Sabina discovers new gold zone at Back River (May 24, 2010)

VANCOUVER — Llama Lake started 2010 as a low-priority exploration target for Sabina Gold & Silver (SBB-T) but has now become the prime focus of drilling after the company pulled high-grade gold intercepts from below the lake.

Sabina originally had only a few drill holes planned for Llama Lake as part of a 20,000-metre drill program this year at the Back River gold project in southwest Nunavut. The company has now shifted all three drill rigs at the project to the zone with plans to significantly increase drilling in the area, both below the lake and on shore.

The new zone sits 8 km northwest of the Goose Lake deposit, which already has a resource estimate, and 4 km northwest of the Echo Lake zone discovered late last year. The newly discovered mineralization at Llama Lake occurs within tightly folded sections of an iron formation that was defined by an airborne electromagnetic survey in 2005.

Under Llama Lake, hole 25 cut 53.6 metres averaging 2.3 grams gold per tonne starting 99 metres downhole. Hole 21, which hit the zone 40 metres below hole 25, returned 22.2 metres carrying 7.61 grams gold starting at 80 metres. Hole 27, cut 100 metres north of hole 21, intersected 11.1 metres averaging 9.21 grams gold starting at 154.9 metres and then a further 7.2 metres grading 68.62 grams gold uncut from 238.8 metres downhole. Assays are still pending for certain sections of the three holes and other drill holes in the area.

The company’s drilling at Llama Lake has established a strike length of about 250 metres and encountered mineralization to a depth of 160 metres, with both directions still open. Sabina reports that the geological model and mineralization style are very similar to the Goose Lake deposit.

The company had originally focused drilling for the year at Goose Lake to upgrade the resource and explore the possibility of open-pit mining in the area, but that has temporarily been put on hold. Goose Lake currently hosts a resource estimate of 1.6 million indicated tonnes grading 11.9 grams gold and 1 million inferred tonnes grading 9.2 grams gold. The deposit lies within a thick, folded iron formation with a shallow plunging gold hinge.

Combined with the George Lake deposits, the Back River project hosts a measured and indicated resource of 3.4 million tonnes grading 10.9 grams gold and 3.6 million inferred tonnes grading 10.2 grams gold.

The Back River project sits 520 km northeast of Yellowknife and consists of deposits or zones known as Goose Lake, George Lake, Boot Lake, Boulder Pond, Needle Lake, Del Lake and the Bath 1 claim. The land package includes 44 federal mineral leases and 37 federal mining claims covering roughly 742 sq. km.

The company has also temporarily suspended exploration at Echo Lake, but still plans to complete enough drilling to move towards a resource later this year.

Sabina acquired the Back River project in March 2009 from Dundee Precious Metals (DPM-T) for $7 million in cash, 17 million common shares and 10 million units exercisable after various criteria have been met.

The company also controls the Hackett River silver-zinc project, 50 km northwest of Back River. Hackett River hosts a combined open-pit and underground resource of 43.6 million indicated tonnes grading 4.15% zinc, 128.75 grams silver per tonne, 0.35% copper, 0.58% lead and 0.27 gram gold. The project host a further 16 million inferred tonnes grading 3.53% zinc, 110.6 grams silver, 0.24% copper, 0.46% lead and 0.25 gram gold.

A late 2009 preliminary economic assessment estimated Hackett River could produce $1.8 billion in free cash flow, carries a net present value of $975 million at a 5% discount, and could generate an internal rate of return of 25.9% by producing three payable concentrates over a 16-year mine life.

Sabina’s stock price was up 28¢, or 21%, on the news to close at $1.64, a new 52-week high. The company has 114 million shares outstanding.