Sulliden set to acquire Peruvian deposit

With $150,000 in hand from a recent private placement, Montreal-based Sulliden Exploration (SUE-T) has inked a letter of intent to acquire Peru’s Shahuindo gold property from Compania Minera Algamarca, a private Peruvian company.

The letter gives Sulliden 90 days in which to complete a due diligence study of the property, which is in the northern department of Cajamarca. Once study is completed, Sulliden must pony up an initial instalment of US$320,000; it paid US$10,000 on signing the letter of intent.

In return for acquiring the property, Sulliden is responsible for escalating semi-annual payments totalling US$3.8 million. The outstanding payments accrue interest at the rate of 5%, which can be avoided if Sulliden elects to accelerate payment. There are no work commitments in the agreement.

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 composite metallurgical tests and a prefeasibility study.

Asarco 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 (PCU-N) umbrella.

Sulliden intends to launch an evaluation and development program once it wraps up its due diligence. “I don’t think we have [anything] to be afraid of” in the due-diligence program, says Jacques Trottier, Sulliden’s president.

Financing the acquisition has been a bigger question, as Sulliden was nearly out of cash at the end of January. Since then, the company has raised $550,000 through private placements, but it plans to arrange further financing for this project.

Late last year, Sulliden, suspended a 3,500-metre drilling campaign on the Mario base metal property, 50 km southwest of Huancayo, Peru. The company had drilled about 1,553 metres to test the Punapuna high-grade zinc-lead-silver massive sulphide zone and its untested northerly and southerly extensions. The zone is part of a large electromagnetic anomaly discovered during a geophysical survey in August 2001.

The first hole cut a zone of well-mineralized skarn at the dacite-marble contact, with disseminated-to-semi-massive sphalerite and pyrite associated with a typical skarn-type assemblage of epidote, rhodochrosite and calc-silicate minerals. A 2.6-metre mineralized interval ran 4.5% zinc.

The second hole encountered mainly pyrrhotite, pyrite and magnetite, with minor sphalerite and chalcopyrite. Again, the mineralization lies at the contact between the limestone unit and the dacite/diorite intrusive body.

Sulliden also opted out of its agreement to earn 60% of the Rolling Pond and 50% of the Mustang gold properties in central Newfoundland. Both projects reverted back to Altius Minerals (ALS-V).