Barrick hits bull’s-eye at Alto Chicama in Peru

Barrick Gold (ABX-T) intends to quadruple exploration and development spending at the Alto Chicama property in north-central Peru to $20 million this year after finding a “significant gold discovery” that could contain up to 3.5 million oz.

An in-house estimate pegs the inferred resource at 55 million tonnes grading 1.95 grams gold per tonne, or 3.5 million ounces contained gold. The estimate is based on 45 holes spaced (on average) 200 metres apart, some of which were drilled to a depth of 100 metres. A hole radius of 50 metres was used for the resource calculation, which employed a cutoff grade of 0.35 gram per tonne. Results from 10 other holes are pending.

The disseminated mineralization is hosted by volcanic and sedimentary breccias and tuffs. The high-sulphidation deposit remains open to the north and south, and at depth.

“While a lot of work still needs to be done, results so far indicate we have a sizeable discovery on our hands,” says Barrick President Randall Oliphant.

In all, the area has been tested by 60 holes. Deeper holes have cut higher-grade sulphide mineralization below an oxide cap.

Barrick plans to operate 12 drill rigs at Alto Chicama. Infill drilling will aim to bring the discovery into the reserve category, with some stepout drilling to expand the resource.

Exploration Vice-President Alex Davidson says there is great potential not only to expand the resource but also to make further discoveries on the 1,200-sq.-km land position.

Barrick won the right to earn a 100% interest in Alto Chicama via a tender by Peruvian state-owned Centromin in early 2001. Barrick was the only bidder.

The gold titan can acquire its stake by spending $6 million over three years and preparing a feasibility study. If it elects to develop the deposit, it must pay Centromin a $2-million royalty advance, credited against Centromin’s 2.51% net smelter return royalty.

Alto Chicama is 175 km north of the major’s Pierina property, which produces 500,000 oz. per year at a total cash cost of US$90 per oz.

In 2001, the mine churned out a record 911,000 oz. at an all-time low of US$40 apiece. Production levels are expected to slip next year as processed ore and reserve grades decline. Production for this year is expected to hit 820,000 oz. at US$77 per oz.

Pierina, acquired in 1996 when Barrick took over Arequipa Resources, has been an operating success but a disappointment on the resource side, as Barrick has not replaced resources at the same rate as they are being mined. At the end of 2001, reserves and resources were deemed sufficient for six years.