LATIN AMERICA — Francisco Gold progresses at El Sauzal

With $38 million in the till and an $8-million exploration budget, Francisco Gold (FGX-V) has decided to focus its efforts on the El Sauzal gold deposit in northern Mexico.

The deposit forms part of the La Brigida property, which comprises 31,000 ha in the Sierra Madre Occidental mountain range. The property is 13 km west of the town of Batopilas in southwestern Chihuahua state.

To date, the company has drilled 124 diamond drill holes, for a total of 20,250 metres. In December 1997, an inferred resource estimate was calculated by Mine Reserve Associates using a drill hole database of 89 diamond core holes together with 1,037 surface trench samples. The resource estimate, based on a 0.5-gram-per-tonne cutoff grade, weighed in at 47 million tonnes grading 3.22 grams gold per tonne. This figure is equivalent to 3.2 million contained ounces gold.

The company has commissioned both Mine Reserve Associates and Behre Dolbear to calculate a new minable resource estimate based on the 124 holes drilled so far.

Preliminary scoping studies prepared by Behre Dolbear indicate an open-pit operation with a daily processing rate of 10,000 tonnes and a yearly production rate of 300,000 oz. of gold. The consulting firm envisages a mine life of just over seven years, with life-of-mine operating costs projected at US$95 per ounce. The estimates are based on a gold price of US$350 per oz.

Bottle-roll metallurgical tests were performed on three composite surface samples from El Sauzal. Two-stage leach tests on samples ground to a fraction of minus-10 mesh returned gold recoveries of 93.5%, 82.9% and 68.7% on head grades of 59.9, 9.7 grams and 2.21 grams gold per tonne, respectively.

Mineralographic examinations indicated that native gold ranged from 3 to 200 microns and usually occurred with fine-grained, interstitial hematite.

Geologically, the El Sauzal project represents a high-sulphidation, epithermal gold deposit emplaced in the upper part of the Lower Volcanic Series sequence. The host rocks comprise andesite flows, tuffs and breccia, which grade upwards into intercalated, highly altered dacitic volcanic rocks. Alteration is argillic and phyllic, with zones of intense silicification and pyritization in the lower part of the deposit. Hydrothermal breccias, hematite-quartz veins and a strong quartz-alunite-dickite-kaoline alteration are associated with the upper dacitic unit, where most of the gold is hosted.

The dacitic host rocks are overlain, unconformably, by post mineral rhyolite-dacite breccias and conglomerates that contain no significant gold values.

Structurally, the deposit is dominated by two sets of steeply dipping faults, which trend in a northeasterly and northwesterly direction. One of the northwesterly trending faults cuts the deposit into the East and West zones.

Francisco Gold has completed the first stage of a 2-stage, 2-year, $15.8-million program. Stage 1, completed in March of this year, focused on diamond drill hole definition and delineation. The company also built a 24-km site access road and performed preliminary scoping-level metallurgical test work and engineering studies.

The second stage of the program, budgeted at $6.8 million, is to focus on the collection of drill hole data and engineering, environmental and socioeconomic data. This stage is expected to culminate in a prefeasibility study.

Francisco’s exploration budget for 1998 is set at $8 million, most of which will be used to develop El Sauzal. The company has $38 million in working capital and no debt.

Los Corralitos

Nearby, about 3 km southwest of the town of Batopilas, Francisco Gold and partner Phelps Dodge (PD-N) have teamed up to explore the Los Corralitos property.

Phelps Dodge can earn a 70% interest in the project by spending a minimum of US$5 million on exploration and making cash payments totalling US$5 million over five years.

Los Corralitos occupies the centre of an extensive gossan that is exposed over a 2-sq.-km area. Two rock types prevail in the area: the Las Tahonas granodiorite and the lower volcanic series andesites.

The geology surrounding Los Corralitos consists of mid-Tertiary-aged tuffs and rhyolites. These rocks overlie an older sequence of volcanic rocks consting of pyritic, aphanitic andesites, flow tuffs and breccias.

The gossan represents an oxidized pyritic halo above what could be a porphyry copper target. Two types of mineralization are found on the property:

n Disseminated pyrite, chalcopyrite, malachite, azurite and traces of galena and molybdenite can be seen in the banded and silicified portions of the granodiorite.

n The second style of mineralization is disseminated pyrite, which exists in fracture fillings and disseminations within the andesitic rocks.

To date, exploration has consisted of a ground geophysical program, geochemical soil sampling, semi-detailed geological mapping and channel and chip sampling. The results reveal a large resistivity zone measuring about 650 by 250 metres.

Geochemical sampling has identified a large copper anomaly with values ranging between 0.1% and 0.6% copper.

Four holes, totalling 867.8 metres were drilled by Phelps Dodge in 1997. The results indicate that oxide copper mineralization is restricted to narrow bands within envelopes of alteration. Phelps Dodge believes a hydrothermal system exists and continues for several kilometres southwest of the gossan. The company is investigating other gossans on the concession with the intention of developing a drill program later this year.

Francisco Gold has 14.8 million shares outstanding, or 16.6 million shares fully diluted.