Exeter Proves Initial Resource At Cerro Moro

VANCOUVER– An initial resource estimate for the Cerro Moro gold-silver property in Argentina has given Exeter Resource (XRC-V, XRA-X) the basis to plan what it says will be a high-grade, low-capital cost mine.

After three years of drilling to trace gold-silver veins at Cerro Moro, Exeter has defined an inferred resource of 1.1 million tonnes grading 10.5 grams gold per tonne and 545 grams silver, using a cutoff grade of 2 grams gold per tonne, for 371,000 oz. gold and 19.2 million oz. silver.

Using a cutoff grade of 4 grams gold, the inferred resource drops to 353,000 tonnes but the grade climbs to 26.1 grams gold and 1,080 grams silver, for 297,000 oz. gold and 12.3 million oz. silver.

The bonanza-grade Escondida vein, which is the best defined on the property, contributes the majority of the resource — at a cutoff grade of 2 grams gold, Escondida hosts 481,000 tonnes averaging 21 grams gold and 878 grams silver for 324,000 oz. gold and 13.6 million oz. silver.

The Esperanza and Gabriela veins, which are parallel to the northwest-striking Escondida system but are offset to the northeast roughly 2 and 4 km, respectively, carry lower grades. Combined, the two veins add 617,000 tonnes grading 2.4 grams gold and 285 grams silver to the inferred resource, at the 2-gram gold cutoff.

Cerro Moro is in northeastern Santa Cruz province, roughly 70 km southwest of Puerto Deseado and 130 km east of AngloGold Ashanti’s (AU-N, AGD-L) Cerro Vanguardia gold-silver mine.

Exeter started exploring Cerro Moro in 2006 and soon outlined a system of high-grade gold-silver veins in the southern part of the property. The company first spent a year drilling the Escondida vein; in late 2007, focus shifted to probing extensions of Escondida and testing the 22 exploration targets outside of the discovery area.

The exploration efforts — including an average of 3,000 metres of drilling each month from late 2007 to late 2008 — have paid off. Exeter has now traced Escondida for 4.3 km of strike and identified more than 30 km of total vein strike length on the property. The low-sulphidation epithermal veins are generally associated with quartz-bearing veins and are preferentially eroded, leaving little surface expression. Veins are further concealed by a thin veneer of gravel.

And at least 20 other prospects on the Cerro Moro property have returned anomalous drilling or surface samples and require further exploration.

Metallurgical test work has to date shown high recoveries for both gold and silver. An extensive test program in 2008 assessing the efficacy of flash flotation, gravity concentration, and conventional leach of the gravity tails returned an average gold recovery of 99% and an average silver recovery of 92%. The metal ratios and minerals vary from one vein to the next but the three-stage recovery system seems to cover the needed range well.

Exeter says it is now considering a startup mining operation to produce 100,000 gold-equivalent oz. annually. But the company will hold off on a development decision until it has an indicated resource sufficient to support at least three years of mining. Mining would start at the high-grade Escondida area.

To upgrade the resource to indicated status, Exeter is working through an 18,000-metre infill drill program focused on Escondida. To date, the company has completed 94 infill holes totalling 6,650 metres. Exeter hopes to announce an updated resource in the first quarter of 2010.

In addition, Exeter hopes the high gold and silver recoveries will allow the use of lower cutoff grades in the next estimate. If that is the case, the resource would grow via the inclusion of areas excluded from the recent calculation, such as Escondida Far East and parts of Gabriel and Esperanza.

And in the meantime, the company will work on an in-house scoping study, based on the new inferred resource, to assess which veins would be amenable to open-pit mining and which would be best approached underground.

Exeter earned 100% ownership of Cerro Moro in late 2007; a previous owner holds a 2% net smelter royalty. And in early 2008, Exeter inked a deal with Formicruz, the Santa Cruz provincial mining company, to earn an 80% interest in Formicruz’s adjacent land by spending US$10 million on exploration and handing over 5% ownership of Cerro Moro upon receipt of all permits and authorizations needed for production. Formicruz’s property is to the south and west of Cerro Moro and includes the strike extension of Escondida.

That strike extension has never been drilled. Magnetics data and geological mapping indicate the potential to add another 2 km of strike to the 4.3 km already defined. The new joint-venture partners recently received approvals to drill in this area and plan to do so starting in early August.

On news of the resource estimate, Exeter’s share price lost 21¢ to close at $3. The company has a 52-week trading range of $1.05-4.37 and 62.5 million shares outstanding.