The Rio Seco Project ("Project") is located in the Department of Libertad, Peru, 33 kilometres southeast of the city of Trujillo. There is excellent access to the Project, mainly on paved highway. The city of Trujillo is located 480 kilometres north of Lima and can be easily reached by direct daily flights (1 hour). The Project area is characterized by a moderate topography at altitudes of between 200m to 600m. The climate is arid and dry, typical of a desert environment.
There is excellent infrastructure already in place for the Project, which includes:
• road access along the Pan-American Highway just 45 minutes from Trujillo (population more than a million)
• a 10 km long well-compacted and easy to maintain dirt road from the highway turn off to the project location
• a major power line located within a couple of kilometers east of the Pan-American Highway
• a large government-owned concrete water channel running through the concessions
Project History
The first mining activities in the area date back to 1980. However, there has been principally only limited, artisanal exploration and exploitation activities carried on to date. Newmont Mining and Barrick Gold carried out some limited exploration activities in the early 2000s. The Government of Peru (Proyecto Especial Chavimochic) owns the land encompassing the Project area.
Geology
The Project area contains numerous outcrops of the Late Cretaceous "Coastal Batholith", composed of porphyritic diorite, granodiorite and tourmaline granodiorite rocks affected by a zone of strong shearing. These rocks have intruded metamorphic and volcanic sequences. On the western section of the Project area, and hosted in granodiorite, are several sets of sub-parallel veins and veinlets striking N40°E, E-W and N-S and dipping sub-vertically.
To date, four mineralized zones have been outlined and at least ten main veins have been identified. Preliminary data suggest the shear-controlled West and South Zones (the "Zones") have the best potential for hosting significant gold mineralization. The Zones contain a 580x100m stockwork target in the northern portion of the shear zone and several vein targets located to the south of the stockwork target. Overall, the shear zone extends for up to approximately 6 kilometres.
In early October 2009, the Company completed a Phase 1 Drilling Program (the "Program) on the Rio Seco Project's stockwork target. The Program entailed the drilling of eleven (11) reverse circulation holes, for a total of 1,398 metres. All holes were successfully drilled as planned. The holes ranged from 100 m to 156 m in inclined length and from 84 m to 141 m vertically from surface. The Program was designed to test the depth, strike extent and grade of the 580x100 m stockwork target to an average depth of approximately 100m, as a follow up to the encouraging assay results from the 2008 and 2009 trenching programs (see news releases of April 20, 2009 and May 12, 2009) which identified the stockwork target area as a potential open pit, bulk mineable, heap leach mineral resource, if economic grades were present.
The Phase 1 drill collars were located along the western side of the access road, where the majority of the trenching of the exposed mineralized lenses had taken place. In general, the holes were drilled along the N-S strike of the exposed mineralized lenses, to the west in order to test for the inferred parallel mineralized lenses under the hill or a combination thereof.
While the majority of the drill holes intersected the veins as projected from the surface mapping and the average AUE grades of the veins in the drill holes were similar to the trench assays (+/- 1.0 g/t AUE), the assay results for the areas surrounding the veins were below the trench assay results. The assays for these holes were all of low grade. Based on the drilling results, it appears that the mineralized lenses are primarily confined to the 580 x 25m area along the access road that was previously mapped and trenched. The Phase 1 drilling results do not support a potential bulk mineable target to the west.
The Company is analyzing whether to conduct a limited drill program to test the full eastern extent of the 580 x 25m mineralized area and also intends to further review the underground mining potential of the Project's vein targets and whether they might support a series of small-scale mines with a centralized processing plant.
