Results from the first 19 holes drilled on the highly touted Luicho prospect in southern Peru indicate that the gold mineralization is confined to only a portion of the upper sandstone unit in the Central zone and appears not to extend to depth.
“We have not located feeder zone-type mineralization in the Central zone, where gold in the upper sandstone appears to be a result of lateral fluid flow,” states Chief Executive Officer Thomas Shrake.
The company is systematically drill-testing a structural corridor at Luicho, where surface rock-chip channel-sampling averaged 2.31 grams for 5,558 samples collected from an area extending 1,850 metres in length and averaging 250 metres wide.
The corridor is related to a complex series of converging regional and subsidiary strike-slip faults that have created a broad zone of intense fracturing and exposed the upper quartz sandstone unit. Most of the surface sampling was carried out in the upper sandstone, which is capped by a shale horizon that appeared to act as an impermeable barrier to the upward migration of gold-bearing fluid. This resulted in the ponding of higher-grade mineralization at the top of the sandstone unit.
A middle sandstone unit consisting of thin-bedded sandstone, shale and siltstone lies beneath the upper massive sandstone. The fact that gold mineralization was found in the middle sandstone unit at two locations in the corridor, as well as north of the corridor, gave Pacific Rim hope that there was a significant vertical component to the mineralized system of at least 200 metres.
However, drilling to date indicates that this is not the case. The first four holes tested the northern end of a high-grade section in the Central zone of the corridor. This high-grade section averaged a grade of 6.69 grams, based on 1,824 surface samples taken from a wedge-shaped area measuring 430 metres along strike and averaging 100 metres wide.
The initial holes were drilled to the east at an angle of 60 at 100-metre stepouts; they were designed to test an area where three major structures intersect. The best intercept from the first four holes was 32 metres grading 2.71 grams beginning at surface in hole 2. The hole ended at a down-hole depth of 203 metres. Stepping-out along section to the west, hole 4 intercepted 10 metres of 1.13 grams from surface.
Pacific Rim continued to extend the first fence to the west at 100-metre intervals; this was designed to test what lay beneath a shale cap that occurs outside the corridor, on the western side of the Luicho fault. Hole 5 intersected 22 metres of colluvium averaging 0.99 gram gold from surface, plus 6 metres of 0.87 gram in porphyry at 54 metres down-hole.
Hole 6 pulled 14 metres of colluvium averaging 0.59 gram gold from surface, followed by 12 metres of 0.61 gram in the middle sandstone unit, starting at a depth of 106 metres.
The last hole on this fence was hole 8, which yielded no significant results.
Hole 9 was drilled well outside the structural corridor, to the north, where the middle sandstone unit is exposed in the Luicho fault zone. It encountered an 8-metre section in the middle sandstone, averaging a disappointing 0.35 gram gold at a down-hole depth of 142 metres.
After the first results were received, the program was adapted to include vertical holes, so as to determine the thickness and continuity of the upper sandstone mineralization while still exploring for blocks of structurally controlled mineralization. Holes 10 through 19 were drilled generally to a depth of 150 metres, testing the Central zone upper sandstone, as well as the underlying middle sandstone units.
Hole 12 was collared in the middle of the corridor, at the northern end of the Central zone, 100 metres north of the first fence. It cut 50 metres grading 1.8 grams gold from surface.
Stepping-out to the south, 100 metres south of the first fence, hole 11 recorded the best hit, intersecting 16 metres of 5.42 grams gold from surface. Farther to the southeast, hole 13 hit 40 metres of 1.2 grams from surface.
The next fence of holes, 200 metres south of the initial fence, returned: 24 metres of 4.43 grams from surface in hole 10; 12 metres of 2.2 grams between a depth of 6 and 18 metres in hole 14; and 14 metres of 1.39 grams, between a down-hole depth of 8 and 22 metres, in hole 7.
Again, stepping-out 100 metres to the south, hole 18 intersected 32 metres of 1.43 grams from surface, while hole 16 returned 14 metres of 0.99 gram from surface. At the southern end of the zone, hole 17 hit 20 metres of 1.05 grams from surface. Hole 19, collared farther to the southwest, passed through 12 metres of upper sandstone grading 0.93 gram from surface, followed by: 28 metres of porphyry averaging 0.64 gram gold, starting at 56 metres of depth; and 30 metres in the middle sandstone unit, averaging 0.44 gram, between 102 and 132 metres of depth.
“These results are, of themselves, significant for a generative gold project,” states Ed Flood, a mining analyst with investment house Haywood Securities. “However, with the market discounting a discovery of some 3 million ounces of gold before the drill program began, the new results were more of a confirmation that the target was now out of reach.
“The primary problem is that the mineralization appears to have a very sharp cutoff at depth. This aspect drastically limits the potential upside tonnage and may reflect either an elevation control on mineralization or a stratigraphic control that had not been previously recognized.”
Back in July, Brent Cook, a U.S.-based mining analyst with Rick Rule’s Global Resource Investments, pointed out that much of the surface sampling had been conducted in a stratigraphic section of the upper massive sandstone that may be less than 50 metres thick, and that, therefore, there is no certainty that the underlying sediments are equally mineralized.
Cook suggested that the Luicho target could be a much narrower structural zone than the sampling suggested, reflecting a skinnier, en echelon series of north-northwest-trending segments offset by post-mineral northeast dextral faults.
In total, 8,226 individual rock-chip channel samples were collected from the property using hammer and chisel methods along 2-metre sections, for an average grade of 1.68 grams. Despite all the samples, Cook believed an unavoidable high-grade sample bias probably existed, owing to preferential weathering and exposure along mineralized fractures.
James Mustard, also of Haywood Securities, was initially concerned that surface sampling reflected a degree of bias that was based on the apparent control of the topography by fault structures. The sampling pattern was not grid-based but completely controlled by access.
The fact that Pacific Rim was able to sustain a market capitalization of more than $100 million for six months on a property that had yet to see a drill hole — and at a time when resource stocks were (and continue to be) out of favour — speaks volumes about the promotional ability of its management.
Led by President Catherine McLeod-Seltzer, CEO Thomas Shrake and Chairman Anthony Petrina, the company was able to raise $7.3 million through a special warrant financing in June at $4.25 a piece. The issue was sold largely to institutional investors, but, in addition, four insiders took down $1.6 million of the financing. Haywood Securities was lead underwriter.
Pacific Rim suspended drilling on Oct. 18 pending the results from 42 holes completed to date. These holes have tested the South zone, the Northeast zone, the area west of the Luicho fault, and the area east of Cerro Luicho.
Pacific Rim has two years remaining on a 3-year option agreement to acquire the Luicho project. The acquisition requires a series of staged payments, including US$400,000 in November of this year, US$1 million in November 2001 and US$24.2 million in November 2002.
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