A first pass of drilling by
The Vancouver-based producer reported results from the first seven diamond drill holes of a $1-million program which focused on the Quebrada del Diablo prospect. The holes were drilled from road-accessible sites and from one helicopter-supported pad close to the previously reported surface sample sites. The steep, rugged terrain is a limiting factor in selecting drill sites for this program, Viceroy reports.
“Despite market reaction to the results, we continue to believe that the Gualcamayo project in Argentina represents an excellent exploration discovery and an opportunity to define a new gold resource for the company,” says Viceroy President Clynton Nauman.
“The drill program confirms the presence of widespread gold mineralization and significant gold intercepts over substantial thicknesses. We are pleased with the initial results and will continue drilling into the Christmas break.”
Situated in San Juan province, the Quebrada del Diablo (QdD) prospect is a gold-bearing brecciated limestone unit in a limonitic and hematitic matrix. It was found exposed in the steep walls of a narrow canyon. Surface sampling at the base of the canyon yielded an average grade of 1.7 grams gold per tonne based on 86 samples taken from accessible sites along a 600-metre section.
Follow-up sampling confirmed the presence of widespread gold mineralization hosted in limestone and marble breccias, as well as altered feldspar porphyry intrusives. Mineralization has been traced over a strike length of 800 metres and confirmed over a vertical distance of 300 metres. In preparation for drilling, road access was extended from the nearby General Belgrano adit into the QdD zone. General Belgrano was one of three areas at Gualcamayo where Mincorp had previously identified skarn-related gold mineralization.
Sampling along the road started 165 metres above the trace of the adit and extended into the canyon beyond the first proposed drill site for a length of 278 metres. The road-cut averaged 2.39 grams over the first 106-metre section, followed by 0.45 gram over 60 metres, 2.9 grams over 62 metres (including a high-grade 2-metre interval of 34.9 grams), 0.17 gram over 18 metres, and 2.17 grams over the final 28-metre section of road. The higher-grade sections are related to intrusive-hosted breccias.
Select results are as follows:
- The first hole, QD-1, was drilled into the canyon wall along a north-bearing azimuth at an angle of minus 30. It intersected 136 metres of 0.94 gram gold, including 50 metres of 1.07 grams, starting at a downhole depth of 10 metres. Hole 1 was completed to a final depth of 220.6 metres.
- Hole QD-2 was collared 65 metres northwest of the first hole and drilled to the northeast at an inclination of minus 45 for a total length of 174.4 metres. The hole encountered 62 metres averaging 2.72 grams, including 36 metres of 4.1 grams, beginning at a 12-metre depth.
- Hole QD-4 was drilled from the same pad site as hole 2 but was swung almost 180 and aimed to the southwest at an angle of minus 50. At a down-hole depth of 66 metres, the hole hit a 20-metre intercept averaging 0.68 gram. Hole 4 was completed to a depth of 151.43 metres.
- The third hole, QD-3, stepped out a further 125 metres to the northwest and was directed to the southwest at an angle of minus 46. It was drilled to a depth of 33.25 metres, encountering 1.5 metres of 0.81 gram at a 5.8-metre depth and 16.8 metres grading 0.89 gram, starting at a depth of 16.4 metres. While overall core recovery is reported to have been good, only 50% recovery was achieved in hole 3.
Holes QD-5, -6 and -7 were drilled from a helicopter-supported pad on the side of the cliff, about 50 metres northeast of the road-accessible site for holes 2 and 4. The holes were drilled to the southeast.
- Hole 5 was collared at minus 45.5 and completed to a down-hole depth of 274.93 metres. It intersected 132 metres of 1.12 grams right from surface. The top 30.1 metres of hole 5 averaged a grade of 1.99 grams.
- Hole 6 was steepened to an angle of minus 70 and encountered 214.4 metres of 0.63 gram, starting at a depth of 3.6 metres. The top 16.4 metres of the hole averaged 1.42 grams. Hole 6 was drilled for a total length of 251.9 metres.
- The seventh hole was drilled vertically, returning 145 metres of 0.64 gram, with the top 23 metres grading 0.88 gram, starting at a 3-metre depth. Hole 7 was completed to a depth of 156.3 metres.
Speculating on the potential difference in grade between the drill intercepts and surface samples, Chairman Ronald Netolitzky says it is possible that gold-bearing fines are being lost from the matrix and oxidized fractures of the breccia as a result of washing during the diamond drilling process. The split core is being analyzed to determine the distribution of gold between the matrix fines and the harder breccia fragments. Surface outcrops will be further tested, especially the road cuts where exposed mineralized intrusive breccias are said to be identical to breccias intercepted in holes QD-2, -5, -6 and -7.
Says Netolitzky: “In previous surface work, we had done a very limited amount of differential sampling between the harder fragments and the oxidized matrix, and in those samples we did see that the matrix had a significantly higher level of gold than the actual fragments.
“The definitive answer to this obviously would require either some twinning with reverse-circulation holes or possibly some bulk-sampling. As soon as we get a comfortable feeling that this is a potential problem, we will address that concern.”
Oxidation is observed to depths of more than 200 metres below surface, particularly in brecciated and fractured limestone and marbles. Within the intrusive and intrusive breccia, oxidation is less developed, and primary sulphides are evident in a number of holes.
Through its wholly owned subsidiary, Minas Argentinas, Viceroy can earn a 60% interest in the 50,000-ha project from Mincorp Exploraciones by spending US$5 million on exploration over five years. Mincorp is a joint venture between
Viceroy, which is considered a mid-tier gold producer, owns a 100% interest in the Brewery Creek mine in the Yukon and a 75% share in the Castle Mountain mine in California.
In the recent third quarter, Viceroy incurred a loss of $509,000 (or 1 cents per share) on sales of $26.1 million, compared with a profit of $3.5 million (7 cents per share) on sales of $29.8 million in the comparable period last year. Nauman says the loss is due to increased exploration expenses and to accelerated depreciation and depletion at the Brewery Creek mine. The company spent $2.1 million on exploration during the 3-month period, mainly on regional programs in the Yukon and Argentina.
Operations generated a cash flow of $9.2 million (17 cents per share) during the quarter, versus 9.8 million (19 cents per share) a year ago.
The company’s attributed production for the period was 43,210 oz. The Brewery Creek mine cranked out 27,638 oz. at a cash cost of US$171 per oz., whereas Castle Mountain produced 20,763 oz. at US$331 per oz.
An intermediate leaching circuit was recently commissioned at the Brewery Creek mine, which has reduced gold production. The circuit effectively doubles the solution-handling capacity and increases the amount of ore under leach. As a result, the leach cycle time is reduced. “We will see the benefits of this in the fourth quarter and on into 1999,” says Nauman.
Viceroy maintains a strong hedge position and, during the first nine months of 1998, realized an average gold price of US$412 per oz. The balance of 40,000 oz. is sold forward in 1998, as are 150,000 oz. in 1999 at US$400 per oz.
Viceroy has revised its 1998 production forecast to 146,750 oz. at a cash operating cost of US$2
46 per oz. The estimate includes 80,000 oz. at a cash cost of US$180 per oz. from Brewery Creek and 89,000 oz. (66,750 oz. to Viceroy’s account) at a cash cost of US$331 per oz. from Castle Mountain.
At Sept. 30, 1998, the company had working capital of $54.9 million, including $40 million in cash.
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