Amarillo Gold posts first resource on Butia prospect in Brazil

Amarillo Gold (AGC-V) has received an initial resource estimate for its Butia prospect, part of the company’s advanced exploration stage Lavras do Sul project in the Brazilian state of Rio Grande do Sul.

At a 0.3 gram gold per tonne cutoff grade, Butia, about 360 km southwest of the city of Porto Alegre, has an indicated resource of 6.39 million tonnes grading 1.05 grams gold per tonne for contained gold of 215,000 ounces, and an inferred resource of 12.88 million tonnes grading 0.74 gram gold per tonne for 308,000 oz. gold.

The estimate was based on resource modeling of 11,056 metres of drilling in 45 holes, which Amarillo completed between 1996 and March 2010 at a spacing of 50 metres, as well as on 891.5 metres of historic drilling done by Rio Tinto (RTP-N, RIO-L).

The resource estimate sent Amarillo Gold’s share price up 2¢ or 2.8% to close at 74¢ apiece. (Over the last year the junior has traded in a range of 50¢-$1.06 per share.)

“The current drill spacing is sufficient to delineate the episyenite core of the prospect but is not sufficient to model the high grade structures that extend out into the perthitic granite from the central core,” the company noted in a press release announcing the resource estimate. “Infill drilling will enable the higher grade structures to be modelled and then included in the resource estimate.”

Gold mineralization at Butia forms an “L” shape at surface, the company says, and is controlled by an east-west structure about 250 metres long and a north-south structure about 250 metres long. Mineralization outcrops at surface and “attains its greatest extent at a depth of 70 metres to 90 metres,” Amarillo states. The zone of gold mineralization appears to be associated with intense alkali alteration that forms an episyenite microbreccia.

Since the resource estimate was completed, the company has drilled another 10 holes totaling 2,448 metres in the Butia area and says it plans to bring the drill back to Butia to target the high-grade zones after it drills some of its other prospects, including Cerrito, about 5 km to the east of Butia.

The Lavras do Sul project covers about 10,000 hectares and according to government records, there are 17 historical diggings on the property.

“In addition to the areas of known diggings, the intrusive over which the land package extends appears highly prospective, with much of it laying under cover or deep weathered soils and therefore under-explored,” the company stated.

In addition to its Lavras do Sul project, Amarillo Gold’s other principal project in Brazil is the Mara Rosa project in the state of Goias. Mara Rosa’s Posse deposit has an indicated resource of 11.9 million tonnes grading 1.62 grams gold per tonne for 623,000 ounces of contained gold and an inferred resource of 10.1 million tonnes grading 1.38 grams gold for 451,000 ounces of gold at a 0.5 gram gold per tonne cutoff grade.

Mara Rosa is about 35 km northeast of Yamana Gold‘s (YRI-T, AUY-N, YAU-L) Chapada open-pit copper-gold operation and about 60 km northeast of Yamana’s Pilar gold project. The project is also about 105 km northwest of Anglo American‘s (AAUK-Q, AAL-L) nickel laterite project.

Grid power to the site was established during Mara Rosa’s previous open pit mining operation in the 1990s, and the Serra da Mesa hydro-electric dam is just 35 km to the east.