Monday 18 October 2010

Mariana Resources removes another layer of risk from Patagonia project

Mariana Resources (AIM: MARL) this morning removed another layer of risk from its promising Las Calandrias gold-silver project by acquiring the freehold surface rights to the licence area in Patagonia.
The purchase also gives the  company more  flexibility in  the future to fast-track  the exploration and development of the site.
The surface rights cover all of the known Mariana gold mineralised zones at Las Calandrias as well as those areas considered to be the highly prospective for new gold discoveries.
The agreement allows the former owner occupy and farm livestock on all vacant land at but prevents him interfering with any exploration and future mining operations.
Mariana has a project office on site as well as two new  core sheds and the recently purchased new camp  facility.
This will cater for 36 people and is fully operational now that a 10,000 metre drill programme is underway to define a maiden resource at Las Calandrias.
Mariana's  Chairman John Horsburgh  said: "The purchase  of the freehold surface rights  demonstrates our commitment to our flagship Las Calandrias project as we continue  to advance the project through the development cycle and up the value curve.  
“The purchase not  only secures our  access to the  project but gives us future   flexibility  to  optimise  further  exploration  work  and  development infrastructure.
"Mariana  is continually  engaging local  communities and  has maintained a very good  relationship with  the previous  owner which  we hope  to build upon as we develop  the  Las  Calandrias  project.  
“We  believe this purchase demonstrates Mariana's commitment to the project, local community and the Santa Cruz Province as  a  place  where  junior  explorers  can  add wealth for shareholders through discovery and development."
The company’s broker FinnCap said the freehold purchase is a positive step in the development of the Argentinean project.
Analyst Joe Lunn said: “It removes the risk of a third party delaying the project in the future by demanding a high level of compensation in return for relinquishment of these rights. We expect the assay results of the first holes at Las Calandrias shortly.”
The project is located in the Deseado Masif, the up-and-coming area in Argentina for gold and silver discoveries.
It is divided in two – Calandria Sur and Calandria Norte – and the licence is 100 per cent owned by Mariana.
Around a year ago Sutcliffe and his team drilled 1,350 metres of holes around Norte and came away with very little.
“We got a few metres with a few grams of gold,” managing director John Sutcliffe told Proactive Investors recently.
However he had better luck when he began a second round of drilling to 70 metres that struck bonanza grades of gold between 338 grams and 443 grams per tonne.
“It is pretty amazing. But both intersections are very narrow - in one case one metre and the other 80 centimetres,” Sutcliffe says.
The first programme, completed in October 2009, did find a very viable target at Sur, which the Mariana MD says is “stacking up to be bulk minable”.
The grades here range between 0.9 grams per tonne and 2.4 grams, but are spread over a much greater area.
However Sutcliffe reckons the drill programme is yet to uncover Sur’s full potential.
“Calandria Sur is a bowl with the gold like a soup at the bottom of the basin,” he explains.
“The gold is spread out over a large area. What we are looking for is where the gold came from, because it didn’t just appear in that rock. It didn’t form that way. It has got to have come from some sort of feeder zone.
“I think the feeder zone is something like Calandria Norte, which is a vein of a high-grade multi-ounce feeder zone.
“Perhaps what we haven’t found at Calandria Sur is what could actually be the future if the project.
“It is going to be hard to find (the feeder zone) and we may not find it in this round of drilling. If we don’t find it then this project is still going to have legs.”
While Mariana continues to look for the source of the gold at Sur, the drilling is also designed to help it compile a resource estimate, which it hopes to publish by the “first part of next year”.
However Mariana isn’t a one project play.
Drilling at Sierra Blanca, in Argentia, will begin by the end of the year with the potential for silver-gold discovery. Mariana owns 70 percent of Sierra Blanca, though it has an option to a buy the remaining 30 per cent from IAMGOLD.
“We have got on the surface some very exciting silver numbers,” says Sutcliffe.
One particular 11 metre intersection contained 386 grams of silver per tonne coupled with a not-to-be-sniffed at 3.4 grams of gold.
“The numbers are really interesting, but we’ve not been able to nail it in the drilling,” Sutcliffe explains.  "This is mainly the result of drilling problems – difficult ground and loss of water circulation.”
In Chile the group has joint ventured all its iron oxide copper gold (IOCG) projects there with Cliffs Natural Resources. The earn-in agreement could see the American group take a 70 per cent stake in Mariana’s Northern Chile properties.
But it will only do so if it invests US$3 million developing them. Cliffs has committed to a minimum spend of US$500,000.
FinnCap analyst Lunn reckons this is a very sensible approach.
“We view the decision ... as an excellent way of unlocking the potential value of this world class exploration ground while maintaining shareholder exposure in the event of a discovery,” he said.
And he points out that while there is the potential for a major copper discovery in Chile, he also notes that a “substantial amount of geophysics” needs to be carried out before drill targets can be determined.
Back in Argentina, and just two kilometres from Calandria Sur, is the El Nido prospect, which barely rates a mention in the Mariana literature and certainly isn’t included in the company’s current valuation.
FinnCap’s Lunn has taken a stab at valuing Las Calandrias and reckons it is worth 41p a share based on a resource of 600,000 ounces of gold. However his matrix gives an upside case of 91p.
“We think that the enlarged mineralised footprint at Calandria Sur, proved up by the recent drilling campaign, has the potential to contain up to 500,000 ounces of low grade, bulk tonnage mineralisation,” Lunn said in a note to clients shortly after the summer fundraiser.
“But our re-rating of the shares is primarily due to the bonanza gold grades encountered at Calandria Norte, located 700 metres away.
“Although only two ore grade holes have been drilled so far, we believe that Calandria Norte has the potential to become the standout discovery at Las Calandrias.”

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