EXPLORATION 1997 — Northern Orion zeros in on copper and gold prospects in Argentina

With interests in a growing number of exploration and development projects, Northern Orion Explorations (NNO-T) is looking to entrench itself in Argentina’s mining sector.

The company was created in 1994 as a partnership between a private Argentine group and Miramar Mining (MAE-T).

The South American nation shares its border with Chile, Bolivia and Brazil, all of which have long histories of mining. Argentina, however, is better known for its beef, with mining (including sand and gravel) accounting for only 0.3% of gross domestic product, compared with 10% in Chile.

While the country has had its share of rich mineral deposits, its mining potential has gone largely untapped for the past 50 years. Argentina produces 35,000 oz. gold per year, plus negligible quantities of lead, zinc and silver, but no copper. By contrast, Chile is the world’s largest producer of the red metal.

“Historically, Argentina has been agriculture-driven,” says Northern Orion’s vice-president, Stephen Quin, who adds that the country’s laws have tended to favor that industry.

Another obstacle to mineral development is transportation. Historically, the bulk of Argentina’s mineral resources have been in the Andes, yet, owing to years of poor relations with Chile, which often degenerated into war, the minerals would not be shipped through the neighboring country.

“It’s only recently that Argentina has realized that mining can be a major stimulus to the economy,” says Quin.

In an effort to boost foreign investment in the industry, the government of President Carlos Menem recently passed a series of mining investment and currency exchange laws, along with a federal mining agreement providing for uniform mining codes across the country. Northern Orion was one of the first foreign companies to take advantage of the more liberal regulations.

While the company has interests in 30 properties throughout the country, covering 650,000 ha, its two major projects are in the north.

Preliminary feasibility studies are under way on the wholly owned San Jorge porphyry copper-gold deposit, and on the Agua Rica porphyry

copper-gold-molybdenum deposit, in which BHP Minerals International holds a 70% interest.

Agua Rica

Measuring 5,000 ha and situated in Catamarca province, Agua Rica is the first major enriched copper deposit to have been discovered in Argentina.

Perched 3,000 metres above sea level, the deposit comprises several porphyry stocks of Tertiary age, with associated alteration covering 3,500 by 2,500 metres.

Rock chip geochemistry has yielded anomalous copper and gold values associated with the altered area. The five principal targets are Mi Vida, Trampeadero, Melcho, Morro Alumbrera and Misterioso. Another, Quebrada Minas, lies between Mi Vida and Trampeadero.

Mineralization at Mi Vida and Trampeadero is predominantly porphyry, whereas Quebrada Minas is a hydrothermal breccia pipe and tends to have a lower grade. The average grade of Quebrada Minas is 0.6% copper, plus gold, silver and molybdenum credits, compared with a weighted average of 1% copper for Mi Vida and Trampeadero.

Leaching, enrichment and erosion have resulted in substantial areas of near-surface, supergene-enriched mineralization. Disseminated crystalline covellite occurs in the advanced argillic zone. Agua Rica has seen almost complete replacement of chalcopyrite with covellite and chalcocite.

Quin says the size of Agua Rica is comparable to the nearby Bajo de la Alumbrera deposit, in which MIM Holdings holds a 50% interest, with the remaining half split equally between Rio Algom (ROM-T) and Australian-listed North Ltd. Production at Bajo de la Alumbrera is projected at 90,000-120,000 tonnes per day, whereas Agua Rica is expected to fall somewhere in between.

The prefeasibility study at Northern Orion’s project is expected in the second quarter, with the final feasibility scheduled for completion in early 1998.

Over the past two years, more than 40,000 metres of core drilling have delineated the deposit, including 103 holes over 25,000 metres in 1996.

Another 25,000 metres are planned for 1997.

Drilling to date indicates that high-grade mineralization extends over 1,576 metres in an east-west direction, and 485 metres north-south. Northern Orion estimates the resource potential of the deposit to be at least 1.2 billion tonnes grading 0.5% copper and 0.22 gram gold, plus molybdenum credits.

The calculation, based on 39 holes, was made in February 1996, since which time infill drilling has been carried out in an effort to prove up the grade.

A new estimate will be based on 103 holes.

San Jorge

The company’s other major Argentine copper-gold project, San Jorge, is a low-potassium, low-sulphide porphyry copper-gold deposit. Perched at an elevation of 2,600-2,700 metres, it lies southwest of Agua Rica, just east of the Andean Cordillera in the 200-km-long Uspallata Valley of Mendoza province.

Mineralization has been defined by 120 drill holes totalling more than 20,000 metres. San Jorge comprises sub-horizontal layers of oxide,

secondary-enriched and primary copper mineralization.

Native gold is uniformly distributed, and averages 0.2 gram per tonne, while silver values are proportional to copper, at 3.5 grams.

Northern Orion’s prefeasibility study, due in April, is evaluating the potential for a mine capable of producing 30,000 tonnes of oxide material per year, from which copper would be derived by means of solvent extraction-electrowinning. This phase of the operation is expected to last seven years, after which time conventional milling of primary ore would take effect.

Meanwhile, in Cuba, Northern Orion has two advanced-stage projects under way in 50-50 joint ventures with that country’s government.

Minable reserves at the Mantua deposit are 6.2 million tonnes grading 2.8% copper mill ore, and 5.2 million tonnes of 0.5% copper. The copper is overlain by a gossan cap of 2 million tonnes grading 1.44 grams gold and 11 grams silver. Current plans are for oxide gold production to begin by mid-1997 with 85,000 oz. gold recoverable over the first 18 months. Copper production will begin six months after gold operations cease.

No data were available for the other Cuban project, a gold prospect known as Delta.

Northern Orion has $35 million in working capital and 80 million shares outstanding.