Patagonia Gold digs into southern Argentina

Goldcorp.’s (G-T, GG-N) $3.6 billion acquisition last year of Andean Resources and its Cerro Negro deposit in Santa Cruz province may have showcased Argentina as a key gold producing region. But Patagonia Gold (PGD-L) had been working in the mining-friendly province for years before that and in February 2007 acquired an exploration property portfolio there of partially developed projects from subsidiaries of Barrick Gold (ABX-T, ABX-N).

Patagonia’s land in the western portion of Argentina’s prolific Deseado Massif region includes its flagship Cap-Oeste deposit as well as its advanced-stage Lomada de Leiva project. In May, the London-based junior explorer came one step closer to becoming a gold producer when it launched a trial heap-leach operation of a 50,000 tonne test pad at Lomada de Leiva. Gold was successfully accumulated onto activated carbon in June but the full trial was held back by freezing temperatures in the winter months of July and August. The trial resumes this month and is expected to be completed in November and yield about 2,500 ounces of gold over an operating period of 120 days. 

“A successful trial heap leach should lead to a fully scaled-up 5 million tonne mine operation,” Garnet Simon of Matrix Corporate Capital in London wrote earlier this year in a January research note to clients. 

Lomada de Leiva contains measured and indicated resources at a 0.30 gram gold per tonne cut-off grade of 5.0 million tonnes grading 1.0 grams gold for 161,346 ounces of contained gold and inferred resources of 3.41 million tonnes grading 0.67 gram gold for 73,725 ounces of gold. Significant drill intercepts have included 18 metres of 6.87 grams gold per tonne and 36 metres of 4.78 grams gold.

“Once fully operational, Lomada de Leiva will render Patagonia Gold virtually self-funding as they progress with development on other key projects,” Wendy Durham of Proactive Investors wrote in a research report in March 2010.

Patagonia’s other key projects include Cap-Oeste, part of Patagonia’s 80-sq-km El Tranquilo block of concessions, where infill and extension drilling returned “bonanza gold and high silver grades intersected in a newly discovered zone,” the company reported in September. 

Highlights of the drill campaign at Cap-Oeste, which remains open along strike in both directions and down plunge, included 8.91 metres of 70.79 grams gold per tonne and 518 grams silver per tonne from drill hole CO-285. Other notable intercepts included 16 metres of 5.91 grams gold and 49 grams silver from hole CO-284; 20 metres of 3.92 grams gold and 48 grams silver in hole CO-281; and 9 metres of 3.01 grams gold and 357 grams silver in hole CO-263.

Currently Cap-Oeste has indicated resources of 5.63 million tonnes grading 1.89 grams gold and 65.04 grams silver. Inferred resources add 1.05 million tonnes grading 1.35 grams gold and 41.34 grams silver.

Drilling is also being carried out at other prospects along the 6-km strike extension of the Cap-Oeste project including at Cap-Oeste South Extension (COSE), La Pampa to the north and Monte Leon to the southeast.

At Monte Leon, 11 km from Cap-Oeste, drills have intersected wide near-surface zones of potentially bulk mineable gold and silver over a strike length of 1 km, including 74 metres of 1.07 grams gold and 102 grams silver. Other highlights reported in June include a 65.50 metre interval averaging 0.87 gram gold and 1 gram silver and 43 metres of 1.04 grams gold and 9 grams silver.

And some analysts believe that Patagonia’s La Manchuria project, a low-sulphidation epithermal gold and silver deposit 50 km to the southeast, could become a satellite ore-feeder to Cap-Oeste. Indicated resources there total 425,705 tonnes grading 2.95 grams gold per tonne and 135 grams silver. Inferred resources add 1.47 million tonnes grading 1.53 grams gold and 49.4 grams silver.

Patagonia’s 2007 land acquisition from Barrick cost the junior about 30 million shares and a small up-front cash payment. Under amendments earlier this year to the original deal, Barrick’s back-in right was eliminated in exchange for a 2.5% net smelter return royalty on all future production.