Bear Creek adds value at Corani

With the Corani polymetallic discovery in Peru hovering just shy of 320 million oz. in an overall contained silver resource, Bear Creek Mining (BCM-V, BCEKF-O) is looking to add value by driving the project down the development path.

The Corani project represents an emerging discovery of potentially bulk-minable silver-lead-zinc mineralization in the high Andes of southern Peru. Drilling has outlined three silver-rich deposits or zones — Corani Este, Minas Corani and Main Corani, as well as the Gold zone and several other targets.

“We saw huge growth in the last eighteen months since we started drilling on this project on a very fast-track basis,” explained Bear Creek president Andrew Swarthout during a presentation at a recent Scotia Capital investors conference in Toronto. “I think we are still going to see growth in the resource, but we are focusing more of our efforts on where we can remove the most risk and demonstrate its value.”

A new resource estimate for Corani was released in early December; while the overall silver content remained the same, ounces in the measured and indicated category have increased by 8%, but at a slightly lower grade. Corani is now estimated to contain 278 million oz. silver in 172 million tonnes grading 50.4 grams silver per tonne, 0.83% lead and 0.42% zinc in the measured and indicated category. Additional inferred resources hold 40 million oz. silver in 29.8 million tonnes averaging 41.4 grams silver, 0.57% lead and 0.27% zinc.

The revised resource estimate, prepared by Independent Mining Consultants of Tucson, Ariz., incorporates the results from an additional 91 holes drilled since the last resource update in August, as well as some engineering adjustments, particularly with respect to specific gravity. The resource database now totals 327 diamond-drill holes and 25 surface trenches.

“We didn’t increase this resource in terms of ounces of contained silver for one principal reason; we took the specific gravity, or density, from 2.81 down to about 2.45,” Swarthout said.

This effectively reduced the overall tonnage by 10%.

“That’s a reasonable occurrence or process to go through in a new discovery, as you are collecting more information all the time,” he explained.

The cutoff grade of 15 grams silver has been lowered by 1 gram to reflect the resource model’s higher metal prices of US$9.75-per-oz. silver, US94-per-lb. zinc and US52-per-lb. lead.

The new resource estimate does not include any drilling on the Gold zone, a gold-enriched prospect 1.5 km south of the Corani target area. In May, Bear Creek moved the rig off of the Gold zone in order to increase resources in the silver-rich portions of the Corani project. Of the 38 drill holes that have tested about 1 km of strike, 33 have yielded intersections averaging 2 grams gold and 40.4 grams silver across 17.4 metres.

“It occupies a ridge and is very amenable to open-pit mining at low stripping ratios,” Swarthout said. “I think it’s going to show good leach characteristics. We’re doing the test work now.”

Bear Creek has begun building a resource model for the Gold zone and is planning to do some more drilling.

“This has the potential of adding hundreds of thousands of ounces gold to the project,” Swarthout predicted. “I doubt if it will reach a million, but you never know.”

Corani, 160 km directly southeast of the city of Cusco, covers 36 sq. km of glaciated terrain of steep ridges and U-shaped valleys at elevations of 4,800-5,200 metres. It’s about a 6-hour drive along paved and unimproved roads from Cusco. The villages of Quelccaya and Chacaconiza, 5 km northwest and northeast of the property, have legal title to the surface area. The remote area is sparsely populated, with roughly 500 people living within 10 km of the discovery area.

The geology

Corani is a low-sulphidation, epithermal silver-lead-zinc deposit hosted in stockworks, breccia veins and fractures.

The mineralization is structurally controlled along a general north-northwest strike. There is a vertical component to the mineralization, but all zones appear to be hosted by westward-dipping features. The host rocks are a Tertiary-age tuffaceous volcanic unit that overlies a Paleozoic sedimentary rock sequence. The mineralized volcanic are, in turn, overlain by post-mineral volcanic tuffs, which are generally flat-lying to gently dipping and cover most of the north end of the property.

The company has explored only a limited part of the 5 by 2-km wide target area with more than 360 drill holes totalling 60,000 metres.

The mineralization is exposed along separate ridges, more than 500 metres apart, before disappearing to the north under a younger post-mineral cover. Separated by a small drainage valley, the Corani Este zone lies directly across from the past-producing Minas Corani area. Corani Este has emerged as the highest-grade resource of the three zones.

Drilling to date has intercepted multi-ounce silver values, along with associated lead and zinc, right from surface over intervals of 50 to 150 metres, to drill depths of 100 to 200 metres in most holes. Bonanza-grade feeder-type structures have been intersected in drilling at Corani Este.

“Obviously we’ve focused our drilling to date on the easier areas, which are outcropping, and now we are exploring under the cover,” Swarthout explained.

Recent drilling at the north end of Minas Corani extended the resource boundary several hundred metres by intersecting 83 metres averaging 79.6 grams silver, 0.1% zinc and 0.6% lead under 43 metres of post-mineral cover in hole 152A. A higher-grade portion in the hole averaged 145 grams silver, 0.9% lead and 0.1% zinc across 34 metres.

Bear Creek is continuing to refine the limits of the three principal zones using three drill rigs. Drilling is focusing in the areas between Minas Corani and Corani Este at the head of the valley in search of links between the high-grade portions of the two deposits. In addition, the drilling is focused on areas where mineralization remains open northwest of Corani Este, west of the Minas Corani/Main Corani trend under shallow post-mineral cover, and between the Minas Corani and Main Corani zones.

“It still has potential for growth,” Swarthout said.

A new surface showing was uncovered several months ago, 400 metres west of the main trend. Samples taken from mineralized outcrops of quartz and stockwork veining ran over 100 grams silver and, interestingly enough, up to 0.5-0.8 gram gold — considered quite significant since gold is generally not seen in the silver system. This prospect has been drill-tested and assay results are pending.

The most recent resource estimate will form the basis for a scoping study that will be completed in early 2007. About 58% of the contained silver resource reports to a higher-grade cutoff of 45 grams.

“It means that you can phase in higher-grade mineralization in early years of mine planning,” Swarthout said.

There are higher-grade cores in each of the three deposits (Corani Este, Minas Corani and Main Corani) offering starter-pit potential at a modelled stripping ratio of 1.85:1. Together, these richer zones contain 175 million oz. silver in a measured and indicated resource of 68 million tonnes grading 80 grams silver, 1.18% lead and 0.53% zinc. There is an additional 11 million oz. of inferred silver in 5 million tonnes of 66.2 grams silver, 0.88% lead and 0.27% zinc.

“Base metals will have a very significant impact on the economic model,” Swarthout said.

The zinc at Corani tends to occur in discrete high-grade zones. By applying a 1% zinc cutoff, there are 24.9 million tonnes grading 1.88% zinc, 1.1% lead and 54.7 grams silver in the measured and indicated categories, representing 65% of the contained zinc in 14.5% of the tonnage.

“The mine scheduling of base metal credits is going to be very important as we look at the property going forward,” Swarthout stressed, estimating that 60% of the value of the deposit would come from
silver and 40% from lead and zinc.

The Corani mineralization is predominantly sulphide bearing. Preliminary metallurgical test work suggests the mineralization responds well to conventional grinding, flotation and leaching to produce concentrates of lead-silver and zinc. A conceptual process flow sheet uses a combination of selective flotation to recover silver-rich lead concentrates and, when higher zinc grades warrant, a zinc concentrate, followed by cyanidation of the flotation tailings to optimize the recovery of silver.

Highlights of the test work show recoveries of 76% silver in the high-sulphide material, leading Bear Creek to believe at least 80% of the silver will ultimately be recoverable. The preliminary work also suggests recoveries of at least 60% for the lead and zinc is achievable. The low-sulphide portions of the resource are amenable to direct cyanide leaching, with silver recoveries in the range of 57% to 79%.

“The work that we have done to date is fairly preliminary, but it gives us a pretty good feel,” Swarthout said.

Over the coming months, the company will focus on optimizing recoveries in the different zones of the deposit. The drilling of four metallurgical holes was scheduled to be complete before Christmas, with the samples on the road to North American labs for testing in the first quarter. The metallurgical drilling is concentrating on the higher-grade cores of the deposits.

Bear Creek optioned the Corani project in January 2005 from Rio Tinto (rtp-n) by agreeing to make a series of back-end loaded payments totalling US$5.4 million over three years for an initial 70% interest. A US$2-million payment is due in January. Upon earn-in, Rio Tinto will have a one-time right to either maintain a 30% participating interest or sell it outright to Bear Creek for US$5 million.

Bear Creek’s earn-in is subject to success payments and a claw-back provision. Should economic resources ultimately exceed 10 million oz. gold or gold equivalent, as defined by a bankable feasibility study, Rio Tinto could re-acquire a 60% stake by reimbursing Bear Creek 300% of its exploration spending and carrying the junior through to production. This threshold is the equivalent of roughly 600 to 700 million oz. silver and is based only on precious metal mineralization; it does not include any zinc or lead credits.

Santa Ana

In related news, Bear Creek announced encouraging results from a second round of drilling on the Santa Ana project, 200 km south of Corani. Santa Ana is a grassroots silver prospect that Bear Creek discovered and acquired by staking in 2004. The initial reconnaissance work had found multi-ounce silver values in outcrop.

Santa Ana represents a near-surface, bulk-tonnage, silver-lead-zinc target in a setting very similar to Corani. Old mine workings dating from the colonial era are found scattered across the claim area. Sampling of the mine dumps returned an average of 281 grams silver per tonne in 40 samples. The property has never been drilled.

It has a very large anomalous silver footprint measuring 2.8 km long, 600 metres wide and at least 80 metres thick, from which 413 surface rock-chip samples averaged 82.8 grams silver, with some lead and zinc. Seventy-eight of the samples were taken from mineralized structures for an average of 237 grams, while the 335 samples represent wall rock and fractured outcrop averaging 43 grams.

“We focused our attention on Corani and now we’re circling back,” Swarthout said.

A first pass of drilling was completed in July, comprising 11 widely spaced holes for a total of 1,100 metres.

The company intercepted long intervals of low-grade mineralization with shorter high-grade intervals, including 12 metres of 6 oz. silver per ton (189 grams silver per tonne) and 50 metres of nearly 3 oz. silver (87.1 grams).

The second round of drilling involved an additional 26 holes totalling 3,200 metres. The average of the reported intercepts in both rounds of drilling is 53 metres of 43.9 grams silver. The drilling shows zones of structurally controlled high-grade silver mineralization are contained within broader zones of low-grade disseminated silver over an area of at least 1 sq. km. Better results include 38 metres averaging 86 grams silver (including 6 metres of 315 grams) in hole SA-10B and 89 grams across 46 metres (including 6 metres of 418 grams) in hole SA-12.

The majority of the mineralization is dominantly oxide, which Bear Creek suggests is amenable to heap leaching based on some preliminary metallurgical test work that yielded recoveries exceeding 50% in 24-hour bottle-roll tests.

Additional drilling and more advanced metallurgical testing are being planned in the new year.

Bear Creek had a cash balance of US$9.1 million at the end of the third quarter, with 40.3 million shares outstanding or 46.7 million on a fully diluted basis. Silver Wheaton (slw-t, slw-x) remains its largest shareholder with a 19.1% position.