A newly doubled indicated resource estimate has convinced Agnico-Eagle Mines (AEM-T, AEM-N) to exercise its option on Industrias Peoles‘ advanced Pinos Altos silver-gold project in northern Mexico’s Sierra Madre gold belt.
The price tag comprises $32.5 million in cash accompanied by US$32.5 million worth of Agnico shares. The deal is scheduled to close on March 15, subject to regulatory approvals.
In all, Agnico tested the Santo Nino, Oberon de Weber, and Cerro Colorado structures with 88 surface holes and 49 underground holes, for 19,768 metres over the past year. Most of the drilling focussed outside of Peoles’ resource estimate of 4 million tonnes of indicated material grading 6.3 grams gold and 131 grams silver per tonne, for 813,000 oz. of gold and 16.9 million oz. of silver. Peoles also outlined 2.3 million inferred tonnes running 6.1 grams gold and 117 grams silver.
Agnico now figures Pinos Altos to contain indicated resources of 12.5 million tonnes averaging 3.9 grams gold and 102 grams silver, for 1.6 million oz. of gold and 41 million oz. silver. Another 3.2 million tonnes of inferred material grading 5.2 grams gold and 111 grams silver.
Around 60% of the resource is contained in the Santo Nino zone, which Agnico has outlined to a depth of around 750 metres. It remains open at depth and to the west. The zone occurs along a regional fault zone, and is up to 45 metres thick over a strike length of 2 km. It remains open to the west and at depth.
Drilling below 200 metres near historic mining sites on Santo Nino yielded 13.6 metres averaging 19.4 grams gold and 141.1 grams silver. Undergound drilling cut 10 metres of 6.4 grams gold and 164.74 grams silver. Agnico says its drilling confirms the open pit potential of Santo Nino.
The company says the Oberon de Weber structures, about 1 km to the east, also show open pit potential, with drilling highlighted by a 22-metre interval running 4.5 grams gold and 130.4 grams silver. Drilling will test the zone at depth over the balance of the year.
On the exploration front, deep drilling tested the Cerro Colorado zone to depths of nearly 600 metres, yielding 3.8 metres running 9.7 grams gold and 25.4 grams silver. The hole extended theZone som e200 metes down plunge of previous intersections, including 14 meters of 19.6 grams gold and 337.5 grams silver.
Agnico-Eagle initially envisages Pinos Altos as a combined open-pit and underground mining operation, with each component running at 1,500 tonnes per day. Recoveries of 92% for gold and 50% for silver are anticipated from a conventional cyanidation Merrill Crowe circuit. The estimated capital cost for the proposed operation rings in at US$150 million.
Drilling during the balance of the year will test to see if Cerro Colorado and Santo Nino join at depth. Agnico currently has 2 drill rigs running on the property, but will shortly add more with the aim of converting resources to reserves.
The work is in anticipation of a bankable feasibility study scheduled for completion in the second quarter of 2007.
In all, the project measures some 110 sq. km, with only the eastern third extensively explored so far. Reconnaissance prospecting and mapping has indicated gold mineralization elsewhere on the property.
Accessible by paved highway, the property is less than 100 km from a major electric power grid.
Shares in Agnico-Eagle were $1.32, or 5%, higher at $27.82 in afternoon trading in Toronto following the news on Feb. 14.
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