Viceroy drilling extends Gualcamayo

Vancouver — The latest round of drilling by Viceroy Exploration (VYE-T, VCRYF-O) has enhanced and extended the potential of the Portezuelo Blanco zone within the main Quebrada del Diablo resource area of the Gualcamayo gold project in San Juan province, Argentina.

Viceroy recently drilled 11 reverse-circulation holes to test for higher-grade portions and a possible southern extension of the Portezuelo Blanco zone. The company notes that the results confirmed both the higher grades and the southern extension of the zone.

Highlights from the drill program include the following:

* 2.11 grams gold per tonne over 60 metres (starting at 52 metres below surface), including 3.32 grams over 24 metres;

* 1.77 grams over 80 metres (starting at 62 metres), including 2.96 grams over 30 metres;

* 1.83 grams over 88 metres (starting at 8 metres), including 3.51 grams over 28 metres and 3.53 grams over 10 metres; and

* 1.35 grams gold over 64 metres (starting at 26 metres), including 5.32 grams over 12 metres.

Other notable results starting at surface include: 2.01 grams gold over 42 metres; 1.3 grams gold over 56 metres, including 2.29 grams gold over 18 metres; and 1.52 grams gold over 46 metres.

Viceroy plans to drill additional holes to test the zone’s potential for higher grades and expansions to the south, where it remains open. Last year, the company spent $10 million to explore and develop three main zones of mineralization, including Quebrada del Diablo, which hosts a measured and indicated resource of 37.1 million tonnes averaging 1.04 grams gold (1.24 million oz.) and an inferred resource of 11.3 million tonnes averaging 1.2 grams (435,000 oz.).

The nearby Amelia Ines and adjacent Magdalena zones host additional resources containing another 368,000 contained ounces gold.

These estimates are based on drilling to late 2004, and do not include results from subsequent exploration programs. An updated resource estimate is expected shortly that will include the results of a 127-hole, 27,000-metre drill program completed earlier this year. A previous preliminary economic assessment will also be updated in advance of the feasibility study scheduled for completion this year.

The 2005 independent preliminary assessment focused on the Quebrada Del Diablo zone, and examined the feasibility of an open-pit, heap-leach mine. The study concluded that the project had potential to produce 96,100 oz. gold annually over a 10-year mine life, based on an 80% recovery rate. Cash costs were estimated at US$133 per oz., while the project’s after-tax internal rate of return was 32.3%, based on a gold price of US$400 per oz.

Viceroy has about $77 million in its treasury, and intends to use some of those funds to advance its wholly owned Gualcamayo project to feasibility and a production decision later this year.

The 488.7-sq.-km Gualcamayo project is situated at an elevation of between 1,600-2,300 metres above sea level, and is near power and water sources and a paved highway.