Desert drilling returns strong iron grades for Anaconda

VANCOUVER — Promising drill results and an available drill rig prompted Anaconda Mining (ANX-T, ANXGF-O) to tack on an extra 4,200 metres to the drill program at its San Gabriel project in Chile, and now the company has even more high-grade iron results in hand.

San Gabriel is a 17-sq.-km property with four magnetic anomalies. To date, work has focused on two zones: San Gabriel and Esperanza, a smaller target to the southeast. After a 13,300-metre drill program returned encouraging results, Anaconda decided to punch two more holes into San Gabriel as well as 26 short holes into Esperanza.

The two added holes at San Gabriel both returned strong results. Hole 35 cut 46.9% iron over 102 metres from 160 metres down-hole, including 28 metres grading 69.6% iron. And hole 33 intersected 108 metres grading 39% iron from 200 metres down-hole, including 50.9% over 16 metres.

The extra San Gabriel zones were targeted to test the extension of a high-grade feeder structure encountered in hole 22, which hit 104 metres of 45.2% iron, and hole 27, which returned 176 metres grading 37.3%, including 32 metres of 60.9% iron. Another strong result from the high-grade core came from hole 5, which returned 20 metres averaging 62.2% iron, including 16 metres of 68.3% iron. Similarly, hole 4 cut 24 metres grading 52.4% iron, including 8 metres of 65.6% iron.

The mineralization in holes 33 and 35 appears to be a continuation of the feeder structure, which has now been traced over a strike length of 250 metres and remains open to the east and at depth.

Other parts of the San Gabriel zone produced lower-grade, longer intercepts. Hole 25, for example, cut 72 metres grading 23% iron starting just 16 metres below surface. Hole 16 and 17 produced lengthy hits: 326 metres grading 28% iron and 308 metres of 24% iron. As a whole, the northwest-trending, sub-horizontal mineralized lens that is the San Gabriel zone extends roughly 800 metres along strike, still open to the northeast, southeast and at depth.

Over at Esperanza, the additional drilling was designed to delineate a near-surface zone of high-grade mineralization previously encountered in hole 1, which cut 204 metres grading 22.7% iron, including 52 metres of 42.2% iron. The effort was successful: hole 7 returned 30 metres averaging 65% iron within a broader 98-metre interval of 35.5% iron, hole 15 cut 16 metres grading 62.4% iron within a 96-metre interval of 41.6% iron, and hole 14 intersected 26 metres grading 56.2% iron within 100 metres grading 33.9% iron. Mineralization in all three holes started essentially at surface.

Preliminary metallurgical test work has shown that San Gabriel is home to high-quality magnetite-bearing material, which can likely be recovered by magnetic separation. Analyses returned very low levels of impurities, specifically silica, phosphorus, sulphur and copper in magnetic concentrates.

The prospect is an iron-magnetite skarn associated with dioritic intrusives of Jurassic to lower Cretaceous age, which intruded andesitic volcanic sequences.

Rio Tinto (RTP-N, RIO-L) drilled 11 holes into San Gabriel 10 years ago but decided the mineralization it found did not meet its criteria and returned it to the vendors. Anaconda picked up the project in September and may earn a 100% interest in the site for US$2.4 million over four years.

Of key importance is the project’s location, in the Atacama desert in Chile’s mining-friendly Region II, 70 km northeast of the port city of Chanaral. Chanaral is already home to a deep-sea port for iron ore exports. A transmission line runs within 15 km of the project, a rail line passes within 20 km, and the main highway is 25 km distant.

Since iron ore projects are earth-moving operations, successful projects require easy access to transportation infrastructure (roads, rail, or port), the availability of reasonably priced electricity, and deposits that are large, high-grade and low in penalty elements.

Anaconda’s potential entry into the iron ore market comes at a good time. Iron ore prices have risen dramatically in the past few years due primarily to China’s insatiable appetite for steel’s main ingredi- ent. Talks over this year’s iron ore price are still in progress but over the last three years iron ore prices have risen by 71.5%, 19%, and 9.5%, respectively. The price is set in annual negotiations between miners and steelmakers, often timed according to the Japanese fiscal year, which begins in April. The world’s three biggest iron ore miners — Vale (RIO-N), BHP Billiton (BHP-N, BLT-L), and Rio Tinto — dominate the negotiations.

China is a net importer of iron ore and the country’s rapid industrialization and urbanization has driven Chinese steel consumption to almost double in the last four years. And the supply-demand curve for the raw material is tight — analysts generally agree that prices will either increase or remain stable over the next few years, rather than decline.

In other Anaconda news, the company recently began production at its Pine Cove high-grade gold mine near Baie Verte in Newfoundland. Construction began one year ago and Anaconda completed the project on time and within budget.

The mine is projected to produce 13,000 oz. gold this year. A Gekko gravity concentrator was incorporated into the mill circuit to maximize grinding and leaching efficiencies.

Probable reserves of 2.3 million tonnes grading 2.8 grams gold per tonne give Pine Cove a 12-year mine life, though Anaconda plans to re-evaluate mineralized zones not considered economic at the US$400-per-oz. gold price used in the feasibility study. The company also plans to expand the exploration footprint to hopefully expand reserves.

Anaconda, after financing the project to production, hold a 60% interest in Pine Cove; the other 40% is held by New Island Resources (NIS-V, NIREF-O). The joint-venture agreement, however, stipulates that Anaconda receives 100% of the project’s cash flow until capital payback is achieved.