Adrian drilling boosts Petaquilla project

In recent months, senior mining companies have offered more than $700 million to acquire four large copper and copper-gold deposits in various parts of the world. Mining analysts predict that another potential takeover target is a large land package being explored by Adrian Resources (TSE) 120 km west of this Central American city.

Now at the prefeasibility stage, the Petaquilla project ranks among the five largest undeveloped copper-gold porphyry deposits in the world. The property’s two main deposits, Petaquilla and Botija, contain a mineral resource now estimated to exceed one billion tons grading 0.6% copper and 0.005 oz. gold per ton (at the 0.3% copper cutoff grade).

If a 0.6% cutoff is used, the combined resource totals about 460 million tons grading 0.8% copper and 0.01 oz. gold. Milling at this cutoff, at a rate of 66,000 tons per day, would produce about 350 million lb. copper and 140,000 oz. gold on an average annual basis.

In addition to work on these known deposits, Adrian has received encouraging results by evaluating other nearby targets. Two recent discoveries, Brazo and Palmilla, are expanding the mineral resource of the land package, while a new gold discovery is enhancing its overall economic potential.

“We are dealing with a largely unexplored mineral district prospective for both porphyry copper-gold deposits and epithermal gold deposits,” said David Mallo, Adrian’s vice-president of exploration, during a site visit by The Northern Miner. “We have so many targets, it is hard to prioritize.” Exploration is carried out from a central exploration camp and several satellite camps nestled in moderately rolling terrain and blanketed by lush tropical rain forests. Transplanted into this setting are Canadian geologists and employees of Canadian helicopter and drilling companies, all of whom share the bond of having previously worked together at the Eskay Creek project in northwestern British Columbia.

“We are also using Panamanian geologists, pilots and drill helpers,” Mallo said. “This is a consistent theme throughout our programs.”

Adrian holds rights to 52% of the Petaquilla project, which consists of a direct 32% interest though its option with Metall Mining of Canada (TSE) and an indirect 20% interest through its ownership of Geo-Recursos. The remaining 48% interest is held by Metall.

Adrian in turn is owned about 20% by MinAmerica, a Panamanian company which has 16 other mineral projects in the country, most of which are joint-ventured to North American mining companies.

MinAmerica President Richard Fifer, a geologist and director of Adrian, was instrumental in reviving the Petaquilla project in the late 1980s, after a successful lobbying effort was made for the country’s mining code to be changed and oriented toward private initiative.

The original discovery was made by in 1968 by a geological team working for the United Nations Development Program. In 1971, a Japanese consortium was awarded the concession through a tender process. Subsequent work led to a positive feasibility study for the Petaquilla and Botija deposits, but the Japanese abandoned the project in 1980 because of political difficulties with the Panamanian government of the day.

The political climate has changed in recent years, however, and all leading candidates in the upcoming elections (early May) are reported to favor incentives to mineral development. New legislation is expected to be brought down that will eliminate a 2% royalty on base metals, as well as make it easier to recoup capital costs.

The improved investment climate has triggered an exploration boom in the country. Cyprus Amax has acquired a large land package near Adrian; others active in the country include MK Gold, Metall Mining, Greenstone Resources and such Vancouver-listed juniors as Arlo Resources, Silvestone Resources, Madison Enterprises, Layfield Resources and Western Keltic Mines. Several groups are also competing through a bidding process to acquire the large, undeveloped Cerro Colorado copper deposit in the interior of the country. Adrian’s Petaquilla project has more favorable logistics than Cerro Colorado in that it is a mere 15 km from the Caribbean coast.

“Having a local partner (MinAmerica) was instrumental in Adrian acquiring one of the largest land positions in Panama,” Mallo said, adding that the company now holds interests in six contiguous properties totaling 1,361 sq. km. The partnership has mutual benefits, according to Fifer. “We like the dynamics the Vancouver Stock Exchange brings,” he said. “We have had more metres drilled in the last two years than in the last 20 years.” Almost all previous drilling was focused on the Petaquilla and Botija deposits, which are fewer than 4 km apart. Both deposits are hosted by quartz-feldspar porphyry stocks and dykes and porphyritic marginal phases of the large Petaquilla batholith, all of which intrude andesitic volcanics. Potassic, phyllic and quartz-chlorite alterations are the most important hosts of porphyry-style mineralization. Sulphide mineralization consists mostly of chalcopyrite and pyrite, with local hypogene bornite and supergene chalcocite.

Adrian’s drilling was aimed at expanding tonnage, as well as determining the gold content of the deposit, as previous operators did not analyze for gold. Recent work is also aimed at defining gold-enriched areas with low stripping ratios, which would serve as “starter pits” for a mining operation. Both deposits display mineral zonation which defines specific gold-enhanced portions often associated with higher-grade copper sections. Several areas of gold-enriched porphyry-copper mineralization have been identified, including the Southwest Gold zone within the Petaquilla deposit and the west-central portion of Botija. The latter is considered an excellent starter-pit candidate for initial Botija open-pit production, as evidenced by Drill Hole 92-01, which intersected 968.2 ft. of 0.71% copper, 0.19 grams gold and 1.8 grams silver per tonne. This includes a 177-ft interval grading 1.09% copper, 0.34 grams gold and 2.6 grams silver.

In early 1993, Adrian discovered the Botija-Abajo area, situated 2.4 km southeast of the Botija deposit. A resource of 50 million tons is projected for the drilled area, which is still open for expansion. The overall weighted average of the drill holes is 0.45% copper and 0.51 grams gold per tonne. Some drilling was carried out last year to test the Vega deposit, 2.4 km southeast of the Petaquilla deposit. A potential resource of 40 million tons was identified, with grades averaging 0.74% copper and 0.08 grams gold per tonne.

This year’s program resulted in a resource being outlined at the Brazo discovery, on the Petaquilla property. Drill results to date point to a mineralized body measuring about 400 by 400 metres and an estimated geological resource of 94 million tons grading 0.57% copper and 0.12 grams gold per ton, at a 0.3% copper cutoff. The deposit is open to expansion in all directions and will be the focus of further drilling.

Recent drilling at the Benecillo concession, where Madison Enterprises (VSE) holds an option to earn a half interest, outlined a geological resource of 17.7 million tons grading 0.99 grams (0.029 oz.) gold per ton plus 0.31% copper. The Palmilla deposit is also open to expansion.

An important development this year was the discovery of the Molejon zone, an epithermal gold target 4 km south of the Botija deposit on the main Petaquilla concession.

The first hole, drilled to test a large gold-in-soil geochemical anomaly, intersected 147.7 ft. of 0.01% copper, 3.82 grams gold and 7.3 grams silver per ton from 0-147.7 ft.

“Soil geochemistry is an important exploration tool for us,” Mallo said. “Defining gold geochemical anomalies is one thing we are doing differently than the Japanese.”

Exploration will continue on the property, although plans are to put the Petaquilla project up for international tender this year. A number of senior mining companies have visited the property and are watching new developments closely.

“This is such a large project, we expect it will be acquired by a consortium of mining companies, rather than just one group,” Mallo said. The Kilborn Engineering pre-feasibility study, which is expected shortly, will update reserves as well as provide information on mining and conventional milling rates. Also included will be stripping ratio estimates and the results of metallurgical studies by Lakefield Research. Previous operators did carry out some preliminary metallurgical tests, which revealed a moderately hard ore with a work index of about 12, copper recoveries between 85-90%, a moderately high copper concentrate averaging 27% copper, and a clean concentrate, as well as economically recoverable contents of gold, silver and molybdenum.

The results of Kilborn’s study will be provided to Teck (TSE), which can elect to acquire half of Adrian’s 32% direct interest by completing a final feasibility study and funding 32% of the capital costs to bring the project into production. This agreement applies only to the Petaquilla concession.