Golden Arrow forges ahead with feasibility at Chinchillas

VANCOUVER — It’s tough times for junior exploration, but Golden Arrow Resources (TSXV: GRG: US-OTC: GARWF) has persevered at its flagship Chinchillas silver-lead-zinc property, 280 km from San Salvador de Jujuy, Argentina. With innovative financing and share-based drill contracting, the company is on track to release a feasibility study at the project later this year, while recent drill results have driven its stock price to a two-year high.

Chinchillas sits on top of a Tertiary-aged diatreme volcanic complex that erupted through the Paleozoic-basement schists at a dilational fault jog within a regional scale, east- to west-trending fault structure.

The resulting 1.6 km by 150 metre basin is filled with volcanic breccias and tuffs, with silver-lead-zinc mineralization occurring in mantos as disseminations, veinlets and matrix filling from surface to the basement contact. A second silver-mineralization style is hosted in structures and breccias within basement schists.

Golden Arrow finished off last year with a couple of major milestones at the project, including an updated resource and a retooled preliminary economic assessment (PEA) that models an 8,000-tonne-per-day, open-pit operation with a US$237-million development price tag.

“We’ve maintained positive momentum, and that’s become somewhat of a rarity these days with the state of markets, and a lot of companies putting on the brakes,” vice-president exploration and development Brian McEwen comments during an interview. “We’ve pushed through the tough times with some creative financings, and it’s been a great story that will prove itself in time. We have a great location with some big-time neighbours in our mineral belt, and we believe there’s an opportunity for the deposit to really grow.”

Golden Arrow’s PEA is based on total indicated resources of 25 million tonnes grading 91.3 grams silver per tonne, 0.7% lead and 0.3% zinc for 96 million contained equivalent oz. silver. Inferred resources tack on 22 million tonnes of 57 grams silver, 0.6% lead and 0.7% zinc.

Based on a US$17 per oz. silver price, the mine plan features a US$90.2-million after-tax net present value and a 14.9% internal rate of return, with a five-year payback.

In a bid to improve Chinchillas’ economics, Golden Arrow kick-started a 16,000-metre drill program. But McEwen says the company halted drilling with 5,000 metres left on the contract in order to give it time to figure out how best to advance the project.

So far Golden Arrow has extended the western boundaries of its resource, discovered a zinc-rich mineralized area in the Socavon basement zone and added another zone underneath and southeast of its planned pit. The program was designed to infill areas and upgrade existing inferred resources, as well as test extensions to the deposit, which remains open in several directions.

“One of the things we wanted to do was really establish the value for the project and, to a degree, structure the deposit so people would view it as something more than just another exploration play. We’ve outlined the economics, and I think there’s significant room for improvement on our capital costs,” McEwen elaborates.

“Based on our new drilling, we’ve determined we have hundreds of metres of mineralized material that’s all flat-lying through the mantos, starts right at surface and is very altered, so it’s going to be attractive in a mining scenario,” he continues.

The western part of Chinchillas includes the upper Silver Mantos zone and lower Mantos basement zone, while the eastern part includes the upper Socavon del Diablo zone, and the lower Socavon basement zone.

Drill highlights along the eastern flanks include: hole 160, which cut 12 metres averaging 105 grams silver and 0.6% zinc from 230 metres deep; and hole 159, which intersected 58 grams silver, 0.8% lead and 1.1% zinc from 143 metres deep.

Meanwhile, results from four holes on the western side of the deposit released in mid-March appear to confirm a new area of deeper mineralization, with assay highlights including: 11.5 metres of 79 grams silver, 2% lead and 2.6% at 162 metres deep in hole 148; and 41 metres of 81 grams silver, 0.7% lead and 0.5% zinc from 14 metres deep in hole 149.

“We were drilling like crazy and getting into new areas, but we had some metres left on the contract, and wanted to take a step back and analyze some of the results before deciding how we want to strategically plan the final stages,” McEwen says. “It’s the smart thing to do in these markets, and we expect the recent drilling will definitely lead to some resource expansion and greater optionality in terms of mine planning.”

Golden Arrow announced in March that it had been granted more concessions west and adjacent to the existing project. The extra 9 sq. km boosts the total project area to 20 sq. km. The company also hit mineralization during condemnation drilling at its Chinchillas I concession, directly south.

Golden Arrow has weathered hard capital markets largely thanks to a royalty sale it completed back in late 2012. The company sold a 1% net smelter return royalty to Premier Gold Mines (TSX: PG; US-OTC: PIRGF) for $16.5 million, and reported $1 million in working capital at the end of 2015.

Golden Arrow closed a $573,000 non-brokered private placement in late January wherein it issued 442,056 shares at a price of $1.46 per share, though McEwen adds it will likely raise capital in the short term.

The company has traded within a 52-week window of 17¢ to 50¢, and has gained 60% over the past six months en route to a 31.5¢-per-share close.

Golden Arrow has 50 million shares outstanding for a $15-million market capitalization.