First drill results downgrade Luicho gold prospect

Results from the first four drill holes of a planned 70-hole reverse-circulation program on the highly touted Luicho gold prospect in southern Peru fell well short of market expectations for Pacific Rim Mining (PFG-T).

Investors traded the issue down to $1.50, for a loss of $2.20 on Sept. 21, upon learning that the best interval was 32 metres grading 2.37 grams gold per tonne beginning at surface in hole 2.

The first four holes are part of a fence of holes drilled on line 8313800 N across the northern end of a high-grade section in the Central zone. The high grade occurs in a wedge-shaped area measuring 430 metres along strike, with a width averaging 100 metres. The area averaged a grade of 6.69 grams based on 1,824 rock-chip channel samples.

Holes 1, 3 and 4 were drilled to the east at an angle of 60 at 100-metre stepouts, and were designed to test an area where three major structures intersect.

Hole 1 intercepted 38 metres grading 2.37 grams gold from surface but was abandoned at 100 metres down-hole when a large open cavity was encountered.

Hole 2 was steepened to 70from the same pad and hit 32 metres of 2.71 grams from surface. The hole ended at a down-hole depth of 203 metres.

Hole 3 stepped out 100 metres to the east and cut 20 metres of 0.8 gram from surface before ending at a down-hole depth of 304 metres.

Hole 4, collared 100 metres west of holes 1 and 2, was drilled to a depth of 310 metres, returning 10 metres of 1.13 grams from surface.

At Pacific Rim’s annual meeting, Chief Executive Officer Thomas Shrake told shareholders that the near-surface drill results mimic the surface sampling results from around the holes. “The larger width of the high-grade surface mineralization is located well to the south of the first drill fence,” he said.

In all four holes, gold mineralization was confined to the upper sandstone unit, which averaged a thickness of 50 metres. Below the massive sandstone is a package of several hundred metres of thin, bedded sandstone, shale and siltstone.

Shrake said that once holes 1, 2 and 3 passed through a dyke-filled fault structure down-hole, the values were fairly low (generally less than 100 parts per billion). In hole 4, the gold values down-hole below the upper sandstone were higher than in the three other holes (generally greater than 100 ppb).

“The key question at Luicho is thickness, and that question remains unanswered,” Shrake said. “These holes tested only a very small segment of the structural corridor. We have a long way to go to test the deeper levels of the system along strike and in other structures.”

Large anomaly

Shrake’s optimism is shared by Pacific Rim’s president, Catherine McLeod-Seltzer. “These preliminary results do not eliminate the potential for mineralization at depth,” she said. “We have only just begun to test this very large surface anomaly in the third dimension, and we have many drill holes ahead of us.”

The main target area at Luicho is related to a complex series of converging regional and subsidiary strike-slip faults that have created a broad zone of intense fracturing. These intersecting faults control the mineralization and form a mosaic of individual fault blocks that are collectively referred to as the structural corridor. The corridor extends 1,850 metres in length and averages a width of 250 metres. Based on 5,558 samples, representing more than 11 km of chip sampling, the corridor averages 2.31 grams.

Based on the structural intensity of the rock and the degree of fracturing, the structural corridor has been divided into three broad contiguous target zones: Northeast, Central and South. In the Northeast zone, 1,432 samples averaged 1.34 grams; in the Central area, 3,329 samples averaged 3 grams; and in the South area, 795 samples averaged 1.14 grams.

Within the corridor, gold mineralization is hosted primarily by the 50-metre-thick upper quartz sandstone unit. Mineralization in the middle sandstone unit has been exposed at two local areas in the corridor, as well north of the corridor, where a 100-metre-wide zone averaging about 1 gram gold per tonne occurs 200 metres into the stratigraphic section beneath the shale cap. This mineralization is contained within the Luicho fault zone.

Upside target

“We firmly believe the middle unit represents a juicy upside target beyond the significant number of ounces that are potentially hosted in the upper sandstone,” said McLeod-Seltzer.

The objective of Pacific Rim’s drill program is to prove up as many ounces as possible within a short time. The company has two years remaining on a 3-year option agreement to acquire the project; the acquisition requires a series of staged payments, including US$400,000 in November 2000, US$1 million in November 2001 and US$24.2 million in November 2002.

“We will continue to test the Luicho fault zone along strike, both north and south of the first drill fence, in an effort to locate blocks of structurally controlled mineralization,” said Shrake. “We will also be spending some drill meterage testing the upper sandstone mineralization for thickness and continuity.”

It is management’s belief that if mineralization is confined only to the upper sandstone, Luicho still has the potential to contain a sizable deposit of outcropping gold.

At presstime, Pacific Rim had completed eight holes, three of which extend the first fence of holes to the west at 100-metre intervals. These holes will give the company an indication of what lies beneath the shale cap on the western side of the Luicho fault. In addition, a single hole had been completed on the next fence to the south, collared within the structural corridor. With two reverse-circulation rigs turning, the company is banging out a hole per day.