Viceroy rolls the dice in Argentina

Vancouver — Northwestern Argentina is an emerging gold district relative to the prolific, more mature El Indio and Maricunga belts across the mountains in neighbouring Chile. Yet junior companies such as Viceroy Exploration (VYE-V) seem to believe that the Argentine side offers better potential to find deposits that can be developed into low-cost mines.

Granted, Chile’s El Indio belt has world-renowned gold deposits, including Barrick Gold‘s (ABX-T) Pascua-Lama deposit, which contains a whopping 16.8 million oz. gold and 594 million oz. silver in reserves. The Maricunga belt has mega-deposits too, notably the Cerro Casale gold-copper project being advanced by Placer Dome (PDG-T) and partners Arizona Star Resource (AZS-V) and Bema Gold (BGO-T). But the lack of access and infrastructure in these regions, combined with the high costs of building and operating mines at high altitudes, poses challenges that only deep-pocketed majors can conquer. It will cost more than US$1 billion to build a high-altitude (about 4,600 metres) mine at Pascua-Lama, and Cerro Casale’s capital costs are even higher, at about US$1.65 billion.

Exploring the eastern slopes of the Andean Cordillera is less costly and more manageable for juniors that hope ultimately to develop what they find. Viceroy Chairman Ronald Netolitzky says the company was initially attracted to the region because it saw potential for deposits with at least a few million ounces of gold that were amenable to low-cost mining methods.

The “new” Viceroy acquired the properties after they were spun off from the “old” Viceroy Resources last year. The company also merged with Trillion Resources and appointed Trillion’s former president, Patrick Downey, as its new president.

Today Viceroy is exploring exclusively on Argentina, where it owns five properties, including its cornerstone Gualcamayo gold project in northern San Juan province and southern La Rioja province.

Netolitzky says Gualcamayo offers “near-term production potential,” while the remaining properties give the company a major presence in an emerging, yet highly prospective and busy, gold camp.

“Gualcamayo is in a rugged, mountainous region, but it’s not a remote, high-altitude project,” Netolitzky says. “The region has a pleasant, Arizona-like climate, and the infrastructure is excellent. It’s road-accessible, and a power line goes through the area.”

Exploring for gold in rugged terrain is nothing new for Netolitzky, who played a major role in discovering and developing the Snip, Eskay Creek and Brewery Creek gold mines, all of which are in remote or rugged regions of northwestern British Columbia and neighbouring Yukon.

“It’s much easier to explore in Argentina [than in northern British Columbia], because there’s 100% outcrop,” he says. “It’s in a mining-friendly region, where the land isn’t suitable for anything else, not even agriculture.”

The 250-sq.-km property is accessible by a 3-hour drive along a paved highway from the capital of San Juan, followed by an 18-km gravel road. The site ranges in altitude from 1,600 to 2,300 metres.

Downey says the major attraction at Gualcamayo was that previous operators (including Viceroy’s predecessor) had spent more than US$12 million advancing the project to the stage where it showed near-term production potential.

Previous work outlined a deposit known as the main Quebrada De Diablo (QDD). At last report, this deposit contained an indicated resource of 12.7 million tonnes grading 1.17 grams gold per tonne, plus an inferred resource of 22.4 million tonnes grading 1.02 grams gold.

The Amelia Ines skarn-hosted zone, 600 metres to the northwest, has a further inferred resource equivalent to 230,000 contained ounces gold, with an average grade of 2.63 grams gold per tonne. Numerous other targets require further exploration and drilling before resources can be calculated.

Viceroy’s predecessor became involved in the project in the 1990s through a joint venture with previous operator Anglo American (AAUK-Q). Anglo initially focused its efforts on the higher-grade, skarn-hosted targets, such as Amelia Ines and Magdalena.

After taking control of the project, Viceroy stepped back and launched a broad-based surface exploration program that focused on the controls of the mineralization.

“That’s when we discovered that the old structural models were wrong,” Netolitzky says, adding that subsequent exploration revealed subtle, epithermal gold mineralization close to the skarns. “We saw lots of parallel mineralized structures, and we saw that all mineralization here is proximal to the intrusive body.”

Gualcamayo is now recognized as a sediment-hosted, structurally controlled, intrusive-related gold occurrence. Gold mineralization is concentrated in stockwork-fractured carbonates, carbonate breccias and intrusive breccias within, or proximal to, a porphyry intrusive complex.

Viceroy carried out more than 11,000 metres of drilling to outline resources in the main QDD deposit. The system is still open above and below the existing reserve base.

This year, the company plans to carry out an expanded drill program of about 9,000 metres, including 4,000 metres in the main QDD deposit area, to upgrade existing resources to the measured, indicated and inferred categories.

“With additional drilling, we think we’ll be able to outline enough resources to justify a low-cost, open-pit, heap-leach mine,” Downey says. “Our goal is to bring the project to the prefeasibility stage by year-end.”

An initial scoping study, planned for the fall of this year, will examine the potential for producing in the range of 130,000-150,000 oz. annually. Preliminary metallurgical work shows that most of the material is amenable to heap leaching, with bottle-roll tests returning 85-92% recoveries. Another benefit is that the rock is soft and oxidized, thus making for easier drilling and blasting and reducing crushing costs. One challenge of operating in this arid region, though, is securing sufficient water for a mining operation.

The initial, 5,000-metre phase of reverse-circulation drilling is designed to test five exploration targets on the property. Four of these are 1.5-3 km north and west of the existing QDD deposit, and near the Amelia Ines and Magadelana targets discovered by Anglo American in the 1980s. The fifth is near the QDD deposit. Previously, surface sampling on one of these targets returned 3.4 grams gold over 50 metres and 1.5 grams gold over 60 metres.

Reverse-circulation drills will be employed, as recoveries are better than they are from core drilling, which tends to lose some of the fine-grained gold.

Elsewhere in the region, Viceroy will see renewed exploration this season at its Las Flechas project. Earlier this spring the company signed an agreement that allows Tenke Mining (VYE-V) to acquire a 75% controlling interest in Las Flechas by spending US$4.5 million over five years.

Las Flechas is in northern San Juan province, between Chile’s El Indio and Maricunga mining districts. Tenke has been active in this region for the past four years, and is currently drilling its Vicuna and Josemaria projects for both epithermal gold deposits and copper-gold porphyry systems.

Past work at Las Flechas has delineated six major gold targets with silver enrichment. Subsequent drilling has confirmed the surface gold-silver mineralization, and shown potential for a large, high-sulphidation epithermal gold-bearing system.

Down the road, Viceroy plans to carry out more drilling at the Salamanca property, 10 km north of Gualcamayo and in the same geological trend.

Previous drill programs outlined a sediment-hosted, skarn-related gold zone with a strike length exceeding 600 metres and a thickness of up to 55 metres. The zone is still open to the north and south and at depth. Three core holes were drilled to test the zone, and all returned about 1.7 grams gold over 50 metres in length.

Viceroy’s discovery costs to date are about US$8.57 per oz. The junior has 28.7 million shares outstanding (31 million fully diluted) and about $7 million in its treasury.