Rapid progress for Atacama Pacific’s Cerro Maricunga

Thanks to several years of work as a private entity, Atacama Pacific Gold (ATM-V) came out of the gates running last year with a $33-million initial public offering and an advanced gold project in Chile.

Listing in November at $2.75, the company has since completed a 30,000-metre drill program, metallurgical testwork and another $30.5-million financing, though the second time around the company sold shares at $5.25 apiece.

Most recently Atacama released an initial resource estimate for its flagship Cerro Maricunga project of  1.62 million indicated oz. gold plus 1.95 million inferred oz. gold at a 0.3-gram-gold-per-tonne cut-off grade.

The resource is concentrated in the Lynx and Phoenix zones that span what the company describes as a single, 1.4-km mineralized zone across two peaks, cut by a north-westerly trending regional structure. Together the zones host 92.8 million indicated tonnes grading 0.54 gram gold, plus 116.7 million inferred tonnes grading 0.52 gram gold.

A few hundred metres southeast sits the Cruz zone that hosts 33.1 million inferred tonnes grading 0.54 gram gold. The zone is cut-off to the southeast along the margins of the volcanic centre, but is open to the northwest towards the Phoenix zone.

The company notes that the Phoenix zone is open along strike to the east and southeast where trenching has outlined 600 metres of untested mineralization. All deposits remain open at depth.

Reached by phone, Atacama president and CEO Carl Hansen says in an interview that the numbers were “better than we were hoping for,” and notes that analysts had been looking for 2.5 million total oz. gold.

Steven Butler, an analyst at Canaccord Genuity, highlights in a note that the resource was indeed 43% higher than his estimate, and reiterates a “speculative buy” rating  with a $10 target.

Butler notes that the 2,500-metre-long structure could host a global resource in the range of 6.7 million oz. gold, while lowering the cut-off to 0.2-gram-gold increases the global resource 28% to 4.6 million oz. gold.

Hansen says that very good drillers and drilling conditions added 10,000 metres to the originally targeted amount, with the resource based on an eventual tally of 33,400 metres of reverse-circulation and diamond drilling over 90 holes.

“We drilled a lot more,” Hansen says, “and that additional drilling . . . combined with positive results, led to a better-than-anticipated resource estimate.”

Hardly slowing down, the company will launch a 42,000-metre, $24-million drill program in October with six rigs on-site, to be paid for with $48 million in cash. 

With the infill and exploration drilling ongoing, the company plans to dive into engineering and an economic study in early 2012, and continue with metallurgical testing.

So far, metallurgical work has indicated the oxide-associated deposit is amenable to heap leaching, with early testing showing that gold at Cerro Maricunga is principally in fine-grained native form at a roughly 97% purity. The company attributes those characteristics to the 79% to 89% recovery rates at a 19-mm crush size.

Gold also occurs in relation to magnetite and hematite associated with black-banded silica veinlets and chlorite-magnetite-quartz veinlets, hosted primarily in a central breccia complex.

The fairly rapid progress at Atacama can be attributed to the years of early work as a private company, and also to the experience of senior staff. Albrecht Schneider, who co-founded Andina Minerals (ADM-V) with Hansen, started Atacama in 2007 and is currently chairman. Hansen, a self-professed exploration geologist, came on-board in 2009 after Andina moved into developing the 6.5-million-reserve-oz. Volcan deposit. The two have been working together for some 15 years.

“Management has done this before, this is nothing new for us,” Hansen says. “We were the exploration geo’s at TVX Gold, which had the Coipa mine in Chile. We were the founders of Andina Minerals and the Volcan discovery, so this is just us moving ahead in Chile. We don’t really have to reinvent anything, we just have to get up and go.”

Schneider’s experience in the area paid off in the initial securing of the Cerro Maricunga property, which he noticed when the claims, apparently previously held by Falconbridge, lapsed.

“Albrecht had been watching it for some time,” Hansen said, “so when it came open, he was just fortunate enough that he happened to see it and stake it.”

The company now wholly owns the property in the prolific area, with no royalties. Neighbours include Kinross Gold‘s (K-T, kgc-n) La Copia mine 20 km to the south and its Lobo Marte project 30 km to the north.

Incidentally, Kinross owns about 6% of Atacama, while Gold Fields (GFI-N) owns 11%, and insiders own 41% of the 47 million shares out.

For 2012 the company will continue to focus on Cerro Maricunga, but plans to also look at its earlier-stage greenfield projects in the region.

Cerro Maricunga presents the challenge of being at almost 5,000 metres in elevation, though the camp is at a more reasonable 3,800 metres.

And, like almost everywhere in Chile, water will be a problem for development. Hansen says the company is looking to resolve the water issue, but with the business so competitive, he cautions that the company had been keeping fairly quiet about it.

On the day the resource estimate came out, Atacama’s share price climbed 5¢ to $5.30 on very thin volume.