LATIN AMERICA — Inca Pacific zeroes in on copper-gold prospects in Peru — Targets in Cajamarca and Ancash deemed promising

With its eye on the copper and gold exploration potential of Peru, Inca Pacific Resources (IP-V) has, over the past five years, amassed a substantial portfolio of properties in the most promising metallogenic belts of that South American country.

Many of these properties are attracting the attention of international mining companies such as Cambior (CBJ-T) and Barrick Gold (ABX-T), as well as Peruvian-based Minas Buenaventura (BVN-N), all of which have entered into joint-venture agreements with the junior.

Regional geology

The Peruvian portion of the Andes forms a northwesterly-trending belt of rocks whose age and type are considered prospective for gold, silver and copper deposits, according to J.W. Mustard, mining analyst for Vancouver-based Haywood Securities. The mineral deposits tend to occur in a number of parallel northwesterly-striking linear belts. Near the crest of the Andes, a series of volcanic and sediment-hosted epithermal deposits, as well as porphyry copper-gold deposits, have been the focus of much of the recent exploration activity. The southern Peru porphyry copper belt hosts copper and molybdenum (with low gold) deposits of mid-Tertiary age, while, in northern Peru, the porphyries are younger and tend to be gold-enriched and lower in moly. This difference has meant that much of the recent Peruvian exploration activity for porphyry targets has been in the northern part of the country.

Mustard considers western Peru as analagous to many other parts of the globe where recent volcanic activity associated with plate boundaries (such as the Central Kalimantan suture zone of Indonesia and the Carpathian belt of Central Europe) has occurred. In the Andes, mineral deposits are found within a series of parallel bands or “metallogenic belts,” with the ages of mineralization becoming progressively younger towards the east.

Inca Pacific, among many other companies, has acquired ground in these metallogenic belts, including the Cajamarca and Ancash belts.

Northwesterly-trending graben structures are considered district controls and, where cross structures are present, these appear to influence the locations and intensity of alteration and mineralization. Within these grabens, intrusion of a series of intermediate, younger porphyries occurs, a process Mustard describes as the heat and chemical engine responsible for near-surface mineralization, particularly epithermal deposits.

The principle deposit being sought in Peru is the “high sulphidation” (also called acid-sulfate) epithermal type.

“Deposits of this type have a uniquely recognizable surface expression that acts as a diagnostic footprint,” according to an Inca Pacific release. “For this same reason, practically all the best ground was quickly identifed and staked in the rush that got under way after 1994. Inca Pacific’s portfolio of properties, assembled prior to this historic rush, contains many promising targets, and these will be systematically explored over the next few years.”

Terms such as “vuggy silica,” “acid leaching,” “low density,” “porous” and “advanced argillic alteration” are often used to describe some of the geological characteristics of high-sulphidation deposits. Gold grades tend to be low (1 to 2 grams per tonne), but silver values can be significant (as high as 150 grams per tonne, or higher). These deposits are considered ideal for low-cost, heap-leach recovery methods. Although the locations of these deposits are strongly controlled by regional faults, the bulk of the deposit typically does not form veins (unlike its cousin, the low-sulphidation type) but is instead more like a manto within a more permeable horizon.

Most of Inca’s properties are in the Cajamarca metallogenic belt, a 159-km-long, northwesterly-trending structure. This belt contains several large copper-gold deposits, including Newmont Gold’s Yanacocha operation, with an estimated 198.1 million tons grading 0.03 oz. gold, and Cambior’s La Granja, where reserves are estimated at

1.3 billion tonnes grading 0.61% copper.

The Querocoto property, on the eastern border of the La Granja property in northwestern Peru, is Inca’s most advanced project. Cambior is earning up to a 70% interest from Inca Pacific and, as operator, has been conducting a drill program on mineralized stockwork zones similar to those found at La Granja.

Geologically, the two deposits are similar. At Querocoto, cretaceous sediments and Tertiary volcanics have been cut by several intersecting fault sets, providing a structural setting similar to that of La Granja and favorable for the emplacement of intrusives and associated mineralization.

Sampling of porphyry intrusives has identified two separate target areas, Quebrada Honda and Querocoto South, each with somewhat different characteristics.

Quebrada Honda is a highly argillized and silicified intrusive containing chalcedonic silica and

a gold-arsenic assemblage — features typical of high-level epithermal gold deposits. Querocoto South is a lead-zinc skarn occurrence developed in contact with an apparently unmineralized porphyry. Potential for economic skarn mineralization exists at this locality and elsewhere in the claim block where carbonate rocks are in contact with intrusives.

Inca Pacific is working to define the Quebrada Honda zone, where surface exploration has identified an intensely leached and kaolinized intrusive exhibiting veins and stockworks. Two breccia pipes have also been identified, with one 15-metre channel sample returning 1.76 grams gold per tonne, and another returning 23.8 grams. Four additional properties in this area are held in a 60-40 joint venture with Cambior.

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Cerro Oro

Inca Pacific is also stepping up exploration efforts at its Cerro Oro property, 250 km north of Lima and 55 km southeast of Barrick’s 8-million-oz. Pierina gold deposit in the Ancash metallogenic belt.

Described as a high-sulphidation target within andesites of Tertiary age, Cerro Oro consists of linear, northwest- and northeast-trending, intensely silicified and brecciated zones that have been mapped and sampled.

The property comprises two contiguous claim blocks that were staked in October 1993: the 1,000-ha Cerro Oro No. 1 block and the 900-ha Cerro Oro No. 2 block.

The rocks displaying the greatest intensity of alteration are associated with areas of pervasive silicification. There appear to be several isolated silica plugs that, in some instances, contain fine-grained pyrite. Other areas display linear zones of vein stockwork material and banded chalcedonic to drusy quartz. Areas of weaker alteration are extensively kaolinized.

The Cerro Oro claims lie at the southern end of a 100-km belt of extensive hydrothermal alteration. Within this altered package of volcanics, sediments and intrusives are many past producers of silver-lead-zinc-copper ore, as well as some mine sites that indicate gold production.

Cerro Oro hosts styles of alteration and mineralization typical of an epithermal precious/base metal environment, Inca Pacific reports, and initial indications are of a silver-rich, fracture-focused depositional environment, with subordinate lead, zinc and copper mineralization. Soil and rock sampling have identified several strong arsenic and weak gold anomalies.

The property has been optioned to Buenaventura, which can earn a 70% interest by paying US$150,000 and spending US$1.7 million on exploration over three years. Once the property has produced 1 million oz. gold, Inca Pacific can increase its interest to 49% from 30%. Buenaventura plans to carry out a US$200,000 work program this year.

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El Rejo

The property known as El Rejo, which is split 60-40 between Cambior and Inca Pacific, is situated 15 km northwest of La Granja. Recent work has outlined two principle targets. The first is a 2.5-by-1.3-km copper-moly-gold-arsenic anomaly in rocks with characteristics similar to La Granja. Hydrothermal alteration typical of porphyry copper mineralization is also present. The second is a 1.5-by-1-km gold-silver-moly-mercury anomaly in altered Tertiary volcanics. Silicification and acid
leaching are also evident. Cambior, which is the operator of the project, plans to launch an aggressive, $800,000 exploration program this year. Work will include road construction, geophysics and 4,000 metres of drilling.

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Magistral

The Magistral property is a copper skarn target 140 km northwest of the Antamina deposit being developed by Rio Algom and Inmet Mining. Antamina is a copper-zinc skarn deposit with reserves of about 500 million tonnes averaging 1.2% copper, 1% zinc, 11 grams silver and 0.03% moly.

The Magistral project comprises two contiguous claims totalling 2,000 ha in the northern region of the Ancash belt. Here, as at Antamina, copper-moly mineralization is found disseminated in a quartz monzonite intrusive, as well as a skarn aureole. Notably, Magistral features rocks of the Jumasha formation, a key host for the rich copper mineralization at Antamina.

Trenching and geophysics are planned for the second quarter; if this work is successful, Inca Pacific will seek a joint-venture partner to conduct drilling later in the year.

Reserves at Magistral are stated to be 2 million tonnes grading 2.04% copper.

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Pasacancha

The Pasacancha property covers a belt of Mesozoic sedimentary rocks and Tertiary intrusives, which encompasses the Aguila copper-moly-porphyry deposit and the adjacent Pasacancha mine, a former silver-lead-zinc producer.

The Inca Pacific claim is exclusive of a 100-ha block covering the Aguila pit, but does cover ground to the north, south and east of the Aguila claim.

In 1997, trenching in the Aguila North sector exposed gold mineralization in intensely altered Tertiary dykes and sills. Values of up to 1.94 grams gold over a true width of 17 metres were reported.

Work in 1998 will attempt to delineate the extent of this mineralization and delineate drill targets. Once these targets have been defined, the company intends to seek a joint-venture partner to carry out a drill program.