San Agustin shaping up on surface and underground

Vancouver – With trenching expanding the mineralized footprint and drilling pulling up good grades over considerable lengths, Geologix Explorations (GIX-V) polymetallic San Agustin project in Durango, Mexico, is showing potential to develop into a significant open pit mine.

San Agustin hosts a historical resource of 346,000 oz. gold and 4.6 million oz. silver within a larger mineralized dacite dome. Geologix optioned the property from Silver Standard (SSO-T, SSRI-Q) based on its growth potential, and work to date indicates two models of mineralization expansion. Northeast of the historical resource there appears to be high-grade gold-silver structures; to the southwest, the company has drilled and trenched a system of gold-silver-lead-zinc mineralization currently outlined to be some 1.4 km in length and 700 metres wide.

Results from the companys second exploration program in 2007 indicate continued potential for expansion while also confirming the existence of high-grade gold-silver structures.

Three drill holes collared along a southwest step-out line from the Main Zone toward Zone 2 intercepted a 250-metre wide mineralized area with each core returning elevated gold, silver, or zinc. Hole 102 returned 131 metres from surface grading 0.41 grams gold, 6.6 grams silver, and 0.36% zinc, including 57 metres grading 1.35 grams gold, 7.59 grams silver, and 0.69% zinc. And hole 104 cut 265 metres from surface grading 0.33 gram gold, 6.2 grams silver, and 0.34% zinc, including 95 metres of 0.69 gram gold, 3.38 gram silver, and 0.37% zinc.

Trenching around the Main Zone and Zone 2 has expanded the width of surface mineralization in both areas. In Zone 2, surface mineralization has been extended to 700 metres in width and traced for 500 metres along strike. Trenching directly north of the Main Zone expanded the mineralized width to 400 metres, with 2.2 km of strike outlined.

Within the Main Zone, infill drilling has returned similar or better grades than historical drill results. Hole 107 cut 140 metres from surface grading 0.4 gram gold, 13.4 grams silver, and 0.37% zinc, while hole 108 returned 223 metres from 74 metres depth grading 0.64 gram gold, 5.1 gram silver, and 0.52% zinc.

And in the companys most recent results, infill and stepout drilling in Zone 4 exceeded expectations. Hole 118 returned 122 metres of 0.55 gram gold, 15.04 grams silver, and 0.76% zinc from 58 metres depth, and hole 120 cut 102 metres grading 0.32 gram gold, 9.86 grams silver, and 1.03% zinc from 53 metres below.

The results from Zone 4 boosted Geologixs share price by 20 or 7.8% to close at $2.76 in Nov. 16 trading. The company has a 52-week trading range of 43 to $3.20 and has 39.4 million shares issued.

Disseminated gold and silver mineralization at San Agustin is hosted in sericite-pyrite altered, locally brecciated, massive to flow banded dome with some quartz and pyrite-manganese veining. Higher grade mineralization appears to be structurally controlled.

According to a 2004 estimate, San Agustin hosts 11.22 million tonnes averaging 0.96 grams gold per tonne and 12.86 grams silver per tonne.

The 576-hectare San Agustin property lies 85 km north of the state capital city Durango via paved road, and national power lines are 6 km east of the property. The Peoles zinc smelter is a 4-hour drive to the east.

In the late 1990s Monarch Resources, now part of Hecla Mining (HL-N), explored San Agustin for a few years, and in 2003 Silver Standard picked up the project and worked on it for a year. The two companies combined exploration efforts left behind 14,290 metres of drilling in 93 holes.

Geologix signed an option agreement with Silver Standard in 2006, handing over 1 million shares within the first year and agreeing to spend at least $2 million and complete 15,000 metres of drilling within the first two years. In the following three months Geologix has to prepare a resource estimate and then pay Silver Standard, on a sliding scale, for each ounce of gold and silver in the resource estimate. Based on current metal prices, Geologix would pay US$15 per oz. gold and US$1 per oz. silver for measured, indicated and inferred resources within the estimate. Geologixs $2 million in exploration expenditures are to be deducted from the payment, as are the value of the shares issued to Silver Standard.

If all obligations are met, Geologix will hold San Agustin outright. Silver Standard will retain a 2.5% net smelter royalty, capped at 2 million oz. gold equivalent.