Focus Sees New Promise In Old Peruvian Mine

SITE VISIT

HUARAZ, PERU — The 600-km-long mineral belt that runs along the northern half of Peru’s coastline is home to a lot of metal. Some of the biggest and richest mineral deposits ever found come from this area, and its mines have made Peru the world’s top silver producer and sixth in the world in terms of total metal output.

Metal extraction here dates back to the Incas. And in many places their descendants still know of gold showings or silver veins, and still extract the precious metals from the ground by hand.

The technological advances of recent decades in the exploration world have passed many of these places by. Small-scale mines are mapped with pen and paper, assay results carefully scribed into a logbook. But just because the data is not digital does not mean it is not valuable.

It is in that gap between old and new that Focus Ventures (FCV-V) fits. Focus is the brainchild of a few explorationists with significant experience in Peru who realized many potentially great projects were falling through the gaps of technology and time.

Simon Ridgway, Focus’s chairman, has spent 20 years exploring and mining worldwide, and raised more than $150 million on the markets in the last two years.

Mark Slauenwhite, the company’s vice president of exploration, is a seasoned geologist who has lived in Peru for the last 13 years, during which time he helped discover the Pierina and Alto Chicama mines.

And Dave Cass, president and CEO of Focus, has spent 21 years exploring the world for minerals, including four in Peru as senior country geologist for Anglo American (AAUKY-Q, AAL-L).

To find a project for Focus, the new team set out to assess dozens of old ones.

“They were projects that fell through the crack — technology moved on and the data got left behind,” says Slauenwhite. “We’d go in and if we saw interesting rocks, we would ask for the maps. Then we’d take these wheelbarrows full of maps and start to put the puzzle together.”

The project they latched on to, named Nueva California, is in northern Peru. It’s near the town of Huaraz and at the base of Peru’s biggest mountain, Huascaran, which reaches 6,700 metres elevation. Nueva California has been home to a small underground mining operation for 26 years.

Miners chase gold-endowed argillite flumes and silica veins a few hundred metres into the hillside before the eucalyptus beams bracing a tunnel snap and the tunnel collapses. Ore is not crushed but simply forced through a 20-cm grate by men with sledgehammers, then leached with cyanide. The average head grade is 8 grams gold per tonne and the cut-off grade is 5 grams gold. The 650,000 tonnes of ore extracted to date have produced roughly 70,000 oz. gold and 450,000 oz. silver.

The high-grade material is what first catches the eye at Nueva California, but it is the lower-grade, bulk-tonnage potential around the high grade shoots that has Focus interested.

“This area — it was the perfect geologic storm,” says Slauenwhite. “There was a lot of stuff going on here fifteen million years ago. It was a big, wet, sloppy volcanic event.”

The Focus team is confident that this “big, sloppy event” left behind a significant load of precious metals in the rocks at Nueva California. And with a second round of drilling about to kick off, they hope they are about to prove themselves right.

Nueva California certainly has a prospective address. It sits in the central portion of the renowned polymetallic mining district of the Western Andean Cordillera of central Peru. The belt stretches for roughly 600 km.

Near the north end of the belt is the famous Yanacocha mine, owned by Newmont Mining (NMC-T, NEM-N), where more than 80 million oz. gold have been delineated and some 60 million already mined from an oxidized dome. At the south end of the trend is the Cerro de Pasco mine, which has already produced 2 billion oz. silver and carries a combined lead-zinc grade of better than 10%.

In between, sit several record-breaking deposits. For example, Antamina, the world’s largest skarn deposit, is roughly 75 km southeast of Nueva California.

Nearby, the Uchuchacua deposit is producing from a 135-million-tonne deposit grading 520 grams silver. Glencore’s Iscaycruz mine, 100 km to the south, taps into the highest-grade zinc deposit in the world, where the zinc level averages 18%. And just 35 km south of Nueva California is Barrick’s Pierina mine, an operation that has pulled 7 million oz. gold from a large, low-cost open pit.

“This is one of the most metal-enriched places on earth,” says Slauenwhite of the Peruvian mineral belt. “And because of the tremendous level of volcanic activity, there is tremendous diversity in the types of deposits here –there are porphyries, skarns, and low-, intermediate-, and high-sulphidation deposits.”

The gold and silver at Nueva California are hosted in the granodiorite of the Cordillera Blanca batholith, at its western edge where it contacts the older rocks of the Goyllarisquisca group. The contact between the intrusive and sedimentary rocks creates a northwest- trending regional fault, known as a Range Front fault.

At Nueva California, the only surface indication of a deposit at depth is a small horseshoe-shaped outcrop. The Incas washed gold from the outcropping rocks; the stone basins they used to crush and then wash the ore were found on the mountainside and now sit beside the door to the mine building.

The rest of the deposit is covered by gravel, the result of sitting at the foot of a large mountain that sheds rock constantly. The mountain’s erosion has created a moraine layer up to 100 metres thick.

When Cass and his team acquired Nueva California, they found themselves with piles of data from 26 years of mapping and sampling as the underground mine progressed, but there was not a computer in sight.

On top of that, the maps all used different scales, different coordinate systems, and were oriented in different directions.

They took 800 hand-drawn maps and data logs from 7,850 underground samples and set to work. Even with a person working full time on digitizing maps, it took three months before the team could assemble a deposit model.

Now they have one. Cass and Slauenwhite believe the black argillite “dykes” and associated hydrothermal breccias with silica veining that carry high-grade gold are surrounded by a silicified granodiorite carrying low-grade precious metal mineralization. The intrusive system reaches to roughly 300 metres depth, where it encounters the Range Front fault.

The volcanic event that created this deposit occurred over tens of thousands of years, and the resulting deposit is difficult to understand. The Focus team, for example, is not sure whether the argillite acted as a conduit for the gold-bearing fluids of an epithermal event, which then moved into the surrounding granodiorite, or whether the fluids moved through the porous granodiorite and then entered the argillite.

To help clarify their model, Focus completed a high-resolution resistivity survey as well as a chargeability survey. The resistivity data show an “impressive high” extending from the lower mine working north for 400 metres and stretching 150 metres east-west. And the chargeability data returned a similar result.

Interestingly, the anomalies do not extend to the northeast, which is where the mine’s high-grade workings lie. Sampling the underground workings in this area produced such results as 10.9 grams gold and 128 grams silver over 7.8 metres, 8.2 grams gold and 199 grams silver over 8.9 metres, and 38 grams gold and 3,500 grams silver over 1.7 metres.

It was in that northeast area that Focus punched its first four drill holes last year. All four holes intersected epithermal-style gold mineralization, with higher grades associated with silicified and hydrothermally brecciated sediments, just as expected. Holes 2 and 3 were drilled from the same pad, located just north
east of the historic open pit. Hole 2 cut 38.2 metres grading 1.7 grams gold and 20 grams silver, starting at surface. The mineralized intercept in hole 3 also started at surface but extended to greater depth; the hole returned 69.6 metres carrying 1.84 grams gold and 22 grams silver.

Hole 1, collared 100 metres to the northwest, cut two mineralized intercepts: 20.6 metres grading 0.88 gram gold and 27 grams silver from 14 metres depth, followed by 10.9 metres averaging 1.33 grams gold and 39 grams silver from 48 metres downhole. And hole 4, situated 150 metres northeast of the drill pad for the holes 2 and 3, returned 22 metres of 1.45 grams gold and 21 grams silver, starting 25 metres below surface.

So, the holes hit strong mineralization, but in each hole, mineralization ended at a low-angle fault. Slauenwhite believes these flat faults and antithetic faults came after the mineralizing event, and that movement along the faults has shifted the upper layer of the deposit to the east. As such, the high-grade workings in the northeast actually tap into an eastward-shifted portion of the zone that, rather than sitting on top of the roots of the system, sits atop unmineralized granodiorite.

That means the geophysical anomalies running north along the west side of the property should be highlighting the lower portion of the system, below the listric faulting. If the team’s concept is correct, the lower part of the zone should extend all the way down to the Range Front fault, some 300 metres below surface, providing lots of room for a bulk-tonnage deposit.

In the 2010 program, which is just getting underway, Focus will use two drill rigs to test both areas of interest. One rig will return to the high-grade workings in the project’s northeast, while a second rig will test the geophysical anomaly to the west. With 4,000 metres of drilling planned, Focus is eager to test its theory.

Focus is still a fairly new endeavour. Ridgway and his team started raising funds and found Nueva California in early 2009, when the company was still listed on Toronto’s NEX board.

Under the terms of the option agreement, Focus can earn 100% of Nueva California by spending US$3 million on exploration and making cash payment totalling US$3 million over four years.

To complete the acquisition, Focus then has to pay the owner, a private Peruvian company, US$4 per oz. of gold reserve as determined by a feasibility study. If a mine at Nueva California produces more gold than defined in the study, Focus must also pay US$4 per oz. on those additional ounces, up to a maximum of 2.5 million oz. in total, or US$10 million.

In September, Focus listed on the TSX Venture Exchange, debuting at 65¢. Since then the company’s share price has almost doubled, closing recently at $1.15.

In November, Focus closed a non-brokered private placement, selling 8 million units at 75¢ apiece to raise $6 million. Each unit comprised a share and half a warrant, with warrants exercisable at $1 for two years. Focus has 28 million shares outstanding, 40 million fully diluted.