Sulliden’s drills expand Shahuindo’s gold (April 12, 2010)

VANCOUVER–Long gold intercepts from Sulliden Gold’s (SUE-T) Shahuindo project in Peru could fill an undrilled gap between the project’s two main deposits with mineralization.

On the heels of a positive preliminary economic assessment (PEA), Sulliden kicked off a 26-hole drill program at Shahuindo in December. Results from the program include some of the highest gold grades and longest intercepts from the project to date.

The northwest-trending deposit at Shahuindo has until now been composed of two zones — the 2-kmlong San Jose zone in the northwest and the shorter but wider East zone in the southeast. The 500-metre-long area in between, known as the Gap zone, had only seen limited drilling and was assumed barren in resource estimates.

Now the Gap zone has seen its first serious drilling effort and the results are intriguing. Hole 113 cut 75.7 metres grading 1 gram gold per tonne and 3.4 grams silver per tonne, starting 46 metres downhole. Hole 112 returned 49 metres averaging 1.3 grams gold and 2.8 grams silver, from 14 metres depth. And in one of the best results from the project, hole 29 intercepted 130 metres from surface grading 0.94 gram gold and 97.5 grams silver.

Sulliden also punched holes into the western edge of the East zone and the results indicate the continuity of mineralized structures at depth. Hole 24 returned 27 metres of 1.1 grams gold and 8.2 grams silver, hole 25 cut 26 metres of 1.07 grams gold and 3.5 grams silver, and hole 33 hit 45 metres of 0.51 gram gold and 9.6 grams silver.

And in the main San Jose zone, hole 106 returned 73 metres carrying 0.49 gram gold and 4.7 grams silver from 60 metres depth, while hole 108 cut 11 metres of 1.09 grams gold and 18 grams silver.

All intercepts are true widths.

Sulliden was limited to a small drill program this time around as it only held a Category 1 drill permit. The company has since applied for a Category 2 permit and expects to receive it in May, when it will kick off an extensive drill program to expand Shahuindo.

The Shahuindo PEA looked at an open-pit, heap-leach operation processing only the project’s oxide resource. For capital expenditures of $89.4 million, Sulliden could develop a mine at Shahuindo delivering 15,000 tonnes of ore to the leach pads daily, to produce 94,866 oz. gold and 347,948 oz. silver annually. Current resources would carry the operation for seven years.

Based on a gold price of US$775 per oz., Shahuindo carries a pretax net present value (NPV) of US$73.3 million, using an 8% discount rate, and should generate a 30.8% internal rate of return (IRR). Increasing the price of gold to US$875 per oz. brings the NPV to US$119 million and the IRR to 43.3%.

Shahuindo’s oxide resource totals 44.5 million indicated tonnes grading 0.58 gram gold and 13.2 grams silver plus 17.7 million inferred tonnes averaging 0.49 gram gold and 6 grams silver.

The president and CEO of Sulliden, Peter Tagliamonte, says the company still views Shahuindo as “significantly underexplored” and sees the PEA as an excellent starting point. The project has seen 40,000 metres of drilling, of which only 7,500 have been drilled since 2004. The exploration delay stemmed from a 5-year legal battle over property rights. After more than 40 separate court cases, petitions, motions, appeals and administrative challenges, Sulliden paid its adversary $13.5 million, a 10% interest in Shahuindo, and a 1.5% net smelter return royalty to settle the dispute.

Shahuindo is located in northern Peru, about 80 km south of regional capital Cajamarca and about 15 km west of Cajabamba city. At 2,800 metres elevation, the project is a much more pleasant working environment than Barrick Gold’s (ABX-T, ABX-N) Lagunas Norte gold mine or Newmont Mining’s (NMC-T, NEM-N) Yanacocha gold mine, which are at 4,200 metres elevation, and 20 km and 35 km away, respectively.

Sulliden’s share price was unchanged on news of the latest drill results from Shahuindo, staying at 70¢. The company has a 52-week trading range of 45¢-$1.06 and 133 million shares outstanding.