Flagship Minerals (ASX:FLG) is advancing into the fertile Maricunga Gold Belt in Chile with a deal to acquire a gold project next door to major producers.
The junior explorer, which has a market capitalisation of $9.2 million, has secured a binding five-year option agreement to buy the Pantanillo Gold Project.
Flagship paid an initial US$100,000 ($158,895) to the vendor to conduct due diligence, which has now been completed. The company has now entered into a binding option agreement, paying a further US$100,000.
Under the option agreement, Flagship is required to make staged payments totalling US$1.4 million over the first four years, and in year five if the company chooses to exercise the option it will pay a further $11 million for 100% ownership.
Pantanillo is an advanced oxide mineralisation exploration project with a foreign resource estimate of 47.4 million tonnes @ 0.69 grams per tonne gold containing 1.05 million ounces.
The resource is compliant under Canada’s NI 43-101, with over 98% of the resource amenable to heap leach processing. However, it needs to be converted to a JORC resource to be compliant in Australia.
The 200km-long Maricunga Gold Belt (MGB) hosts more than 65 million ounces of gold resources across several major deposits, including the 27-million-ounce Norte Abierto joint venture between Newmont (NYSE:NEM) and Barrick Gold (NYSE:GOLD), Kinross Gold’s (NYSE:KGC) 10.7-million-ounce Maricunga operation and Hochschild Mining’s (LSE:HOC) development-stage 11-million-ounce Volcan Project.
Flagship’s new foothold in Latin America spans about 110km2.
Managing Director Paul Lock says securing the Pantanillo Gold Project marks an important milestone for the company.
“The project provides Flagship a material gold inventory and leapfrogs the company several steps closer to feasibility and production,” Lock says.
“Pantanillo is well situated, in the centre of the prolific Maricunga Gold Belt (MGB) and sitting adjacent to several substantial projects.
“What attracts Flagship to Pantanillo? It is the advanced stage of the project, the production history of the MGB, the presence of multiple tier one gold producers nearby, and the demonstrated low production costs of oxide gold projects in the MGB.”
A recent example, according to Lock, is Rio2’s (TSX-V:RIO) Fenix Gold Project, which is an oxide heap leach project in construction with a 0.48g/t gold head grade, all-in sustaining costs of $1,237 an ounce and an initial capital requirement of around US$117 million.
“Pantanillo is de-risked from an exploration perspective, it has all the merits of a strategically well-situated project, it has the potential to be low cost from a capital intensity and opex perspective, and it positions Flagship very well in the current gold price environment,” Lock adds.
Gold continues to hit new records, late last week punching through US$3,200 an ounce.
Historical production has not been reported within the Pantanillo project area, but Flagship says it appears artisanal miners have targeted certain outcropping silica “ledges” that may contain gold values exceeding 5g/t, for toll processing in Tierra Amarilla and Copiapó.
Anaconda reportedly undertook exploration and some drilling in the early 1980s but Flagship says none of the data exists anymore.
Modern exploration started in 1983 and was conducted by Anglo American (LSE:AAL) and its Chilean subsidiary, Kinross Gold, Fortune Valley Resources and Orosur Mining (TSX-V:OMI).
The deepest hole, drilled by Kinross, was down to nearly 700m and returned an intersection of 160m @ 0.7g/t from 524m.
Oxide material extends up to 180m below surface, with mixed material below extending up to 310m below surface. Sulphide/fresh mineralisation extends below the mixed zone and has been intersected in drilling up to 600m below surface.
According to Flagship, the sulphide potential is at least as much as the foreign resource estimate, which is contained in less than 0.5km2 of the 110km2 concession.
The Pantanillo deposit is over 850m long and between 200m and 600m wide, remaining open along strike and down-dip.
Oxide ores form much closer to the surface and can be economically mined via an open pit, whereas refractory ores, which host the higher grade sulphides, are found at greater depth.
Most heap leach (oxide) gold operations in the Americas are about 0.7g/t or lower.
Rio2’s Fenix Project, which sits 40km to the north and is in construction, has a resource grade of 0.38g/t and reserve grade of 0.48g/t, while Hochschild’s Volcan deposit 10km northeast has a resource grade of 0.66g/t.
Meanwhile, $3.6 billion Capricorn Metals’ (ASX:CMM) resource grade at its Western Australia-based Karlawinda Gold Project is 0.7g/t, and that is a more complex crush and grind carbon-in-leach operation.
Multiple target areas have been identified at the Pantanillo Project throughout the concession area along with several regional expansion opportunities.
Flagship’s focus now is to convert the foreign resource estimate to a JORC 2012-compliant resource, undertake confirmatory drilling and metallurgical testwork, expand the resource and firm up the feasibility of the project.
The company has an aspirational target of around 100,000 ounces of gold annually over a 10-year period using open pit mining and heap leaching.
Flagship is working towards the completion of a placement to raise funds before the end of April.
Write to Angela East at Mining.com.au
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