Argentinian porphyry attracts Peregrine Metals (May 31, 2010)

Peregrine Metals (PGM-T) is fast-tracking a preliminary economic assessment (PEA) on a solvent extraction-electrowinning (SX/EW) copper heap-leaching operation for its near-surface higher-grade copper mineralization at the Altar porphyry copper-gold project in Argentina.

The potentially leachable copper target could have a core zone with potential quantity and grade in the range of 60 million to 100 million tonnes averaging between 0.60% copper and 0.70% copper as part of a larger leachable copper target whose potential quantity and grade is estimated to be in the range of 200 to 400 million tonnes grading between 0.40% and 0.50%, the company’s vice-president of exploration, Jeff Toohey, outlined in a statement.

Four drills are currently turning at Altar, one of the largest recently discovered porphyry copper deposits in Latin America. The deposit sits at an elevation of 3,100-3,500 metres about 8 km from Argentina’s border with Chile, and is about 23 km by road from Xstrata’s (XSRAF-O, XTA-L) feasibility stage El Pachon porphyry copper project.

Altar is in San Juan province, an area that also hosts Veladero, Barrick Gold’s (ABX-T, ABX-N) producing gold mine, as well as the gold major’s advanced-stage Pascua-Lama development project. Yamana Gold’s (YRI-T, AUY-N, YAU-L) producing Gualcamayo gold mine is also in San Juan.

The current National Instrument 43-101 measured and indicated resource for Altar at a 0.4% copper cutoff grade is 251 million tonnes grading 0.52% copper and 0.07 gram gold per tonne for contained copper of 2.87 billion lbs. and 570,000 oz. gold.

In addition, there is 244 million tonnes grading 0.54% copper and 0.06 gram gold for contained copper of 2.93 billion lbs. and 440,000 oz. gold. The resource was based on 64 drill holes completed prior to 2010, and the deposit remains open-ended laterally and at depth. A revised resource estimate is expected in the fourth quarter of 2010.

The deepest hole assayed to date, drill hole 43, returned 719 metres averaging 0.72% copper and the bottom 322 metres averaged 0.90% copper. An 81-metre extension of this hole drilled to 1,010 metres earlier this year awaits assay results.

Peregrine says Altar has “excellent access, relatively-low elevation, ample water sources onsite and the topography is very suitable for mining, processing and heap-leach pad infrastructure.”

All of that gives Peregrine “an important competitive advantage that we will fully investigate starting with the completion of an independent, NI 43-101 compliant, PEA over the next ten months,” Peregrine Metals’ president, Eric Friedland, said in a statement.

The company has also identified large-scale epithermal gold potential in a 2 km by 1.5 km zone along Altar’s eastern edge. Rock chip samples collected returned assay values of up to 14.1 grams gold, 400 grams silver and 12.4% copper.

Peregrine Metals began trading in March and on April 8, Rodney Cooper, an analyst at Dundee Securities in Toronto, initiated coverage of the junior with a buy recommendation and a 52-week target price on the stock of $2.20 per share. Peregrine at presstime was trading at about 75¢ per share.

“Multiple value-drivers include the potential for a lower capital cost open-pit copper-leaching project, a much larger flotation milling project, and two intriguing gold opportunities,” Cooper writes in a note to clients. “In addition, a second copper porphyry deposit near Altar offers longer term exploration potential. With convenient access to infrastructure on the Chilean side of the border, a transportation corridor can be readily developed to access the site.”

And as a “relatively unknown participant in the marketplace, with control of an extraordinary asset,” Cooper added, Peregrine Metals is a “unique and undervalued investment opportunity.”

Not only is the copper resource open laterally and at depth, Cooper writes, but a second copper porphyry system, Quebrada de la Mina, adjacent to Altar, is also undergoing early stage prospecting this year.

In addition, the epithermal gold potential has yet to be defined, Cooper says. “Extending over 2 km by 1.5 km along the eastern edge of Altar, 477 samples of 200 quartz ledges has returned values up to 14 grams gold, 400 grams silver and 12% copper. Senior gold mining companies active in the region are likely to be very interested in this high-sulphidation epithermal opportunity.”

Peregrine describes Altar as a large Andean-style porphyry copper deposit. The alteration zone takes up an area measuring over 3 km by 2 km with a coincident induced polarization geophysical anomaly of roughly the same size.

The copper mineralization within the upper 300 metres of the deposit includes supergene digenite-covellite and hypogene chalcocite-bornite replacing earlier chalcopyrite. In several drill holes, higher-grade copper mineralization is present at surface, and the average depth of the leached capping is roughly 80 metres.

In January, Peregrine started detailed outcrop sampling, excavator trenching, continuous rock chip sampling of road cuts and trenches, and an induced polarization and resistivity geophysical survey to further define the gold and silver potential and to guide preliminary drill testing.

The leached capping of the porphyry copper deposit transitions upwards into the roots of the highsulphidation epithermal gold-silver system and together this large volume of material represents an attractive, potential bulk-tonnage, gold-silver target that likely would be removed as pre-stripping in accessing an eastern portion of Altar’s porphyry copper mineralization.

About 80 holes, totaling 25,000 metres of core are set to be drilled this year as part of the PEA.

In addition, the company will wrap up the first phase of a column leach metallurgical testwork program, continue environmental baseline and impact studies, and complete road, power, water and sulphuric acid optimization studies. The PEA is estimated to cost about US$11.35 million.

Since drilling began in 2003, a total of 112 holes have been completed to the tune of about 46,000 metres.

If the results of the SX/EW PEA are favourable, Peregrine says it plans to start a prefeasibility study immediately.

The company holds a 100% interest in the Altar project, subject to a 1% net smelter return (NSR) royalty granted to Rio Tinto (RTP-N, RIO-L) and another 1% NSR royalty granted to the underlying concession owner. Peregrine has the option to purchase the second 1% NSR from the underlying owners at any time for US$1 million.

The junior has a 52-week trading range of 72¢-$1.16 and 117.5 million shares outstanding.