Rio Alto rises on La Arena drilling

VANCOUVER — With its La Arena gold mine having just completed its first year of commercial production, Rio Alto Mining (RIO-T) is finding time to probe some nearby exploration targets, and results from the first set of holes are promising.

Rio Alto has identified four exploration targets at La Arena: La Colorado West, La Colorado East, Esperanza South and Esperanza North. A mapping, sampling, geophysics and reverse-circulation (RC) drill campaign in late 2012 focused on the La Colorado zones and returned some prospective results, including a 10-metre rock-chip line that averaged 3.9 grams gold per tonne from La Colorado West.

This year Rio Alto returned to La Colorado West with a diamond drill, and hit gold mineralization in all 19 holes. The best result came from hole 2, which cut 78 metres grading 1.34 grams gold starting from 14 metres downhole. Hole 18 produced 84 metres of 1.16 grams gold starting from just 2 metres downhole, with an intercept that included 6 metres of 10.3 grams gold.

Other results include 0.46 gram gold over 82 metres in hole 1, 0.94 gram gold over 30 metres in hole 3 and 0.29 gram gold over 80 metres in hole 5.

The company drilled 11 condemnation holes to ensure that areas being considered for future infrastructure are not gold-bearing. All 11 holes returned barren rock.

Rio Alto could churn out results over the rest of the year, as the company has considerable exploration plans. La Colorado West will see another 3,000 metres of diamond drilling, as well as 6,000 metres of RC drilling; La Colorado East will undergo a 5,000-metre RC drill program; an 8,000-metre RC drill program will explore Esperanza North and South, while a 3,000-metre diamond drill effort will probe a chargeability anomaly within the South area; and detailed mapping work will be completed across the project area.

La Arena is located in the mining region in north-central Peru that hosts Barrick Gold’s (ABX-T, ABX-N) large Lagunas Norte gold mine. An estimate prepared in January 2012 pegged La Arena’s oxide resource at 100 million measured-and-indicated tonnes grading 0.46 gram gold, plus 10.4 million inferred tonnes averaging 0.27 gram gold.

The project is also home to a sulphide resource holding 313 million indicated tonnes grading 0.29% copper and 0.24 gram gold, and 320 million inferred tonnes averaging 0.3% copper and 0.2 gram gold. Rio Alto is advancing a feasibility study on the sulphide resource that it expects to finish sometime this year.

Rio Alto produced its first gold at La Arena in May 2011, and celebrated its first quarter of commercial production at the gold oxide heap-leach operation in April 2012. In its first year of operations the mine churned out 201,113 oz. gold, and Rio Alto expects similar output levels in 2013. Cash costs for the coming year are expected to average US$675 to US$725 per oz., which is slightly higher than it was in 2012 because of lower grades, rising labour costs and a strengthening Peruvian nuevo sol.

Rio Alto plans to spend $80 million to $100 million at La Arena this year. Most of the money will go into the mine: the company is spending $30 million to expand the heap-leach pad to life-of-mine capacity, and $37 million to advance the project’s sulphide potential. The rest will pay for exploration and fund earn-ins on other properties in southern Peru.

News of the drill results from La Colorado West lifted Rio Alto’s share price 6.5%, adding 29¢ to bring Rio shares to $4.74. The company has a 52-week share price range of $3.53 to $5.97, with 176 million shares outstanding.