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TABLE OF CONTENTS Oct 31 - Nov 6, 2011 Volume 97 Number 37 - 0 comments

Minera IRL finds its heart's desire in Patagonia

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By: John Cumming
Deseado Massif, Santa Cruz province, Argentina 2011-10-31

For many people, the word "Patagonia" conjures up images of snow-capped mountains and pristine valleys filled with frolicking seals and blissed-out ecotourists.

Thankfully, for Lima-based gold explorer, developer and miner Minera IRL (IRL-T, MIRL-L), that's all much farther south or to the west, well away from its wholly owned, gold-rich Don Nicolas project and satellite tenements in Patagonia. This tenement package is located 100 km inland from the South Atlantic in a cold, windy and flat part of Santa Cruz province that's barely able to sustain several species of spiky plants, the odd puma and a few nervous sheep.

Adding to the area's post-apocalyptic vibe, in 1991 the Chilean volcano Cerro Hudson dumped several inches of ash over a 200-km-wide swath of Santa Cruz, including Minera IRL's tenements, forcing most of the ranchers scattered around the region to hastily abandon their land and estancias, never to return. Even today, a nudge of the boot into any one of these spiky plants shows stems clogged with fine, grey ash, and a glance around the landscape shows ash pooled in low, dead ground.

Minera IRL's exploration team in Argentina has contentedly set up a base in a once-abandoned estancia named El Condor, and has surrounded the old ranch house with new structures including modern offices, a core shack, a garage and portable housing.

Despite the desolate, fin del mundo feel of the place, infrastructure is, in fact, excellent. About a four-hour drive to the north, just across the border in Chubut province, is Comodoro Rivadavia, a bustling oil city of 140,000 overlooking the South Atlantic that's filled with blue-collar workers, oil and gas storage tanks and nodding oil derricks. (Commercial flights into and out of the city are still cancelled on occasion, though, owing to too much volcanic ash in the air.)

National Highway 3, which begins 2,000 km to the north in Buenos Aires, passes through Comodoro Rivadavia and southwards right through the heart of Minera IRL's large tenement package and onwards to its terminus at Ushuaia in Argentina's Tierra del Fuego province.

Other infrastructure benefits for Minera IRL include potential access to the national electrical grid, a natural gas pipeline running parallel to Highway 3 in the area, a deepwater port at Puerto Deseado 130 km to the east and water resources available at an industrial scale, owing to the company's recent well-drilling program.

Politically, Santa Cruz is one of the most mining-friendly of Argentina's provinces, and the newly re-elected Argentine President Cristina Fernandez and her late husband originally built up their political power base in Santa Cruz. The Peronist government has rankled many Argentine business people in the cities with its heavy-handed interference, but the president in the past has been supportive of natural resource development in the hinterlands, especially in her adopted home province of Santa Cruz.

Geographically, Minera IRL's ground is in the eastern part of the flat-lying Deseado Massif volcanic complex, which stretches across 77,000 sq. km of the northern third of Santa Cruz province and has become in the past decade one of the world's most exciting low-sulphidation, epithermal gold-silver camps.

Within the Massif, gold and silver mineralization typically occurs in steeply dipping, 1-to-6-metre-wide quartz veins hosted in Jurassic-age, intermediate-to-felsic tuffs and volcaniclastics.

"It is an emerging, world-class gold province, and I also believe that it's underexplored," says Corrie Chamberlain, Minera IRL's exploration manager for Argentina,  "We only have only two majors here, AngloGold and Goldcorp, and it's starting to get a lot more exploration expenditures directed towards it, so we're starting to see a lot more discoveries."

It's little wonder gold wasn't discovered in earlier decades by individual prospectors. Gold and silver grains are typically microscopic in size, and shallow vein structures are often hidden a metre or two beneath a crust of sandy, windswept gravel. Because of this poor visibility, simple soil sampling, geophysical surveying, trenching and shallow scout drilling have been critical tools for making near-surface grassroots discoveries over the last couple of decades.

Minera IRL has 2,700 sq. km of tenements here, making it the third-largest tenement holder in the Deseado Massif. Its most successful neighbours include AngloGold Ashanti's (AU-N) Cerro Vanguardia gold-silver mine, Coeur d'Alene Mines' (CDM-T, CDE-N) Martha silver mine, Pan American Silver's (PAA-T, PAAS-Q) Manantial Espejo silver mine, and Minera Andes' (MAI-T, MNEAF-Q) and Hochschild Mining's (HOC-L) San Jose gold-silver mine.

Other companies with promising gold-silver exploration or development projects in the Massif include Goldcorp (g-t, gg-n), Extorre Gold Mines (XG-T, XG-V, XG-X), Mariana Resources (MRY-T, MARL-L), Argentex Mining (ATX-V) and Patagonia Gold (PGD-L).

"We're very well positioned here and, while we wouldn't turn away opportunities, we really have enough ground to occupy ourselves for quite a while," Chamberlain says.

Minera IRL has several gold-silver projects on the go here: Don Nicolas, Michelle, Escondido, Chispas and Alberto.

Don Nicolas is by far the most advanced, with a feasibility study due this quarter by lead consultants Ingenieria Penta Sur. The project area is comprised of two vein field blocks: La Paloma to the northwest, dominated by a single vein named Sulfuro, and Martinetas to the southeast. The field blocks are about 40 km apart on either side of Highway 3.

Yamana Gold (YRI-T, AUY-N) first discovered gold mineralization at Don Nicolas as Yamana Resources in the early 1990s during a regional exploration program. The company first drilled the site in 1996 and brought in several joint-venture partners over the years, including Newcrest Mining (NCM-A) and Minas Buenaventura (BVN-N). Then U.K.-based grassroots explorer Hidefield Gold bought the property from Yamana in 2006 and carried out a scoping study.

Minera IRL in turn bought Hidefield for 9.8 million shares in December 2009. The £7.2-million deal gave Minera IRL in one fell swoop a new Argentina-focused, stand-alone business unit to add to its Peruvian gold assets that today include the profitable Corihuarmi heap-leach gold mine southeast of Lima and the potentially multimillion-ounce Ollachea high-grade gold project in Puno district. The Argentine assets remain subject to various royalties payable to the provincial government, Royal Gold (RGL-T, RGL-V, RGLD-Q) and Yamana.

Minera IRL's vice-president of exploration Donald McIver says that after Minera IRL took over work at Don Nicolas, extra impetus was put into working towards mine development instead of just grassroots exploration.

Total measured and indicated resources at La Paloma and Martinetas stand at 5.6 million tonnes grading 2.1 grams gold and 6.3 grams silver per tonne for 381,400 contained oz. gold and 1.1 million oz. silver, using a 0.3-gram gold lower cut-off. Inferred resources add 3.1 million tonnes at 1.5 grams gold and 3.5 grams silver, for 145,000 contained oz. gold and 347,000 contained oz. silver.

The above numbers include results from 18 months of drilling by Minera IRL totalling 23,000 metres, which almost doubled the resource tabled by Hidefield in 2009.

However, these resource numbers are set to change and be upgraded again upon release of the upcoming feasibility study, which Minera IRL hopes will outline a  plan for an open-pit gold mine that could use heap leaching and standard milling to produce at least 50,000 oz. gold per year, trucking ore from La Paloma and Martinetas to a central processing facility.

The feasibility study is taking into account the shallow portions of nine veins at La Paloma and Martinetas, and there remains plenty of exploration potential at depth and along strike in these veins, as well as in nearby, partially explored gold-bearing veins.

"We're looking at a lot of these little satellite heap-leach targets sitting within a couple of kilometres of Martinetas," Chamberlain says, noting that they generally form topographic highs, have good mineralization and are often 100-by-25 metres in size. "So very quickly we've identified a number of these areas, and some of them have even been worked into the feasibility. We'd love to make a big find, but these easy pickings add up."

Preliminary metallurgical work by Hidefield in 2007 showed milled recoveries of 99% for gold and 93% for silver in oxide material, and 84% for gold and 59% for silver in sulphides. Weathering in the area may extend 20 metres to 50 metres deep.

Michelle

Minera IRL's westernmost tenement holds its greenfields Michelle epithermal, low-sulphidation gold-silver project, which sits directly northwest of the vast, rich vein field being mined via narrow open pits and underground by AngloGold at its Cerro Vanguardia gold-silver mine.

"The veins and host-rock units can be traced at surface from Cerro Vanguardia into Michelle," Chamberlain says. "And the veins have demonstrated to be gold anomalous. It's the northwest extension of the Cerro Vanguardia vein field - there's no question about it."

Owners AngloGold (92.5%) and Santa Cruz government-owned Fomicruz (7.5%) produced 209,000 oz. gold and 2.8 million oz. silver at Cerro Vanguardia in 2010 at a total production cost of US$517 per oz. gold, and a recovered grade of 6.11 grams gold. It ranked as AngloGold's lowest-cost mine last year, and the company is now moving to ramp up complementary underground operations via several new portals, and has been adding heap-leaching capacity for marginal-grade ores to the main, conventional 3,000-tonne-per-day mill and carbon-in-leach circuit.

AngloGold budgeted US$9 million for exploration work at Cerro Vanguardia this year in a program that would include 31,000 metres of diamond drilling and 17,000 metres of reverse-circulation drilling. AngloGold's stated goal is to "expand the mine's mineral resource at depth and to the north and west of the concession" - marching steadily towards the doorstep of Minera IRL's Michelle vein field, which is only 6.5 km from the nearest Cerro Vanguardia pit. 

Chamberlain notes that the famously secretive and standoffish AngloGold has been quite friendly towards Minera IRL lately.

This year Minera IRL has completed geophysical surveys over Michelle, and has been carrying out a 4,500-metre scout core drilling program to test the depth potential to 150 metres of two veins named Michelle and Jackpot. Preliminary results show similar geological sequences as at Cerro Vanguardia and grades above 1 gram gold over 1.5 km of strike at the Michelle vein and 250 metres at Jackpot.

"We're looking at discovering a number of fertile vein structures that have shoots of anywhere
between 100,000 oz. gold and up," Chamberlain says. "The total ounces aren't going to come from a particular pod of mineralization. They're going to come from a number of shoots and pods. That's the way it happens at Cerro Vanguardia."

Making things a little more difficult, half the Michelle project area is covered by a thin veneer of younger flood basalts that mask the economically important Chon Aike host-rock formation, which is widely exposed on the Cerro Vanguardia ground. Michelle is also a four-and-half-hour drive from home base at El Condor, so exploration logistics are an issue.

But the area's geological potential and setting remain compelling. "It's probably the largest known epithermal vein field in the world, it would have to be," Chamberlain gushes. "It is amazing the volume of fluids that must have gone through this area. It is huge. It is gigantic."

Escondido

At the northern end of Minera IRL's tenements is its Escondido greenfields gold project, which covers the 700-metre-long southeastern extension of Mariana's Las Calandrias gold discovery announced in late 2009.

Escondido and Las Calandrias are notable for hosting gold mineralization not in epithermal veins, but in large rhyolite dome-related hydrothermal vein-breccia bodies that make for good bulk-tonnage targets.

Earlier work carried out by Hidefield focused on the northwest corner of the tenement near Las Calandrias, but Minera IRL has spent the last two years carrying out helicopter-borne magnetic radiometric, induced polarization and other geophysical surveys over the entire block, plus drilling 92 core holes totalling 11,500 metres.

In particular, there has been excellent correlation between resistivity highs, chargeability highs and gold-mineralized breccia zones.

Some of the best holes from 2010 in the mineralized breccia include 25 metres grading 1.45 grams gold and 9.62 silver from 52 metres in hole 10-2 and 100 metres of 1.19 grams gold and 7.77 grams silver from surface in hole 10-3, while 2011 yielded results such as 16 metres of 2.05 grams gold and 7.39 grams silver from 25 metres in hole 11-52. Mineralization remains open to the southeast.

Plans are to define new drill targets to test in the first quarter of 2012, particularly ones at depth, and move towards completing a scoping study.

"At Escondido, we could develop the project in synergy with Mariana, which is not a miner," Chamberlain comments.

Chispis in the southeast corner of the tenement package is another greenfield epithermal gold-silver vein field prospect, with the most advanced target being the high-grade Pan de Azucar vein in the Spark tenement, which is seeing active scout drilling this year.



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Photos

Minera IRL project geologist Juan Mayer in a trench at the Martinetas gold vein field, which is part of Minera IRL's Don Nicolas gold project in southern Argentina's Santa Cruz province. Photo by John Cumming
Minera IRL project geologist Juan Mayer in a trench at ...
Minera IRL's exploration manager for Argentina, Corrie Chamberlain, and project geologist Julia Arranz in a core shack at the Don Nicolas gold project in Argentina's Santa Cruz province. Photo by John Cumming
Minera IRL's exploration manager for Argentina, Corrie ...
Minera IRL's active gold projects in the Deseado Massif region of southern Argentina's Santa Cruz province. Photo by Minera IRL
Minera IRL's active gold projects in the Deseado Massif...

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