Rio Alto rises on La Arena drilling

VANCOUVER – With its La Arena gold mine having just completed its first year of commercial production, Rio Alto Mining (RIO-T) is finding time to probe some nearby exploration targets and results from the first set of holes are promising.

Rio Alto has identified four exploration targets at La Arena: La Colorado West, La Colorado East, Esperanza South, and Esperanza North. A mapping, sampling, geophysics, and reverse-circulation (RC) drill campaign in late 2012 focused on the La Colorado zones and returned some prospective results, including a 10-metre rock-chip line that averaged 3.9 grams gold per tonne from La Colorado West.

This year Rio Alto returned to La Colorado West with a diamond drill and hit mineralization in 19 of 19 holes. The best result came from hole 2, which cut 78 metres grading 1.34 grams gold starting 14 metres downhole. Hole 18 produced a similar result: 84 metres grading 1.16 grams gold starting just 2 metres downhole, an intercept that included 6 metres of 10.3 grams gold.

Other results include 0.46 gram gold over 82 metres in hole 1, 0.94 gram gold over 30 metres in hole 3, and 0.29 gram gold over 80 metres in hole 5.

The company also drilled 11 holes intended to ensure that areas being considered for future infrastructure were not mineralized. All 11 holes returned barren rock.

Rio Alto should continue to churn out results over the rest of the year, as the company has considerable exploration plans. La Colorado West will see another 3,000 metres of diamond drilling as well as 6,000 metres of RC drilling; La Colorado East will be tested with a 5,000-metre RC drill program; an 8,000-metre RC drill program will explore Esperanza North and South while a 3,000-metre diamond drill effort will probe a chargeability anomaly within the South area; and detailed mapping work will be completed across the project area.

La Arena is in north-central Peru, in a mining region that also hosts Barrick Gold‘s (ABX-T, ABX-N) large Lagunas Norte gold mine. An estimate prepared in January 2012 pegged La Arena’s oxide resource at 100 million measured and indicated tonnes grading 0.46 gram gold, plus 10.4 million inferred tonnes averaging 0.27 gram gold.

The project is also home to a sizeable sulphide resource: 313 million indicated tonnes grading 0.29% copper and 0.24 gram gold and 320 million inferred tonnes averaging 0.3% copper and 0.2 gram gold. Rio Alto is advancing a feasibility study on the sulphide resource. The study is expected sometime this year.

Rio Alto produced its first gold at La Arena in May 2011 and celebrated its first quarter of commercial production at the gold oxide heap leach operation in April 2012. In its first year of operation the mine churned out 201,113 oz. gold and Rio Alto expects similar output levels in 2013. Cash costs for the coming year are expected to average $675 to $725 per oz., slightly higher than in 2012 because of lower grades, rising labour costs, and the continued strengthening of the Peruvian currency.

Rio Alto plans to spend $80 to $100 million at La Arena this year. Most of the money will go into the mine: the company is spending $30 million to expand the heap leach pad to life-of-mine capacity and $37 million to advance the sulphide side of the project. The rest of the money will pay for exploration in and around and fund earn-ins on other properties in southern Peru.

News of the drill results from La Colorado West lifted Rio Alto’s share price 6.5%, adding 29¢ to bring RIO shares to $4.74. The company has a 52-week share price range of $3.53 to $5.97 and has 176 million shares outstanding.