Sulliden picks up Shahuindo (November 18, 2002)

Vancouver — Having completed a 90-day due-diligence program, Sulliden Exploration (SUE-T) is proceeding with its purchase of the Shahuindo gold property in northern Peru.

Engineering firm Simons Peru (AMEC) tabled a positive technical review of the project, prompting the junior to sign final agreements with Socrate Capital and the private Peruvian company Algamarca.

Under the deal, Sulliden must pay US$4.1 million to Algamarca over two years. Socrate supplied the initial financing by agreeing to earn a 30% interest in the property in return for US$1.5 million. Sulliden has already made an initial payment of US$320,000.

If, at any time, Sulliden fails to meet its acquisition commitments, the property will revert back to Algamarca, with Sulliden retaining a 0.5% net smelter royalty for each US$1 million spent.

The Shahuindo property comprises 80 sq. km south of the city of Cajamarca and 25 km north of Barrick Gold‘s (ABX-T) Alto Chicama discovery. Between 1993 and 1998, Asarco (now part of Grupo Mexico) discovered several epithermal gold occurrences on the property, including the oxidized, high-sulphidation San Jose deposit, reported to contain more than 800,000 oz. gold. Asarco spent US$4 million at San Jose, sinking more than 150 drill holes, outlining a reserve calculation, and completing metallurgical tests and a prefeasibility study.

The major pegged the economic reserve of San Jose’s oxidized portion at 18 million tonnes running 1.04 grams gold and 17.5 grams silver per tonne.

Previous metallurgical tests on composite drill samples suggest that gold extraction from the oxidized samples is efficient and rapid (less than 48 hours), with a recovery rate of 80% and relatively low cyanide consumption.

According to a 1998 evaluation, the San Jose deposit’s oxide ore is capable of supporting an open-pit, heap-leach operation for nine years, based on a gold price of US$300 per oz. Annual gold production would ring in at 50,000-80,000 oz. at an operating cash cost of US$128 per oz.

Asarco gave up its option on the property after the Grupo Mexico takeover, when the parent company suspended Peruvian exploration outside the Southern Peru Copper (pci-n) umbrella.