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Hoping to discover a sizable deposit that would ensure its survival into the next century, the company is exploring prospects in Mexico and South America, an important target being ground in Peru that appears to be geologically similar to
Despite some encouraging results over the past two years, no major discoveries have been reported. Even so, the junior’s land package has attracted the interest of several majors, including Barrick and Australia’s Newcrest Resources. This year, four priority projects are slated for drilling: two in Peru, and one each in Mexico and Chile.
Newcrest is drilling Queenstake’s wholly owned Pico Machay property in southwestern Peru’s Huancavelica province, 230 km from Lima. The 1,800-ha property was acquired in 1994 after Landsat satellite imagery indicated alteration in volcanic rocks. Surface reconnaissance mapping over the next two years confirmed the existence of strongly altered Lower Tertiary volcanic rocks — an indication of a previous, epithermal metals system.
Newcrest took over exploration of Pico Machay in 1997 as part of a joint venture with Queenstake on 13 properties in the area. A year later, the partners acquired an additional 2,000 ha of surrounding ground.
To earn a 51% interest in Pico Machay, Newcrest is required to spend US$1.9 million on exploration over five years. At this point, Queenstake can elect to participate or dilute down to 40% at the prefeasibility stage. The company cannot fall below 35% until a bankable feasibility study is completed, at which point Newcrest will be required to finance 20% of development costs for Queenstake at prime plus 2%.
Newcrest’s initial work at Pico Machay included mapping and sampling, which outlined an altered zone measuring 2 by 1 km, surrounded by weakly altered to fresh volcanic rocks. The property is underlain by andesitic and dacitic flows, tuffs and fragmental rocks cut by north-northeast and northeast structures which appear to cross in the area of the most intense alteration and the highest geochemical values.
Of the roughly 400 chip samples tested, more than 130 returned assay results averaging 1 gram gold per tonne from the centre of the system, where silica alteration is most intense. This gold anomaly covers 400 by 300 metres and is adjacent to another anomaly of similar size where 11 samples returned an average grade of 0.6 gram gold. Together, the anomalies occupy an area measuring 1.2 km by 600 metres, with gold values in surface rocks averaging greater than 0.1 gram.
Newcrest plans to test this target with an initial, 2,000-metre drill program consisting of six to eight reverse-circulation holes. If results warrant, followup drilling will attempt to outline an open-pit deposit.
Elsewhere in Peru, Barrick Gold has been testing Queenstake’s Uchcumachay project on the Ancash trend, which also hosts the major’s newly developed Pierina mine. The target here is multiple mineralized zones in a large epithermal system similar to that found at Pierina and Yanachocha. Production at Pierina is scheduled to start early next year at the annual rate of 750,000 oz. gold, with cash costs projected at US$50 per oz.
Barrick must spend US$2.5 million to earn a 51% interest in Uchcumachay, after which either party can dilute down to 30%. The major holds rights to other Queenstake properties in Peru, including the South Ancash group of properties, which are also believed to be prospective for Pierina-type deposits.
Other Queenstake projects to be drill-tested this year are the Quebrada Grande porphyry copper property in northern Chile and the 60%-held Guinaloza property adjacent to Francisco Gold’s El Sauzal gold discovery. Both prospects are in the early stage of being explored.
With more than $8.7 million in the till, the company estimates it can survive for more than three years at anticipated spending rates without seeking additional financing.
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