Latin American Minerals drives into Argentina, Paraguay (June 30, 2008)

SITE VISIT

VINCHINA, LA RIOJA, ARGENTINA — As our convoy speeds towards a distant mountain range, kicking up clouds of dust along the unpaved road on the way to Latin American Minerals’ (LAT-V, LATNF-O) Rio Tendal project, in northwest Argentina, it’s hard to believe that just a couple of months ago, this dry, desolate landscape was pounded by torrential rains. The scrub that dots the rocky earth here, on the eastern edge of the Andes, in La Rioja province, betrays no signs of the recent deluge.

Even so, the downpours caused very real destruction. Normal rainfall is 150 mm a year in the semi-arid region, but this year, 350 mm fell– in January and February alone.

Parts of Latin American’s 22- km gravel access road through the mountains to its camp at Tendal were washed away four separate times during the Argentinean summer. Each time, the company rebuilt, and each time, it cost roughly $100,000. In total, the road has eaten up nearly a quarter of its budget at the zinc-copper- lead-silver project.

“The access road is going to be a continuous challenge for us,” acknowledges LAT president and CEO, David Wahl, after a jarring three-and-a-half-hour ride to the camp from the small town of Vinchina, about 100 km south.

But if the history of the volcanogenic massive sulphide (VMS) camp is any indication, the project could be well worth the effort. Tendal’s rich silver-lead veins, discovered at the turn of the 20th century, lured miners to the remote site until 1950. Then, they hauled only the highest-grade ore they could find out of the mountains by horseback.

Now, the trip is made by four-wheel- drive trucks to a 50-person camp located at 3,000 metres altitude, where the kitchen is open late to accommodate 24-hour-a-day drilling, and the satellite TV is almost always tuned to a soccer game.

More importantly, the property is seeing its first drilling ever. Latin American sank the first holes here in a planned 5,000-metre diamond-drilling campaign starting in February, moving quickly after acquiring Tendal in early 2007, and building (and rebuilding) its access road, and camp.

Owned outright by the junior, the 364-sq.-km property consists of Precambrian schists overlain by Ordovician shales. While past miners were interested in the lead and silver hosted in narrow mineralized veins found in the schists, Latin American is exploring stratabound mineralization confined to a horizon in the schist.

Drilling so far has focused on three different targets: Verdiona, Las Catitas and Yegua Pircada.

Due out in June, the drill results were not available at presstime, but a trench-sampling program consisting of more than 1,000 samples has returned some promising results from all three targets. Verdiona returned up to 18.5 metres of 4.28% zinc, 0.75% lead, 0.7% copper and 7.45 grams per tonne silver; Yegua Pircada, 3.6 km west of Verdiona, returned 8 metres of 3.09% zinc, 9.38% lead, 0.03% copper and 91.02 grams silver; and Las Catitas, 400 metres south of the Verdiona zone, returned up to 27.5 metres of 0.66% zinc, 0.7% lead, 0.24% copper and 4.95 grams silver.

But Latin American has also discovered up to seven other potential targets, including El Alto (which consists of parallel east-west vein breccias, and has returned grab samples of 9% copper and 0.2% zinc), plus copper-gold porphyries.

“Our challenge here is prioritization,” Wahl says. “Every target we’ve identified so far is worthy of a lot of drilling. God gave us a good project here.”

Nonetheless, the geology at Tendal is complicated, much more so than indicated on surface, where multiple instances of outcropping mineralization give the appearance of a “slam dunk” project, Wahl says.

“The geology is more complex than first envisioned,” he concedes. “But the massive sulphides are there –there’s no question.”

The Verdiona zone extends for 2 km on surface and is about 80 metres thick; mineralization is found in stacked lenses of massive sulphides that strike north. Mineralization at Catitas, which is about 300 metres wide, is similar to that at Verdiona, found in veins hosted by massive sulphide lenses up to 3 metres wide and disseminated in the host rock. Richer in copper and silver than Verdiona, the company believes it could represent the feeder zone of the Verdiona system. At Yegua Pircada, about 3.6 km west of and parallel to Verdiona, mineralization is hosted by a north-trending limestone unit about 40 metres wide, and in the hangingwall and footwall contacts. Massive sulphides have been traced for 700 metres on surface.

On a tour of the property that leads up steep switchbacks to the drill rig at Yegua Pircada, at 3,400 metres, Tendal project manager Ana Portoro says part of the reason the mineralization is so complex is that the property encompasses a number of different mountain ranges. The Cordillera, the Precordillera and the Sierra Pampeanas ranges all have “different ages, histories, and geology,” which results in what she refers to fondly as a geological “mess.”

Aiding the company’s exploration efforts is X-ray fluorescence (XRF) technology. The company has three XRF guns — and at about $100,000 each, Wahl says they have been an invaluable investment. Giving a rough reading of the minerals in rock, the guns help determine areas of importance and assist the company’s geologists in determining whether one hole or another is worth continuing.

Unfortunately, Latin American was unable to finish its drilling program at Tendal this season. The repeated damage to the access road, as well as a fatal accident in February — in which a subcontractor drove through a safety berm — delayed the program.

The company was cleared of any responsibility in the incident, which was attributed to driver error, but as a result of the delays, the company finished less than 80% of the planned 5,000 metres. (Latin American is very serious about safety, as the nearest medical help is about four hours away; in January, Theodore Freedman, a former president and CEO of Mount Sinai Hospital was appointed to the board of directors. Wahl says Freedman will help the junior further develop safety and emergency protocols.)

The program was also cut short because the camp had to be shut down in June; there’s not enough snow in the winter to insulate the water lines the camp needs to function, so everything freezes.

The second phase of drilling will begin in the fourth quarter, when the weather warms up. Along with a recently completed gravity survey (testing an anomaly west of the Verdiona zone), the results will be used to complete a National Instrument (NI) 43-101 report on Tendal by the end of the year.

Latin American’s work has attracted major Teck Cominco (TCK. B-T, TCK-N), which has staked areas near its concessions, plus a few small mines totalling just over 1 sq. km within the junior’s claims. (Some small fluoride mines that belong to third parties also fall within Latin American’s claims.)

With the size of Latin American’s holdings and the number of targets it’s identified, Wahl hasn’t ruled out joint venturing the property in the future.

First, however, he wants to further assess Tendal’s potential.

“You don’t want to sell the store until you find out what the inventory is,” he says.

The area is sparsely populated, but it’s not entirely infrastructure poor. An international highway (parts of which were also heavily damaged by rain this year) passes within 50 km and leads west to Chile through the Andes.

Paso Yobai

Tendal is not Latin American’s only promising property — the junior also has a 75% interest in the La Carolina epithermal gold and base metals project, in San Luis province, Argentina (part of which has been optioned to an Argentinean capital group); and the Esmeralda gold project, in Colombia. But its focus for the rest of the year will be the Paso Yobai epithermal gold project, in Paraguay.

With virtually no mining history and
no wide-scale geological surveys of the landlocked country, sandwiched between Brazil on the northeast and Argentina on the southwest, it’s no wonder there are only five mineral companies, including Latin American, actively exploring in Paraguay.

But where geological surveys are absent, local lore will have to do.

Legend has it that gold looted in the Paraguayan War in the 1860s — which pitted Paraguay against Brazil, Argentina and Uruguay — was buried in the area of Paso Yobai. The story attracted a treasure- hunter in the late 1990s, who is credited with the gold find.

Since then, gold nuggets have also turned up in laundry being washed in a nearby creek, as well as in soil caught up in the tangled roots of tropical plants and trees.

The 273-sq.-km project is located near the town of Paso Yobai, 150 km southeast of Paraguay’s capital, Asuncion. Driving over the last 40 km to Paso Yobai, where paved road becomes a rutted, muddy path, lush fields of yerba mate (used to make a popular tea-like drink) and sugarcane, surround us on both sides. The population of about 20,000 here mostly make their living in agriculture, and keeping pigs, cows and chickens. For about 90 families, small-scale gold mining provides a seasonal, supplementary income.

Latin American is earning a 70% interest in Paso Yobai, which consists of the only two mining concessions granted in Paraguay. Minas Paraguay and Minera Guaira had two separate operations on contiguous concessions, but when LAT stepped in early last year, it shut them both down while it better defines the deposit with surveying and drilling. As a result of the previous operations, the project is fully permitted.

A 35-hole, 5,200-metre first-phase diamond-drilling program at Paso Yobai has nearly tripled the Discovery zone’s length to 2 km. Latin American has started a definition drilling and bulk-sampling program on the zone which could provide enough data for a resource calculation later this year. The company has also taken more than 10,000 soil samples, plus rock and chip samples at Paso Yobai.

Of the first 35 holes, guided by soil anomalies and drilled on 200- metre centres, nine delivered gold values higher than 1 gram gold per tonne, and core from several holes had coarse, visible gold. Hole 1 cut 10 metres of 2.17 grams gold from 92 metres depth; hole 11 cut 3.6 metres of 4.01 grams gold from 89 metres depth and 6.5 metres of 26.64 grams gold from 99 metres, including 0.5 metre of 105.51 grams gold; and hole 23 returned just under half a metre of 13.66 grams gold. All intervals represent true widths; samples with visible gold were analyzed by metallic or screen fire assays, in addition to fire assays.

News of visible gold in the core sent Latin American’s stock to a 52-week high of $1.30 in December. At presstime, the shares were trading at 32 apiece, near their 12-month low of 30. The company has nearly 40 million shares outstanding.

Airborne magnetic surveys have shown the Paso Yobai gold trend, which the Discovery zone forms a part of, to be 7 km long, and outlined by a gold-in-soil anomaly 8.5 km long by 2 km wide. A second, 4 by 1-km anomaly south of and parallel to the main trend, has also been identified for follow up.

Paso Yobai is an alkalic low-sulphidation epithermal gold system with mineralization occurring in “bonanza-style” carbonate and quartz veinlets and stockwork hosted in mafic dykes intruding sandstones.

Gold occurs in veins associated with pyrite and as coarse-grained, free gold in veins without sulphides. Bonanza grades occur when the sulphide-free veins with visible gold coincide with veins containing pyrite.

Latin American hasn’t quite figured out the mineralization yet, says executive vice-president exploration Waldo Perez. While the gold was initially thought to be hosted in the mafic dykes, that hasn’t been completely consistent. Sections of core from the sandstones, where gold occurs within fractures, have returned up to 2 oz. gold per ton.

“There are many questions we can’t answer, but we have the parts of the puzzle,” Perez says.

An NI 43-101 report released in March says that Paso Yobai is likely to have depth potential; green, smectite alteration in the vein system on surface and in drill holes suggests Paso Yobai is eroded to expose the top of the epithermal vein system. The company says that the presence of visible gold at surface and at depth is evidence that the gold is not supergene.

Local miners work along 1 km of the 7-km Paso Yobai trend, where about 20 farmers hold surface rights, digging huge pits and selling sacks of soil to local mills, where the gold is extracted.

But the pits hold obvious dangers: During The Northern Miner’s visit, the workings were abandoned as recent rain had made the sides of the pits even more unstable than usual. On drier days, however, 20 to 100 local miners would be in the pits.

Wahl says the miners are reaching the limits of how far they can dig — because of the instability of the pit walls, and also because they will eventually run out of soil, which extends for about 100 metres, reaching the hard rock beneath.

Latin American owns all mineral rights, but isn’t trying to curb artisanal activity, instead seeking to create employment.

“We try to keep the company labour intensive (in Paraguay),” Perez says.

About half of the 62-member staff at Paso Yobai is local, some of them former artisanal miners; the rest are Paraguayan.

The policy of putting together local teams instead of bringing in expats distinguishes Latin American from many other juniors that can display the clumsy touch of a foreigner, unfamiliar with local culture, language, power structures and personalities.

“There’s a bit of a different perception and way to entrance when you’re local, so we think that we have a bit of an advantage with that,” Perez says.

An Argentinean geologist with 20 years of experience and a former academic, Perez has studied and worked in Argentina, Alberta and New Brunswick. He’s also worked for Barrick Gold (ABX-T, ABX-N) and Iamgold (IMG-T, IAG-N) in senior positions. Many of his young professional staff trained under him at the majors, and have followed him to Latin American.

Perez emphasizes that the company’s local approach means that the junior is at home in each place it operates, and seen as just another partner.

“We perceive South America as our playground,”Perez says. “These (Argentina, Paraguay and Colombia) are very interesting places to position yourself early.”

The company is also addressing social responsibility issues early, with one staff member at each project hired to handle social issues.

But political risks remain in all three countries. Paraguay is very much untested in terms of mining, and mining is unfashionable right now in parts of Argentina, where some provinces have enacted or proposed bans on cyanide and other chemicals used in mineral extraction. Meanwhile, Colombia has civil war and high crime rates.

The junior has been burned once already; it gave up its Cerro Amarillo project in Argentina’s Mendoza province after a ban on chemicals used in mining was passed last June. La Rioja’s lower house approved a similar bill banning open-pit mining using cyanide last year — largely aimed at Barrick Gold’s Famatina project. However, a promised followup referendum has not materialized, leaving the law in limbo.

As Latin American is targeting VMS mineralization at Tendal, Wahl says the legislation doesn’t affect it, anyway.

And the junior, aware of political cycles, has a long-term view, believing that Latin America is no more risky than anywhere else. “Every country in the world goes through phases,” Wahl says.

“When you talk about political risk, all you have to do is look at Newfoundland,” he adds, referring to the recent ban on uranium development on Labrador Inuit land that has punished Aurora Energy Resources’ (AXU-T, AUEGF-O) stock.

Paraguay’s first mining law ever –passed
only last year in the hopes of attracting the type of mining investment that has made Chile prosperous — outlines a friendly regime with no mining royalties and a flat corporate tax rate of 10%. However, in an election this April, the longgoverning Colorado Party was dethroned after six decades of rule. The new government, led by former bishop Fernando Lugo, will take power in August.

Although Lugo is left-leaning, Wahl says Latin American’s country manager in Paraguay, Juan Carlos Benitez Maldonado, has been in touch with the incoming government, and there hasn’t been any indication that it will be anti-mining.

If anyone can negotiate the vagaries of Latin American politics, it is Wahl and Perez, who both joined the junior in September 2006, and the teams they have put together.

Latin American has a hearty leader in Wahl, who came out of a retirement that lasted all of six months, to head the company.

During 2007, Wahl’s first full year with the junior, he suffered a skull fracture, a serious shoulder injury (both while working on renovations to his home outside Toronto), and contracted Dengue fever in Paraguay — all while leading the company through three property acquisitions in three different countries, a $12-million boughtdeal financing and the Cerro Amarillo debacle. With four decades of experience in the industry, however, the mining engineer has the unflappable demeanour of someone who’s been around.

“These things happen in people’s lives,” Wahl says. “You’ve had malaria, you’ve had Dengue, okay — so what? That goes with the territory.”

But Wahl, an American by birth who comes from a veritable mining family (his father served as vicepresident of Bethlehem Steel and one of his three sons represents the sixth generation in mining), is by no means reckless. Instead, he knows the business and isn’t afraid to take calculated risks.

That can only be good for Latin American’s future.