34 metres down-hole, followed by 210 metres in the main zone grading 1.3 grams gold and 3.4 grams silver between 244 and 454 metres depth.

The mineralization

Detailed petrographic studies on a suite of 29 samples from the Campamento zone show a package of variably altered and mineralized, calc-alkaline or weakly alkaline, volcanic andesitic flow rocks, pyroclastic flow rocks and tuffaceous rocks of indeterminate depositional origin, related hypabyssal intrusive rocks, and epiclastic volcanic sedimentary rocks. All of the rocks in the suite carry a disseminated sulphide phase assemblage dominated by pyrite and all have undergone hydrothermal alteration.

Gold mineralization occurs as native gold, electrum and a gold-silver-iron-sulphur alloy in carbonate-dominated veinlets and wall rock disseminations. The gold is fine-grained, generally less than 50 microns in diameter, and occurs freely or along the edge of other sulphide phases, and less frequently as tiny inclusions in sulphides. The primary silver-bearing minerals include silver telluride phases tentatively identified as cervelleite and benleonardite, plus tetrahedrite group minerals, argentite and
polybasite. Sphalerite, chalcopyrite and galena, generally on the order of trace to 0.1%, occur as sparse disseminations in association with pyrite.

With over 90 holes and counting, Linear continues to chase sniffs of mineralization on the northeast extension, as well as at depth. Linear has hired Micon International to prepare a resource estimate, which is due by mid-year.

Haywood Securities analyst Kerry Smith is crediting a 1-million-oz. discovery at Campamento in his 12-month target of $9.00 for Linear, which he continues to rate as a “speculative sector outperform.” Linear is currently trading around $7.00 in a 52-week range of $3.15 to $8.95.

Ixhuatan

The Ixhuatan project covers 980 sq. km immediately southwest of the historic producing Santa Fe mine in the northwestern part of Chiapas state. The project, easily reached by dirt road, 5 km east of Rayon, is 150 km south of Villahermosa, the state capital of Tabasco, a 2-hour drive along paved highway.

Access within the property is difficult due to the ruggedness of the terrain, which reaches a maximum elevation of 2,470 metres, but averages 1,400 to 1,600 metres above sea level. Dense tropical vegetation, covered by thick soils, and the rugged topography with deeply incised rivers, makes travel difficult and outcrops hard to find, except along the streambeds.

Property title is in the form of an exploration licence. Surface rights are negotiated with local landowners or nearby settlements. Linear acquired the Ixhuatan property in October 2003 from Swiss mining house Xstrata (XSRAF-O, XTA-L) as part of a larger portfolio of early stage exploration assets in southern Mexico and the Dominican Republic, formerly held by Australia’s MIM Holdings. Xstrata bought out MIM Holdings in 2003. MIM’s exploration activities, which spanned Australia and much of Central and South America, were hit hard by office closures and staff reductions following a decision by Xstrata to divest its exploration portfolio and focus solely on near-mine exploration.

Linear paid Xstrata US$250,000 and issued 1 million shares at a deemed price of 76 apiece, along with warrants to buy an additional 500,000 shares priced at $1.00 each until October 2005. Upon completing the purchase of MIM’s Central American portfolio from Xstrata, Linear raised $6 million in an equity financing priced at $2.00 per unit, with Haywood Securities acting as lead agent.

MIM was active in Chiapas for several years. It was drawn to the Ixhuatan area by the presence of the historic producing Santa Fe gold-silver-copper mine. MIM deduced that the Santa Fe mineralization was formed in a high-sulphidation environment and had the earmarks of a porphyry system at depth.

Some broad regional stream-sediment sampling in 2000 highlighted some strong anomalous gold sites on the Ixhuatan concession area and MIM quickly homed in on the central part of the property. Anomalous sites were followed up with further sampling along the main drainages of the catchments. Exploration work by MIM in 2001-02 included detailed BLEG (bulk leach extractable gold) stream-sediment geochemistry, geological mapping and soil geochemical surveys, which included auger sampling along ridges and trails, plus detailed grid sampling.

MIM identified seven separate anomalous target areas of 100+ ppb gold, some associated with more restrictive anomalous copper and molybdenum values. Each of the seven targets — known as San Isidro, Central, Northern, Western, Cerro La Mina, Buenos Aires and Campamento — showed strong clay alteration. Chip sampling returned values in the range of 0.1 to 9.4 grams gold and 0.1 to 1.1% copper. A helicopter-borne magnetic survey flown in 2002 highlighted a large positive magnetic feature extending more than 15 km from the Santa Fe mine area into and across the Ixhuatan property. The magnetic feature potentially represents a buried porphyry intrusion complex, which is believed to be the driving mechanism for the widespread mineralization. A reinterpretation of the magnetic data was recently completed.

“It’s pretty rare to sample anything here that is below detection,” Rowe says. “There is a lot of gold in this system and background is probably more in the twenty to thirty ppb range, which is really unusual. The focus is to stay within the igneous complex. We do get a little bit of mineralization bleeding out, but the primary potential is along trend within the system, both up towards Santa Fe, and as we start to move into these newer areas.”

Linear has increased its holdings in the immediate area to cover the entire southern extension of the igneous complex.

The Ixhuatan-Santa Fe region is underlain by an older, shallow-dipping package of volcanic and sedimentary rocks crosscut by a very young igneous complex that has a pronounced northeast-striking orientation. Geological mapping by MIM in the south-central part of the property identified relatively flat-lying stratigraphy composed of andesitic porphyries, lahars, tuffs and breccias of Pliocene age overlying a sequence of Eocene-Oligocene aged carbonates, siltstones and sandstones.

San Isidro anomaly

In January 2004, Linear began drilling at Ixhuatan, with an initial 5-hole program to test the 2.3-km-long San Isidro anomaly on the southeast part of the property. The anomalous area is defined by soils carrying values up to 975 ppb gold, 31 ppm silver and 75 ppm molybdenum. Rock-chip sampling by MIM across a hydrothermal breccia gave values of 1.67 grams gold and 0.69% copper. The holes encountered broad zones of lower-grade disseminated gold and copper mineralization in hydrothermal breccias and andesitic volcanic breccias. Results included 68 metres of 0.5 gram gold and 0.15% copper, plus 1.9 grams silver.

Linear expanded the drilling by putting a single hole into each of the Buenos Aires, Cerro La Mina, Central, Campamento and Northern zones. The first eight holes all intersected mineralized volcanic flows and tuffs, cut by zones of hydrothermal breccia. The Buenos Aires target returned 66 metres of 0.7 gram gold and 4.2 grams silver in hole 5. Cerro La Mina yielded 14 metres of 1.3 grams gold and 6.5 grams silver in hole no. 7 and the Central target was tested by hole no. 8, which intercepted 6 metres of 1.1 grams gold and 0.8 gram silver. The discovery of Campamento was made in the ninth hole of the program.

While waiting for the results of hole no. 9, Linear had, in the meantime, moved the rig onto the Northern target, which took two weeks to do by hand because of the tough terrain. Situated 2 km north-northeast of Campamento, the Northern anomaly, which has since been renamed Caracol, was partially tested by hole 10 to a depth of only 21 metres, due to poor drilling conditions. The hole yielded anomalous copper of 0.15% over 6 metres near the top, while the last 1 metre gave 0.9 gram gold.

Caracol revisited

Linear is now just getting back to revisiting the Caracol target and investigating an intrusive-skarn contact zone, where a 10-metre-long surface trench yielded an average grade of 1.9 grams gold, 28.5 grams silver and 1.28% copper. A rig sitting atop Caracol has completed seven holes to date. Recent results include 19.4 metres of 1.9 grams gold per tonne, 28.6 grams silver and 1.1% copper in hole no. 6, including a 7.9-metre interval of 3.8 grams gold, 48.4 grams silver and 2% copper.

The skarn mineralization occurs in altered calcareous sedimentary rocks near the contact of a porphyritic diorite-granodiorite, which, in turn, hosts porphyry stockwork mineralization.

While conducting follow-up work in the southeast part of the main Caracol grid, in the vicinity of a 3.6-gram soil hit, rock-chip sampling has yielded up to 46.1 grams gold, 119 grams silver and 4% copper in a surface showing 325 metres southeast of the discovery holes. This new showing is being tested with at least one drill hole.

Extensive regional exploration is under way.

“Campamento definitely became the focus for a year and a half, and we’re now rapidly ramping back up, changing tracks if
you will,” Rowe says.