Eldorado takes up option on Vila Nova

A deal with Brazilian company Mineracao Amapari gives Eldorado Gold (ELD-T) an option to earn 84% of the Vila Nova property in the northern state of Amap.

Eldorado will pay US$5.2 million over three years, subject to an initial commitment to spend US$200,000 on exploration on the property before March 20, 2006. Property payments amount to US$1 million in 2005 and US$1.2 million in 2006.

Mineracao Amapari’s 16% interest is carried to production, after which it becomes a working interest.

The 42-sq.-km property covers about 10 prospects, including three large garimpos: Gaivotas, Santa Maria and Vicente. “Formal” production from Vila Nova was about 20,000 oz. up to the end of 1994, according to the Brazilian government. Minerazao Agua Boa operated a heap-leach mine at Vila Nova from 1994 to 1996 at an annual production rate of 10,000 oz. Garimpeiro production up to 1997 was estimated by geologists from Brazilian iron producer Caemi and the University of Brasilia at just over 80,000 oz.

Mineralization is mainly hosted in folded banded iron formation in the same Guyana Shield greenstone belt that hosts the Amapari gold deposit, 60 km to the northwest. Goldcorp (G-T) is scheduled to begin production from oxide ores at Amapari later this year.

Channel samples by previous operators at Gaivotas indicate surface widths of 1-5 metres and gold grades mostly ranging between 3 and 10 grams per tonne. The mineralization widens near the noses of folds, which plunge southward at about 40 and in sheared areas.

In 1987, Mineracao Amapari estimated Santa Maria had a resource of 1.3 million tonnes grading 0.84 gram gold per tonne, and a 1989 calculation put the Vicente resource at 2 million tonnes grading 1.23 grams. Neither estimate would be compliant with present-day rules. Norman Pitcher, vice-president of exploration at Eldorado, says most of the drill results his company has seen are from 50 metres and shallower depths, and that 95% of the results are from the Gaivotas pit. Previous operators targeted oxide mineralization almost exclusively in a weathering profile 25-50 metres deep.

“We saw multiple quartz veins and a big alteration halo” in the Gaivotas pit on a visit in June 2004, says Pitcher, adding that there was strong evidence of gold in unaltered bedrock. The banded iron formation is intensely carbonate-altered, similar to other gold deposits hosted in iron formation.

Eldorado’s hopes to outline enough mineralization in fresh rock to justify a larger operation than Agua Boa’s oxide pits. There is no metallurgical work at the company’s disposal, but Pitcher noted that “the garimpeiros are getting some gold,” so some must be non-refractory.

Some cleanup obligations from the Agua Boa operation are Mineracao Amapari’s, though Pitcher characterizes publications from the Instituto Observatorio Social, a think-tank sponsored by the national labour council, as “Brazilian tabloid journalism at its best.” He says funding from the deal would allow the vendor to start work on the cleanup requirements.

Eldorado has US$1.8 million budgeted for work on the property, including mapping, surface sampling and drilling. A geophysical program of magnetics, electromagnetics and radiometrics is scheduled for the third quarter, and drill results should be out in the last quarter.