Trek extends mineralization at Aurizona

Shallow step-out holes drilled at Trek Mining’s (TSXV: TREK) wholly owned Aurizona gold project in Brazil have extended gold mineralization west of the past-producing Piaba open-pit mine.

Drill results from some of the first 6,500 metres of a 30,000-metre drill program this year indicate that the Piaba gold deposit continues at depth and along strike west of the pit, and the company says that continued infill drilling should lead to a resource increase.

Aurizona hosts proven and probable reserves of 18.6 million tonnes grading 1.62 grams gold per tonne for 969,000 contained oz. gold. The reserves were calculated in June 2016 using a US$1,104 per oz. gold price.

The project’s pit-constrained, measured and indicated resource stands at 29.9 million tonnes grading 1.67 grams gold for 1.6 million contained oz. gold and inferred of 2.7 million tonnes at 0.72 gram gold for 61,600 contained oz. gold.

Gold reserves are contained mostly within the Piaba pit, which remains open along strike and at depth. Piaba West is a potential extension of the Piaba gold deposit and is the first of several near-mine targets to be drilled in the US$7.5-million program.

Highlights from Trek’s first 18 drill holes include 3.90 grams gold over 11 metres in drill hole 575, which was 300 metres beyond the westernmost edge of the Piaba open pit, and starting from 49 metres downhole. Another hole, 576, intersected 0.71 gram gold over 6 metres another 100 metres west of 575, from 110 metres deep.

Other results were 2.63 grams gold over 9 metres in hole 572; 0.99 gram gold over 15 metres in hole 571; and 1.22 grams gold over 33 metres, including 2.27 grams gold over 11 metres, in 569.

“These intercepts have excellent grades and are well above reserve grade at Piaba,” mining analyst Kerry Smith of Haywood Securities said in a research note, adding that he sees “the resource upside at Aurizona as a key part of this story, along with management’s desire to also grow through prudent acquisition in the Americas.”

Scott Heffernan, Trek’s executive vice-president of exploration, tells The Northern Miner that his company is pleased with the first round of results.

“It’s a fantastic start to our program,” Heffernan says. “It’s pretty exciting. We have a more than 30,000-metre program that will take us to the rest of 2017 with a few goals: to grow the existing resource and to test regional targets that are somewhat defined nearby the main deposit, but also further afield.”

Heffernan says the priority is to follow the mineralization at Piaba along strike and down-plunge, and  increase drill hole density below the western edge of the current reserve pit and the initial 300-metre west extension. The company also plans to test 600 metres of western strike once it interprets a 38,000 line km airborne magnetic and radiometric survey.

Drillers at Trek Mining’s Aurizona gold project in Brazil. Credit: Trek Mining.

“We’re drilling underneath the westernmost end of the pit to test the depth continuation of mineralization and were successful drilling mineralization to depths of 200 metres, so it’s underneath the pit,” he says. “And then there’s the extension from the western pit limit to 300 metres and beyond, so the drilling shows the mineralization continues to depth under the pit and the 300-metre extension.”

A prefeasibility study examining the economics of restarting the open-pit mine released in September 2016 recommended a new mine plan that would expand the mill’s capacity to 8,000 tonnes per day from 5,500 tonnes per day. The increase in mill capacity would lead to producing 150,000 oz. gold a year at all-in sustaining costs (AISCs) of US$708 per oz., based on a six-and-a-half-year mine life. The prefeasibility study estimated US$146 million in capital expenses.

The company subsequently launched a feasibility study, which it expects to complete shortly. The study will examine incorporating a crushing and grinding circuit that will process all known types of mineral-bearing rock through the gold-recovery plant. A new mine plan would also involve upgrades to the power station, a mine fleet and improvements to existing infrastructure.

“The feasibility study will be a milestone for us, after which we hope to announce a construction decision in the third quarter of this year,” Heffernan says. “And all of that is leading to a first gold pour in December 2018.”

The mine produced a total of 329,042 oz. gold from 2010 to 2015 at an average grade of 1.28 grams gold per tonne. It was shut down in mid-2015, however. Falling gold prices and a stream-finance deal with Sandstorm Gold (TSX: SSL; NYSE-MKT: SAND) hindered its cash flow, while operational issues resulted in cost overruns and production shortfalls. In the second quarter of 2015, the mine produced just 14,260 oz. gold at AISCs of US$1,119 per oz. gold.

In addition to its 450 sq. km property at Aurizona-Piaba, Trek is in a joint-venture with AngloGold Ashanti (NYSE: AU) on an adjoining land package of 2,000 square kilometres. Trek owns 100% of the property and AngloGold is funding all costs to earn a 70% interest. Under the agreement, AngloGold must spend US$14 million over four years of financing and operating the joint-venture, and plans to drill 18,000 metres by year-end.

“The takeaway is that exploration is taking place on a number of fronts, and all results are super exciting,” Heffernan says. “We want to get into steady exploration to generate exploration results in the marketplace.”

The company has US$85 million in cash, which is enough, Heffernan says, to move into construction, although Trek will have to seek debt.

Smith of Haywood Securities estimates that Trek “will be able to consider multiple sources of funding for Aurizona, given the strong economics of the project, relatively limited upfront capital costs and Trek’s balance sheet.”

In March, Trek closed an $83.4-million equity financing at $2 per share.

In addition to Piaba, Trek owns 75% of the Koricancha mill in Peru. The custom-built, gold- and silver-processing facility is a 10-minute drive from the Pan-American Highway in southern Peru’s Nazca-Ocona gold district. The mill processes gold-bearing ore bought from small-scale and artisanal miners. Payments are set at the time of purchase at a discount to market, the ore is processed, and the gold and silver is sold at spot prices for Koricancha’s account.

Trek is also involved with Warintza, a porphyry copper-molybdenum exploration project in southeastern Ecuador, the Ricardo porphyry copper-molybdenum exploration project in Chile and Elk Gold, a past-producing, high-grade gold mine in British Columbia.