Barrick strikes Peruvian gold

Barrick Gold (ABX-T) says it will quadruple exploration and development spending at the Alto Chicama gold property in north-central Peru to $20 million during 2002, after finding a “significant gold discovery” that could contain up to 3.5 million oz. of the yellow metal.

An in-house estimate pegs the discovery’s inferred resource at 61 million tons grading 0.057 ounces per ton, or 3.5 million oz. of contained gold. The estimate is based on 45 holes, spaced an average of 200 metres apart, some drilled to a depth of 100 metres. A drill hole radius of 50 metres was used for the resource calculation. The estimate also employed a cut off grade of 0.0102 oz. per ton gold (0.35 gram per tonne). Assay results are pending for 10 other holes.

The discovery’s disseminated mineralization is hosted by volcanic and sedimentary breccias and tuffs. The high-sulphidation deposit is similar to that at Barrick’s Pierina mine, and remains open to the north and south, and at depth.

“While a lot of work still needs to be done, results so far indicate that we have a sizeable discovery on our hands,” said Randall Oliphant, Barrick’s president and CEO.

In all, the area has been tested by 60 holes. Deeper holes have cut higher-grade sulphide mineralization below an oxide cap.

During the rest of 2002, Barrick is looking at running 12 drill rigs at Alto Chicama. An infill drilling program will aim at bringing the discovery into the reserve category. Step-out drilling will focus on expanding the resource.

Alex Davidson, Barrick’s senior vice-president of exploration sees, “great potential not only to expand the resource but also to make further discoveries on the 1,200-sq.-km land position we have in the area.”

Also planned for the balance of the year at Alto Chicama is metallurgical test work and mine and process planning and permitting.

Barrick won the right to earn a 100% interest in Alto Chicama via a tender by the Peruvian State mining company, Centromin, in early 2001. Barrick can acquire its stake by spending $6 million over three years and preparing a feasibility study. If it elects to go ahead with Alto Chicama’s development, Barrick must pay Centromin a $2-million royalty advance, which will be credited against Centromin’s 2.51% net smelter royalty.

Alto Chicama is situated about 175 km away from Barrick’s Pierina property. Pierina’s life-of-mine annual production rate is 500,000 oz. with average total cash costs of US$90 per oz.

In 2001, the mine churned out a record 911,000 oz. at an all-time low of US$40 apiece. Production levels are expected to slip next year as processed ore and reserve grades decline. Production for this year is expected to hit 820,000 oz. at US$77 per oz.

The proximity of Alto Chicama to Pierina should add life to the latter and help to reduce cost by sharing infrastructure.

The news from Alto Chicama sent investors scurrying to Barrick’s issue on the Toronto Stock Exchange on Tuesday. By midday, the company’s stock was 77 higher at $29.63 on a trading volume of more than 4.8 million shares.