LATIN AMERICA — AG triggers gold boom

The gold exploration boom in Argentina owes much to Argentina Gold‘s (ARP-V) discovery of a major, ever-growing bulk-tonnage resource at its 60%-owned Veladero joint-venture project in San Juan province, as well as ongoing work by Barrick Gold (ABX-T) in both Argentina and neighbouring Chile.

AG recently spurned a $5-per-share takeover bid by Barrick, which owns the remaining 40% interest in the project, as well as its own nearby land package straddling the border between Argentina and Chile. AG then surprised the mining community by negotiating an offer from Homestake Mining (HM-N) worth $7.81 per share. AG shareholders are to receive 0.545 of a Homestake share for each share held, subject to the approval of two-thirds of AG’s shareholders.

At the time of the Homestake’s offer, Veladero was estimated to contain a resource equivalent to 4.5 million oz. gold and 100 million oz. silver. Homestake President Jack Thompson recently described the property as “a superb gold asset with exceptional upside potential.”

AG recently announced an updated resource estimate for the Amable and Filo Federico targets at Veladero. These targets are now estimated to contain an indicated and inferred resource totalling 73.19 million tonnes grading 2.47 grams gold and 30.7 grams silver per tonne, equivalent to 5.8 million oz. gold and 72.2 million oz.

Situated 390 km northwest of the capital city of San Juan, Veladero comprises 13,000 ha along the border with Chile. The main target at Veladero is a 4-by-4-km alteration zone coincident with a ridge called Cerro Pelado. This ridge is formed by two large diatreme systems, Cerro Pelado and Filo Federico, which cover more than 10 sq. km of geochemical and geophysical anomalies. Most of the target area lies above an elevation of 4,200 metres.

To date, AG has completed 158 reverse-circulation drill holes and six twinned core holes, and in the process has outlined three principal targets: Filo Federico, Amable and NW. There are currently three RC rigs and three diamond drill rigs on site.

In addition to the Veladero property, AG holds a large, prospective 560,000-ha land package encompassing a good portion of the Argentine side of the El Indio gold belt.

Barrick’s Pascua project is less than 6 km northwest of Veladero’s northern boundary. The major’s exploration work in 1998 expanded reserves and resources to 20 million contained ounces gold and 525 million ounces silver. At the end of 1998, proven and probable reserves stood at 219.5 million tonnes grading 1.99 grams gold, equivalent to 14 million contained ounces, while additional resources totalled 181.6 million tonnes grading 1.13 grams gold, or 6.7 million contained ounces.

Barrick will make a final decision on Pascua’s development later this year. Based on studies done to date, it will cost US$950 million to develop the mine. Annual production is pegged at 675,000 oz. gold and 20 million oz. silver, with the initial cash operating cost estimated at US$125 per oz. Barrick is examining ways of reducing the construction costs.

Last year’s exploration program also discovered several mineralized zones on the Argentine side of the border. These are targeted for further drilling in 1999.

Barrick’s 1999 exploration program consists of 13,000 metres of drilling from an exploration tunnel extending from Chile into Argentina. The tunnel is scheduled for completion in the second quarter of this year. A surface program of an additional 40,000 metres of drilling will be carried out on select targets in an effort to build on the resource at Pascua.