Pediment up on San Antonio drilling (September 13, 2010)

VANCOUVER — On the heels of a healthy preliminary economic assessment (PEA) for the San Antonio gold project in Mexico, Pediment Gold (PEZ-T) has hit promising intercepts in an untested zone between the project’s two deposits, signaling the potential to significantly expand its gold count.

Pediment is working through a 40,000-metre drill program at San Antonio that has three goals. The company wants to enhance and expand the Main zone, which is also known as the Los Planes deposit; expand and infill the South zone, which is also known as the Las Colinas deposit; and probe the Intermediate zone, which is a 600-metre-long segment between Los Planes and Las Colinas that just saw its first drill holes.

Results from the first 25 holes of the program are now out and the work at Los Planes looks set to increase the confidence and southern extent of the deposit. From the centre of the zone, hole 186 cut 10.7 metres grading 0.21 gram gold per tonne from 51 metres depth, followed by 21.3 metres of 2.81 grams gold and then 44.2 metres of 0.98 gram gold. Nearby, hole 182 returned four intercepts between 51 and 237 metres depth: 88.4 metres grading 0.68 gram gold and 32 metres of 1.03 grams gold, plus two short hits.

Moving to the south, hole 204 intercepted 41.2 metres carrying 1.43 grams gold, starting 37 metres downhole. Some 200 metres to the west, hole 198 cut a lengthy intercept: 155.5 metres averaging 1.09 grams gold, starting at 23 metres depth. Other encouraging results included 67 metres grading 0.7 gram gold and 47.3 metres of 1.49 grams gold.

The Intermediate zone is also returning encouraging results, especially given that this is the first time the area has been drilled. Pediment released results from nine holes into the new area, most of which returned results similar to those from Los Planes or Las Colinas. Hole 175 cut 53.3 metres grading 1.18 grams gold from 60 metres downhole, hole 177 hit 36.6 metres of 2.73 grams gold from 142 metres depth, hole 174 intercepted 45.7 metres averaging 0.6 gram gold from 136 metres depth, and hole 172 returned 44.2 metres of 1.16 grams gold from 140 metres below surface.

Drill results from the Las Colinas, in the south, are still pending.

The Intermediate zone is defined by post-mineral cross faults that offset the Los Planes mineralization to the north and the Las Colinas mineralization to the south. If Pediment can track mineralization through the Intermediate zone, the three gold zones will join up to create 2,000 metres in strike.

“We saw the Los Planes develop and we saw the Las Colinas develop, and so we came back into the Intermediate zone and we’re drilling away,” says Gary Freeman, Pediment’s president and CEO. “We’re seeing enough in the Intermediate zone to suggest it really does exist, and we’re seeing Los Planes spread to the south, so we’re excited because we could go over 2 million oz. (gold) here easily. And that’s before any exploration downtrend to the south, where the San Antonio system extends along another 25 km of untested ground.”

A change like that would improve the project’s already healthy economics significantly. A recent PEA found that an open-pit, heap-leach operation at San Antonio could produce 82,500 oz. gold annually for nine years, based on current resources. It would cost US$71 million to build the oxide operation and major facilities, plus US$27 million in year three to add the sulphide material tertiary crusher. For that investment Pediment should be able to produce an ounce of gold for US$513.

Based on a gold price of US$900 per oz., the project carries a pretax net present value of US$79 million, using an 8% discount rate, and should generate a 33% internal rate of return. The return would allow capital payback in 3.3 years.

The project currently boasts oxide and transition resources totaling 16 million measured and indicated tonnes grading 0.89 gram gold plus 769,000 inferred tonnes averaging 0.65 gram gold. Sulphide resources add 19 million measured and indicated tonnes of 1.26 grams gold plus 327,000 inferred tonnes averaging 1.19 grams gold.

Both Los Planes and Las Colinas are amenable to conventional open-pit mining, with an overall project strip ratio of 2.6 tonnes of waste rock to 1 tonne of ore. The pit would produce 11,000 tonnes of ore daily. All of the ore would be heap leached; the PEA assumed gold recoveries of 50% for the sulphide material and 75% for the oxide and transition rock.

Freeman says the company assessed other options for treating the sulphide ore but found heap leaching to provide the best economics. Now the company is turning its focus towards metallurgy.

“Over the next 18 months we’re doing a number of large diameter metallurgical holes,” says Freeman. “When we did the initial bottle roll tests, we actually saw a pretty good recovery from the chips, as good as 76% from the sulphide chips. But we never really prepared the sulphide material for that kind of metallurgy — it wasn’t ground down as much as it could have been — so I think this next round will really show what leaching the sulphide rock can really do.

“I wouldn’t be surprised to see a better recovery,” he continues. “Whether it will be 75%, I don’t know, but even if it rises to 60% or 65% that’s a huge difference.”

San Antonio sits 40 km southeast of La Paz, in Baja California Sur. The project is surrounded by infrastructure. A power line, a paved road, and a fibre-optic cable all traverse the project site and would actually have to be relocated because they cross the proposed pit.

Freeman says the PEA is a good starting point but, when results are in from the current drilling and metallurgical programs, things should get better.

“I think the pit is going to get bigger and deeper, the grade is going to improve, the deposit is going to become more consistent, and the recoveries are going to go up,” he says.

On news of the drill results from San Antonio, Pediment’s stocks jumped 23¢ or 21% in two days to reach $1.35. The company has a 52-week trading range of 72¢-$1.98 and 48 million shares outstanding.