LATIN AMERICA — Geomaque drill-tests gold prospect in Honduras

Geomaque Explorations (GEO-T) has received encouraging results from the first three holes drilled at the Vueltas del Rio gold project in Honduras.

The Toronto-based company acquired the project last year as a result of merging with Milagro Minerals, the previous owner.

Geomaque has completed 14 holes in the San Juan (formerly Nelson) zone. Drill holes are spaced at 40 metres and inclined at 70 to the south. The deposit dips to the north, and core samples show an intersection with the orebody at 55. The average depth of holes drilled to date is 80 metres.

Of the first three holes, the highest grades were encountered in hole V-2, which intersected 36.02 grams gold over 10 metres. The 10-metre interval includes 1-metre assays of 129.4, 103.5 grams, 34.79 and 32.11 grams gold per tonne.

Hole V-2, drilled at a depth of 95 metres, also intersected a 12-metre interval grading 1.52 grams gold, plus 1-metre zones grading 65.25 and 11.22 grams gold.

Hole V-3 was drilled to a depth of 102 metres and included intervals of 4 metres grading 17.66 grams gold, 2 metres grading 6.26 grams, and 4 metres grading 11.75 grams.

Hole V-1 was 67 metres deep and included intervals of 1.85 grams gold over 13 metres, as well as 3 metres grading 2.02 grams gold. Additional, 1-metre intercepts ranged up to 2.92 grams gold.

“These results correlate well, in terms of grade and thickness, with the results of previous trenching and drill programs conducted in the zone,” says Phillip Walford, vice-president of exploration for Geomaque. “They also confirm the high-grade potential of the oxide and sulphide resource at Vueltas del Rio.”

Prior drilling

Holes V-1, V-2 and V-3 were centred around hole VRD-1 — previously the best intersection drilled on the Vueltas del Rio property. Hole VRD-1 had a 43-metre intersection grading 3.49 grams gold in the oxide zone, including 8.7 metres of 10.44 grams. A total of 17 holes, including VRD-1, had been drilled in the San Juan zone prior to Geomaque’s acquisition of the 10,000-ha property in January 1997.

The Vueltas del Rio shear zone, which strikes east-west, has a known length of 1.5 km and a width of 300 metres. The structure hosts numerous old workings and is the site of the historic San Martin mine, which reportedly produced 15,000 oz. gold from high-grade ore in the 1940s.

“High-grade lenses, such as the one intersected in hole V-2, are the sort that have been mined at the site in the past,” Walford notes. “They can have a tremendous impact on the overall economics of the deposit.” Overall, the gold at Vueltas del Rio occurs in multiple sulphide and quartz-rich zones, the thickness of which varies up to 40 metres in a sericite schist. Tropical weathering has oxidized the sulphides to about 40 metres from surface, making this zone amenable to conventional heap-leach methods with high metallurgical recoveries.

The Vueltas del Rio deposit hosts a drill-indicated resource of 10.2 million tonnes grading 1.7 grams gold, or 515,000 contained ounces. Because less than half the deposit has been drill-tested, Geomaque is confident that there is excellent potential to expand the resource.

Holes V-1, -2 and -3 form the first phase of a 6,000-metre program of diamond drilling, the purpose of which is to determine the extent of the Vueltas del Rio shear zone and establish reserves. Assays are pending on an additional 11 holes.

San Francisco mine

Meanwhile, Geomaque reports that production for 1996 at the San Francisco gold mine in Mexico’s Sonora state exceeded 36,000 oz. gold at an average cash cost of US$225 per oz.

Earnings were $781,000 (or 3 cents per share) for the fourth quarter, and $2 million (6 cents per share) for the year. Cash flow remained strong in the fourth quarter, coming in at $1.1 million (4 cents per share), or $4.1 million (13 cents per share) for the year.

Fourth-quarter production totalled 10,662 oz. at a cash operating cost of $199 per oz. For the year, total production amounted to 36,250 oz., giving the company a cash cost of US$225 per oz. gold sold. (Cash costs exclude non-cash reserves for site reclamation.)

Total mine costs (including amortization of mine properties and site reclamation but excluding corporate and exploration expenses) were US$266 per oz. in 1996, and US$235 per oz. in the fourth quarter.

Revenue was $3.5 million for the quarter, and $12.3 million for the year.

Since startup in March 1996, 31,340 oz. gold have been sold at an average price of US$393 per oz.

“We are extremely pleased to have had such a successful first year of production and are particularly satisfied with the fourth-quarter cost and production numbers,” says Geomaque President John Paterson.

A program aimed at expanding the San Francisco to 80,000 oz. per year continued in the fourth quarter, with capital expenditures amounting to $1 million. The expansion will triple the size of the gold recovery plant, double the size of the crusher and double mining capacity. Completion is expected in April.

Meanwhile, Geomaque has completed the sale (by private placement through an underwriting syndicate) of 5 million special warrants at a price of $3.50 each.

Proceeds of $17.5 million will be held in escrow until all final prospectus receipts are issued in Ontario, Quebec and Alberta. Each special warrant will be exerciseable into units of Geomaque, with each unit consisting of one share and half a share purchase warrant. Each whole share purchase warrant will have a 2-year term from the closing date of March 19, 1997, and an exercise price of $4.

A portion of the proceeds from the financing will be used to acquire new projects in Latin America.