GLOBAL SEARCH FOR GOLD — Drilling penetrates gold zone at Tanzania’s Geita — Development program continues at Samax’s Golden Pride property

While its 1-million-oz.-plus Golden Pride gold deposit remains its primary focus, Samax Resources (SMX-T) is increasingly encouraged by its separate Geita gold property, about 160 km to the northwest, where results from reconnaissance drilling indicate potential for a significant gold discovery in the Lake Victoria Goldfields district of northern Tanzania.

The program, which consisted of 6,300 metres in 75 reverse-circulation (RC) holes and four diamond drill holes, tested four of seven surface anomalies on the 250-sq.-km property. The anomalies represent areas of greater intensity within a broader, 8-km-long-by-1-km-wide soil and coincident geophysical anomaly.

Thirty RC holes were drilled in the Area 3 South zone, 26 in the Area 3 West zone, 11 in the Area 3 Central zone, and the remainder in the Area 1 zone.

Of these, 44 hit at least one zone over 5 metres in width, averaging a minimum of 1 gram gold per tonne; three of the core holes were drilled at Area 3 West; and the remaining one was drilled in Area 3 South.

At the newly discovered Area 1 zone, seven of eight drill holes intersected mineralization to a maximum depth of 60 metres. Gold values ranged from 0.6 to 5.37 grams over core lengths of 5 to 35 metres. The best interval was encountered in hole A1R-2, which hit 35 metres (from 35 to 70 metres) of 5.37 grams. The lowest-grade interval was intersected in hole A1R-7, which returned 0.6 gram over 5 metres (from 5 to 10 metres).

The holes were collared on three sections spaced 80 metres apart, within a target area 800 metres long by 100 metres wide. Several of the holes bottomed out in mineralization, and, based on the results, Samax believes holes A1R-7 and A1R-8 were drilled off strike of the mineralized horizon.

(The latter hole failed to intersect mineralization.)

The best results were derived from the Area 3 West zone, where only one hole failed to intersect mineralization. The zone lies 1.4 km east of Area 1 and contains several smaller, higher-grade intervals within wider zones of mineralization. Gold values ranged from 0.59 to 18.85 grams over core lengths of 1 to 115 metres.

Within Area 3 West, core hole 3WD-3 returned 1.96 grams over 115 metres (from 112 to 227 metres). The hole bottomed out in mineralization after hitting 12.39 grams from 221 to 224 metres.

Other highlights include: hole 3WR-164, which intersected 44 metres (from 11 to 55 metres) averaging 3.59 grams and ended in mineralization; hole 3WR-163, which intersected 30 metres (starting from surface) averaging 2.46 grams; and hole 3WR-161, which returned 45 metres (from 40 to 85 metres) of 1.43 grams.

Although the zone was discovered last year, the recent drilling extended the mineralization and indicates a possible increase in grades and widths at depth. To date, drilling has reached a vertical depth of 250 metres below surface.

Along strike of Area 3 West, 700 metres to the east, results from the Area 3 Central zone ranged from 0.39 gram over 27 metres to 0.86 gram over 17 metres. Based on geological mapping, Samax believes drill holes may have intersected only the southern margins of the favorable host rocks.

A further 900 metres to the east, drilling at the Area 3 South zone confirmed and extended previous indications of shallow mineralization. Four mineralized intervals were intersected by drilling, including: 10 metres averaging 1.33 grams; 10 metres of 1.65 grams; 15 metres of 1.2 grams, and 10 metres of 1.04 grams.

Although more work has yet to be done, Samax’s chief executive officer, Michael Martineau, believes the potential exists for a significant deposit.

“Certainly our target would be for a 1-million-oz. deposit,” says Martineau.

“We feel the width and grade of mineralization, along with the size of the overall anomaly, indicated that we can potentially meet that target.” Iron formation

Regionally, the Geita property occupies the eastern third of the 16-km-long Geita mining district. It lies roughly 6 km east of the historic Geita mine, which, from 1938 to 1962, produced 950,000 oz. gold. That mine is currently owned by Ashanti Goldfields (ASH.U-T), which recently revised its resource estimate for the former producer to 3 million from 1.3 million oz. Ashanti is attempting to extend the 4.5-km-long trend of mineralization through further drilling, while, at the same time, conducting metallurgical tests for a feasibility study.

Traditionally, the Geita area has been regarded as an iron-formation district, though Martineau says most of the mineralization is hosted by volcanic tuffs and, to a lesser degree, intrusive rocks.

So far, three mineralized zones have been recognized at Geita, and these, in turn, are hosted by a 100-metre-thick sub-unit of cherts and volcanic tuffs.

The sub-unit is part of a larger, 300-metre-thick sequence of basic volcanics, volcanic tuffs, cherts and black shales. Drilling indicates two of the mineralized zones range in true thickness from 10 to 30 metres, whereas the third is narrower, at 5 metres.

Mineralization is predominantly replacement-type with little quartz, and is associated with sulphides. Oxidation occurs down to a depth of 90 metres, after which primary sulphide mineralization occurs in the form of pyrite, pyrrhotite and, to a lesser degree, arsenopyrite. Visible gold has been observed on the outside of pyrite grains.

Structurally, the mineralized units dip vertically and strike west-northwest, parallel with the trend of the larger soil anomaly. The units are folded, and, to date, drilling has been focused on the southern limb of the fold and on a small portion of the fold nose (Area 3 South).

Between the drilled areas, the soils contain weaker concentrations of gold, which Martineau believes could simply be a function of laterite cover or surface leaching.

“Initially, this gave us problems in our interpretation,” he says, “but since then our understanding has increased.”

Nonetheless, Samax has begun a magnetic survey in an effort to trace the underlying mineralized horizons. Although the company will also use satellite radar imaging, which Martineau says has been successful in other areas, the bulk of its exploration efforts will continue to employ geochemical techniques and drilling.

Starting in early October, a 5,000-metre second phase of drilling will commence. Martineau says emphasis will be given to extending known mineralization, as well as testing several other anomalies along the folded structure.

“We have always felt this was a major district,” he says. “The question for us to answer now is, How far do these zones run along strike?” Golden Pride

Meanwhile, the company’s Australian-based joint-venture partner, Resolute Samantha, is continuing with development of the Golden Pride deposit.

Situated 160 km southwest of Geita in the Nzega greenstone belt, the deposit is potentially minable by open-pit methods. It was discovered by Samax in 1991, when the company held the ground independently. In September 1994, Samax entered into a joint-venture agreement with BHP, but in early 1996 the major judged the project to be below its expectations. Consequently, Resolute struck a deal with Samax and, in June 1997, the two equal partners signed a definitive development agreement with the Tanzanian government.

Production is targeted for mid-1998 at a annual rate of between 140,000 and 170,000 oz. gold. Resolute is acting as project manager and funding the first US$18 million of the estimated capital cost of US$50-million. For the remainder, the company will arrange for non-recourse project financing.

Samax’s share of the project debt is US$16 million, which will be repaid out of its half-share of operating revenue from future production.

The average cash costs over the mine’s 10-year life span are pegged at US$210 per oz.; the stripping ratio at 6-to-1. About 15% of the total gold content occurs in native form and is amenable to simple gravity methods. The remaining material will be processed by conventional carbon-in-leach methods.

Recovery rates from the two methods are expected to exceed 90%.

Proven reserves stand at
8.5 million tonnes grading 3.3 grams gold, whereas the probable figure is estimated at 1.3 million tonnes grading 3.09 grams gold. These reserves lie in a total geological resource of 27.7 million tonnes grading 2.6 grams gold, based on a cutoff grade of 1 gram gold.

Oxidation at depth

Gold mineralization occurs in a series of mineralized zones up to 40 metres wide which strike east-west and dip nearly vertically. The main orebody comprises three strands of a regional transgressive shear and is hosted by siltstones and volcanic ash tuffs within a larger sequence of shales. The mineralized resources have been traced over a length of 3.1 km and down to a depth of 150 metres. Oxidation occurs to depths of 100 metres below surface.

Mineralization remains open along strike and at depth. (Some previous deep holes intersected mineralization down to depths of 240 metres.) For the upcoming year, US$1.5 million has been earmarked for exploration of the surrounding 3,500 sq. km. (Under the terms of the agreement with Samax, Resolute must fund the first US$3.5 million in exploration.) Follow-up work will be applied to several prospective geochemical and geophysical anomalies which occur in the same formation that hosts the Golden Pride deposit. This year alone, US$800,000 was spent exploration programs at Golden Pride.

Samax also plans to continue with exploration programs on other properties it holds in Tanzania and elsewhere in Africa, some of which are already at the drill stage. The company is well-funded, with US$7.5 million still left from its initial US$24-million public offering made last December. So far this year, the company has spent a little more than US$5 million of the acquired funds on exploration.

Samax also receives revenue from its 50.4% operating interest in the Prestea Sankofa tailings project in Ghana. The 20,000-oz.-per-year operation is held in partnership with Ghana National Petroleum (39.6%) and the Ghanaian government (10%).

Samax also holds the mining rights to 90 sq. km of ground immediately east and west of the main reef of the Prestea vein system, which provided ore for past-producers in the area.