Exeter Defines Big Caspiche Resource

VANCOUVER– The initial resource estimate for Exeter Resource’s (XRC-V) Caspiche gold-copper project in Chile is in and it is big.

The property is now home to an inferred oxide resource of 74 million tonnes averaging 0.55 gram gold per tonne plus an inferred sulphide resource totalling 375.9 million tonnes at 0.61 gram gold and 0.25% copper. Combined, the oxide and sulphide zones host 8.73 million oz. gold; the sulphide zone contains 2.1 billion lbs. copper.

However, the new resource does not include several significant holes drilled this year, such as the 1,214-metre intercept grading 0.9 gram gold and 0.33% copper from hole 32, as results were received after the calculation was under way. The company plans to calculate another resource starting at the end of May that should be available in September.

Exeter started exploring Caspiche in late 2005 after signing an option agreement with Anglo American (AAUK-Q , AAL-L). In its first two years of activity, the junior found little more than what Anglo already knew about the property: that it hosted a thin oxide blanket containing reasonably good gold mineralization.

But in 2007, Exeter decided to punch one deep hole to see what lay beneath. That hole returned the expected 174 metres of 0.88 gram gold per tonne from the oxide layer but then hit 130 metres of sulphide mineralization, hosted in microdiorite porphyry, that graded 0.88 gram gold and 0.22% copper. The hole ended in mineralization.

Exeter then embarked on a mission to define the deep sulphide zone at Caspiche and with this resource estimate has reached its first milestone. The company envisions first mining the shallow oxide layer, using the gold contained therein to pay for mine development. After that, the deeper sulphide mineralization in the porphyry would be mined.

In fact, the resource calculation also estimated the division between open-pit and underground resources. The oxide resource is completely contained in an open pit, as are 197.5 million inferred sulphide tonnes grading 0.61 gram gold and 0.22% copper. The underground sulphidic portion adds another 178.4 million inferred tonnes grading slightly better in terms of both gold and copper.

Exeter is close to owning Caspiche outright; the deal with Anglo required the junior to spend US$2.55 million on exploration, including at least 15,500 metres of drilling, to earn 100% of the project. Anglo retains a 3% net smelter return royalty.

Exeter completed 5,000 metres of drilling at Caspiche in 2007 and another 4,500 metres in 2008. From now until September 2010 the company plans to spend $16 million at Caspiche, focusing on expansion and infill drilling as well as infrastructure and metallurgical studies.

Exeter is open about the fact that it wants to find a partner or buyer for Caspiche: “The company’s ultimate intention with regards to Caspiche is to negotiate a transaction with a major mining company,” says company chairman Yale Simpson.

Exeter wants to bring its other main asset, the Cerro Moro gold-silver project in Argentina, into production itself. The high-grade vein system project is in Patagonia, roughly 100 km southwest of the port town of Puerto Deseado.

The low-sulphidation epithermal gold and silver mineralization at Cerro Moro is associated with quartz veins that strike over distances ranging from 240 to 1,250 metres. Exeter has focused primarily on the Escondida vein, which strikes for 2 km and is divided into four mineralized zones, each roughly 300 metres long.

Drilling at Escondida has returned numerous short, high-grade hits such as 14 metres of 5.7 grams gold and 20 grams silver, 2 metres of 54 grams gold and 3,000 grams silver, and 5.6 metres of 302 grams gold and 6,623 grams silver.

Exeter acquired 176-sq. km Cerro Moro project from AngloGold Ashanti (AU-N, AGD-L), which retains a 2% net smelter return royalty. If Exeter builds a mine, a mining company owned by the government of Santa Cruz province called Fomicruz will have a 5% stake in the property.

Exeter also just swung another deal with Fomicruz giving it 80% ownership in a 760-sq.-km set of claims immediately adjacent to Cerro Moro. Geophysical survey data indicate the Escondida structure could extend onto the Fomicruz property and now Exeter will start drill testing that possibility.

The agreement requires Exeter to spend US$10 million on exploring the large claim block, acting as manager and sole financier. Fomicruz will repay a portion of those costs from half of its share (stemming from its 5% ownership stake) of net revenue from operations.

Cerro Moro is sufficiently shallow and high grade that Exeter reckons it can develop a small operation on its own. The company envisions a mine churning out 150,000 to 350,000 tonnes annually.

Exeter is well funded to continue its efforts at both Caspiche and Cerro Moro after completing a bought-deal financing that brought in $28.98 million. The company sold 12 million shares at $2.40 per share.

On news of the Caspiche resource estimate, Exeter shares gained 40¢ to close at $3.68. The company has a 52-week trading range of $1.05 to $5.07 and has 62 million shares outstanding.