Drill intercepts reported by
While drilling a series of anomalous geochemical soil targets near the surface of the wholly owned Ixhuatan project, Linear intercepted 30 metres grading 11.5 grams gold and 22.6 grams silver per tonne in the ninth hole of the reconnaissance program and the first hole on the Campamento target.
When the results of the discovery hole were first announced, in mid-June, Linear was trading below $2. By mid-November, having sunk 17 holes in the Campamento target, Linear quickly shot up to almost $12 after intersecting an average of 12 grams gold and 63.7 grams silver over the entire 100.3-metre length of hole 26 — the best intercept to date.
Owing to the depth limitations of the existing drilling equipment, hole 26 bottomed in mineralization grading 8.5 grams gold and 78.3 grams silver across the last 2.3 metres. Hole 26 was collared at a 1,375-metre elevation on the hill side, about 150 metres southeast of, and 40 metres higher than, discovery hole 9.
Shares in Linear have since fallen back to around $7.20 (at presstime) as the market digests a new batch of results for a series of stepouts (holes 27-34) up to 100 metres directly south of hole 26. The stepout holes failed to deliver comparable grades.
At surface, Campamento is characterized by a high gold-in-soils anomaly with values ranging from 100 to 9,700 parts per billion (ppb) over an area 500 metres long and up to 250 metres wide, which is part of a much larger, irregular-shaped, 100-plus parts-per-billion gold anomaly that extends for 1,400 metres in length.
Linear is coping with some steep, challenging terrain in the discovery area. The company has been drilling with two small portable core rigs that can be disassembled and carried on foot between drill sites. These rigs are limited to a depth capacity of about 175 metres. So far, four of the holes (nos. 22, 25, 26 and 27) have ended while still in good gold mineralization. Road building is under way at Campamento in advance of bringing in a larger rig capable of drilling to depths of 300-400 metres.
Linear has been chasing the high-grade mineralization with short stepouts of 30-60 metres. Most of the drilling is concentrated uphill east and southeast of the discovery hole. The mineralized zone is believed to have been eroded away, to the west. Twenty-seven holes have been completed to date, with assay results reported for the first 25; all but two holes were drilled vertically. Twelve of the 25 holes have intersected near-surface grades of 4 grams gold or better across significant widths in a thick porous volcanic rock package, which is believed to be part of a regional porphyry intrusive-volcanic complex.
That said, the results show a highly complex mineralized system hosted in tuffaceous andesite breccias and sandstone units of late Tertiary age. Higher-grade gold mineralization is hosted in both oxide and sulphide portions of a system locally associated with a stockwork of fine (1-2 mm) clay-pyrite veinlets and disseminations. The near-surface oxidation has a thickness of up to 30 metres. Porphyry-style propylitic alteration (chlorite and epidote) is observed in the system, grading into zones of strong silicification and later potassium-rich clay (illite) alteration.
“The andesite and related coarse volcanic rocks are reworked and exhibit subtle sedimentary features, such as graded bedding,” says Don Poirier of First Associates in a recent research report following a site visit. “The breccia is largely matrix supported with fragments ranging from pebble-size to 10 cm or more in some instances.”
The mineralized zone appears to be a sub-horizontal, wedge-shaped, tabular body that fans out to the east and dips gently to the north-northwest. “Based on our observations, there are important northwesterly-trending structures that may have structurally prepared the zone or have been a preferred conduit for the migration of mineralizing fluids that carry gold,” states Poirier. “We note from our site visit that the drill core in hole 26 was highly fractured and brecciated, supporting our view that there are controlling structures that trend through the zone and/or property. We believe this is a positive feature for the project as it may have led to an increase in the grade of several holes, including hole 26.”
Holes 15, 20, 21 and 26 are collared roughly down the middle of a 250-by-250-metre section of the anomaly. The holes line up along a north-northeasterly direction. These previously reported holes intersected a higher-grade core of mineralization extending 125 metres through the anomaly. Strong clay alteration, pyrite mineralization and calcite veining are closely associated with the higher grades. Hole 15, drilled just outside the anomaly boundary at an elevation of 1,355 metres, intersected 54 metres of 2.2 grams gold and 14.6 grams silver (including a 20-metre section grading 4.7 grams gold and 35 grams silver) starting at a depth of 74 metres.
Hole 21 was collared 137 metres due east of discovery hole 9, and about 40 metres south-southeast and 20 metres higher from hole 15. It cut 50 metres averaging 4.9 grams gold and 23.8 grams silver (including 22 metres of 9.2 grams gold and 40.1 grams silver), beginning at 26 metres of depth.
A further 50 metres due south and 25 metres lower in elevation, hole 20 averaged 9.5 grams gold and 27.4 grams silver across the top 60 metres of the hole. A second, deeper zone yielded 14 metres of 1.1 grams gold and 5.4 grams silver, starting at 110 metres depth.
Hole 26 was spotted 30 metres directly south of hole 20 and intersected the strongest values to date, returning 12 grams gold and 63.7 grams across the entire 100.3-metre length of the hole.
In the latest batch of results, Linear stepped back 15 metres to the east, directly between holes 26 and 20, and hit 143.9 metres averaging 6.6 grams gold and 39.1 grams silver across the entire length of hole 27. The hole bottomed in mineralization grading 2.1 grams gold and 1.6 grams silver across the final 1.9 metres. The most easterly hole drilled to date is hole 22 (108 metres of 3.5 grams gold and 12.3 grams silver), which sits 35 metres northeast of hole 27 and 40 metres southeast of hole 21.
Tonnage implications
The newest batch of results have important tonnage implications for the project, as previous drilling showed a thickening trend of higher-grade mineralization to the south. This has proved not to be the case. Hole 29 represented a 100-metre stepout directly south of hole 26. Collared just outside of the anomaly boundary near the top of an east-west trending ridge, hole 29 intersected only anomalous gold mineralization averaging 0.2 gram gold in the favourable volcanic tuff unit, starting from a depth of 88 metres through to the bottom of the hole ending at 172 metres.
Closer-spaced stepout drilling shows only marginal results, with the exception of holes 32 and 34. Hole 28, drilled just 34 metres to the southwest of hole 26, intersected 92 metres of 1.2 grams gold and 7.9 grams silver starting at 28 metres depth. Hole 30 was collared 31 metres south-southwest of hole 26 and encountered only strongly anomalous values averaging 0.5 gram gold over the entire 135-metre length of the hole.
Holes 32, 34 and 35 were drilled from the same site, just 10-15 metres east-northeast of hole 30, and 31 metres to the southeast of hole 26. Drilled vertically, hole 32 cut 90 metres grading 1.9 grams gold and 26.4 grams silver from surface, including a 22-metre interval of 4 grams gold and 53.6 grams silver. Hole 34 was angled 70 to the east and intersected 54 metres of 2.6 grams gold and 18.7 grams silver from surface, including a 24-metre section of 4.4 grams gold and 35.7 grams silver. Results for hole 35, a 70 angle hole to the south, remain pending.
Stepping out farther to the south, hole 33 was collared 61 metres southwest of hole 26 and 25 metres due south of hole 28. The hole encountered weakly mineralized gold values averagi
ng 0.5 gram over its entire length of 106 metres.
Spotted 46 metres due south of hole 26 and 25 metres east of hole 33, hole 31 was drilled to a depth of 127 metres, hitting only a couple of thin sections of material grading 1 gram gold.
More data
Drilling is to resume in late January, pushing out to the east and southeast on Campamento. “We are getting a better handle on what we’re doing here; every time we drill a hole, we’re learning more about it,” says Linear President Wade Dawe. “We are definitely building some ounces here.”
“Although a structural component is evident and essential at Campamento, the primary gold mineralization control appears to be the intrinsic permeability of the host volcanic tuff,” states Haywood Securities’ Kerry Smith in a recent research report. “Hot gold-bearing fluids, which intersected the high-permeability volcanic tuff while circulating through the sub-surface, in part along faults and through breccia pipes, would have bled into the high permeability tuff, mineralizing a significant portion of the unit.”
“Where we have the best permeability in the tuff, that’s where we are getting good concentrations of gold,” says Dawe.
Gold mineralization at Campamento appears to be associated with illite, a lower temperature type of clay alteration mineral. Smith says this “suggests that the mineralizing fluids had circulated some distance from the epithermal system’s intrusive heat source before depositing gold at Campamento. Linear believes that this heat source is represented by a diorite intrusive, which underlies its Central target at Ixhuatan.”
The Ixhuatan project covers 283 sq. km in the northern part of Chiapas state and can be reached by gravel road from several regional centres. Property title is in the form of an exploration licence. Linear acquired Ixhuatan in October 2003 from Swiss mining house
Linear paid Xstrata US$250,000 cash and issued 1 million shares at a deemed price of 76 apiece, along with warrants to purchase up to an additional 500,000 shares priced at a $1 apiece until October 2005.
Portfolio
The portfolio included 10 properties in Chiapas and three properties in the Dominican Republic, plus an extensive database covering the Central American region. Many of the projects and ideas were developed by an exploration team led by Philip Pyle, who assumed the role of Linear’s vice-president of exploration for Central America at the time of the acquisition. Pyle has 15 years of exploration experience in Central America. He acted as BHP Minerals’ exploration manager in Mexico and the Caribbean from 1988 to 1997, and as manager of development in Central America for MIM from 1997 to 2003, where he was instrumental in acquiring Ixhuatan and certain key Dominican Republic (DR) concessions.
Linear has since farmed-out two of the concessions in the Dominican Republic to
Placer has committed to spending US$575,000 on exploration and paying US$125,000 in the first year of the joint venture. Linear is the operator during the first year.
Placer controls 100% of the Pueblo Viejo mine under a special lease agreement ratified by the Dominican Republic government in April 2003. The agreement gives Placer four years in which to reach a production decision. A high-sulphidation, epithermal gold and silver deposit, Pueblo Viejo was first placed into production in 1975 by Rosario Resources, then a subsidiary of Amax. The open-pit mining operation used a cyanidation mill to treat oxide ore. The government nationalized the mine in 1979 and continued operations until 1993. By that point, the oxide and transitional portions of the deposit had become nearly depleted. Limited mining continued until 1999, by which time Pueblo Viejo had produced 5 million oz. gold and 22 million oz. silver.
The existing indicated sulphide resource containing 17.5 million oz. gold and 101 million oz. silver (178 million tonnes grading 3.1 grams gold and 17.7 grams silver) is refractory in nature and associated with zinc and copper mineralization. Placer was to have completed a prefeasibility study by the end of 2004, with a bankable feasibility study due by mid-2005.
Metallurgy is a key challenge, and Placer is currently having a hard look at its processing options, which include the use of an autoclave or bio-leaching, or some combination of the two.
Upon completing the purchase of MIM’s Central American portfolio from Xstrata, Linear raised $6 million in an equity financing priced at $2 per unit, with Haywood Securities acting as lead agent. The Halifax, N.S.-based junior has since acquired four additional properties in Mexico, including the Cobre Grande project in Oaxaca state, where two rigs have been testing a polymetallic copper skarn system previously identified by MIM.
MIM was active in Chiapas for several years, targeting a belt of volcanic and intrusive rocks it believed to be prospective. Regional stream-sediment sampling highlighted a large cluster of anomalous copper and gold sites on the Ixhuatan concession area that appeared to be associated with a northwest/southeast-trending intrusive complex. Follow-up grid soil sampling by both MIM and Linear identified seven separate anomalous target areas of 100-plus ppb gold in 2-sq.-km area. Soils were taken every 50 metres on 100-metre-spaced grid lines. Each of the seven targets, known as San Isidro, Central, Northern, Western, Cerro La Mina, Buenos Aires and Campamento, show strong indications of porphyry- and skarn-style alteration. Chip sampling returned values in the range of 0.1 to 9.4 grams gold and 0.1 to 1.1% copper. Induced-polarization geophysical survey work in late 2002 shed more light on several targets.
“We think this property has district-size potential,” says Dawe. “There’s a good chance we’re going to find more of these Campamento-type zones.”
In January 2004, Linear initiated drilling at Ixhuatan, with an initial 5-hole program to test the 2.3-km-long San Isidro anomaly on the southeastern portion of the property. The anomalous area is defined by soils carrying values of 100 to 1,490 ppb (14.9 grams). The holes encountered broad zones of lower-grade disseminated gold and copper mineralization in hydrothermal breccias and andesitic volcanic breccias. Results included 68 metres of 0.5 gram gold and 0.15% copper, plus 1.9 grams silver.
Expanded drilling
Linear expanded the drilling by putting a single hole into each of the Buenos Aires, Cerro La Mina, Central, Campamento and Northern zones. The first eight holes all intersected mineralized volcanic flows and tuffs, cut by zones of hydrothermal breccia. Fragments in the hydrothermal breccias show strong disseminated and stockwork copper mineralization. The discovery of Campamento was made in the ninth hole of the program.
After completing a site visit to the Ixhuatan project in early December, Kerry Smith of Haywood believes the Campamento discovery has potential to develop into at least a 750,000-to-1-million-ounce resource through minimal additional drilling. “Campamento represents one of the highest-reward exploration projects
in the market,” says Smith, who has set a target price of $16 for Linear and given it a speculative sector outperform rating.
“If drill holes IX-28 and IX-29 return assay results that are similar to IX-26, Linear could be on its way to delineating a multimillion-ounce deposit at Campamento,” Smith says. “Even if drill holes IX-28 and/or IX-29 do not return results comparable to IX-26, we still believe that Campamento represents a solid new discovery with significant growth potential and should be valued as such.”
Poirier of First Associates recommends Linear as a speculative buy, with a target of $14.50: “The geology and mineral system is attractive and, together with reported grades and the consistency of mineralization, suggests the presence of a significant deposit at the Campamento target. . . . We are confident Linear Gold has outlined a system (base case) that has 1.5 million ounces of gold as geological potential with its drilling to date.”
In his base-case model, Poirier assumes an average grade of 5 grams gold and a 2.7 specific gravity for a mineralized zone he estimates is 65 metres thick over an area of roughly 225 by 225 metres.
At the beginning of December, Linear had a cash position of $5.9 million and 16.1 million shares outstanding, or 19.9 million on a fully diluted basis. Management and insiders hold about 25% of the shares.
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