Aug 12 - 18, 1996 Volume 82 Number 24 - 0 comments

STOCK MARKETS -- Golds lead Toronto market higher

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The Toronto Stock Exchange moved higher during the report period July 31-Aug. 6, with the TSE 300 composite index finding its way back above 5,000 for the first time since July 19. The index closed at 5,024.26, up 123.11 points (or 2.5%) from a week before. .
Gold added $2.75 this week on London bullion markets, with the morning price on Aug. 7 fixed at US$388.25 per oz. Platinum pushed up another 50 cents to US$400 per oz. but silver was off 6 cents to US$5.05 per oz.
Arequipa Resources was 25 cents higher at $28.15, $1.15 higher than the takeover offer Barrick has on the table. Arequipa's board has not yet replied to the offer, but drilling continues at the Pierina property in northern Peru.

Aug 19 - 25, 1996 Volume 82 Number 25 - 0 comments

Arequipa intensifies drilling as Barrick waits

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By: James Whyte

Junior Arequipa Resources (AQP-T) has stepped up its drill program in the hope that more geological information will help directors and shareholders assess the takeover offer from Barrick Resources (ABX-T). In a circular mailed to shareholders, Arequipa's board of directors recommend that shareholders not tender their shares in acceptance of Barrick's $27-per-share offer "until further communication from the board." Arequipa's key project is the Pierina property in northern Peru, where adit sampling encountered gold mineralization with gold grades in the range of 4-5 grams per tonne. Subsequent drilling, largely by reverse-circulation (RC), has outlined a mineralized zone measuring about 29 hectares.
The company hopes that additional mineralized drill intersections from Pierina will entice another bidder to enter the ring before Barrick's offer expires at 12:01 a.m. on Aug. 20. Arequipa said that other companies are reviewing existing data on the project and "may be prepared to make a competing offer."
Brokerage houses Nesbitt Burns and Loewen, Ondaatje & McCutcheon, both of which Arequipa had engaged to provide fairness opinions on the bid, are also awaiting more drill results before they report their findings.
The company says its drilling program has two goals: to define a drill-indicated resource and to demonstrate that there is potential for more mineralized zones to exist on the property. It is drilling to the southeast of the surface showings, where more mineralization has been intersected below cover. It is also filling in drill coverage on 50-metre centres near the adits to confirm the continuity of the mineralized zones.
At the same time the company is working on buying up the necessary surface land rights and on getting approvals for water use.
The company has not released a resource estimate, but mining analysts have estimated a potential of 3-8 million oz. gold. Barrick has stated that it is basing its bid on a resource of 5 million oz.
The samples from the tunnel and drill holes have had remarkably consistent gold grades.
"Normally these disseminated gold deposits are spotty and irregular, but this one is more like a porphyry copper," says Arequipa Chairman David Lowell.
"It's contiguous and coherent and relatively predictable. In that sense it's unusual. We've now defined a block that is as much as 1,200 metres long and probably averages more than 300 metres in width."
Following the Barrick bid, Arequipa released further sampling results from the property, including both drill results from its 100-by-100-metre drill grid, and bulk grades from a raise bored from one of the tunnels.
Gold grades in the new drill holes ranged from 0.21 to 12 grams per tonne over widths from 6 metres to 206 metres. Of the 34 holes drilled in the mineralized zone, 30 have had intersections of more than 10 metres in length, grading more than 1 gram gold per tonne; typical grades are between 2 and 7 grams per tonne, and the mineralized intersections are most often 50 to 60 metres long. Most of the holes have been drilled vertically.
A raise bored at the origin of the Pierina grid, where twinned core and RC holes had previously been drilled, showed an average grade of 6.2 grams gold and 290 grams silver per tonne. Grades in the diamond drill hole were slightly lower and those in the RC hole slightly higher than those found in the raise.
The gold is disseminated through a lithic tuff and in an underlying feldspar porphyry that has been encountered in most of the drill holes. The host rocks are profoundly leached, with quartz and alunite often the only remaining minerals. With depth, the quartz-alunite alteration changes abruptly to match a regional pattern of clay-sericite alteration.
Sulphide minerals are rare -- there are traces of the copper sulphides enargite and covellite, and rarely there is some galena. Strongly mineralized rocks usually have barite and native sulphur. The mineralogical associations and the strong alteration have led some geologists to compare Pierina to the Goldfields deposit in Nevada. Lowell finds it resembles La Coipa, in Chile.
He says the leached and altered rock has presented problems; diamond drilling gets poor core recovery, so Arequipa has depended heavily on RC drilling.
"The RC drilling is a much better way to do the sampling, but sometimes we don't get return of RC cuttings," says Lowell. "So it's kind of a driller's nightmare."
The gold is finely divided -- an average of 20% of the gold is under 75 microns in size -- and RC drilling may also not recover the fine gold.
Arequipa has installed an additional cyclone unit on one RC drill to recover fine suspended solids from the drill water, and has found that gold grades in the fine material are much higher than in the main RC sample.
The host rock at Pierina is a Tertiary lithic tuff belonging to the Calipuy formation, the same rock unit that plays host to Newmont Gold's (NGC-N) Yanacocha mine. Lowell makes little of the connection, noting, "it isn't a continuous volcanic sequence; they just happen to be the same age and roughly the same lithology. There shouldn't be too much read into the fact that they're the same formation."
`Belt-ology discovery'
More important, he says, is Pierina's location in a belt of gold deposits extending from south of Huaraz, through Cajamarca and into southern Ecuador.
"It's a sort of a `belt-ology' discovery," says Lowell.
Two to three years ago, Lowell and his associate, Freddy Huanqui, staked several showings and some areas showing hydrothermal alteration along the belt, then ran a series of geochemical surveys that ultimately turned up a gold anomaly in bedrock samples. The property was folded into Arequipa, which drove two adits into the Pierina hill. Drilling started this spring and has indicated a wide zone of mineralization beneath the hill.
The mineralization appears to persist to the southeast, roughly parallel to a series of tension fractures. The drill pattern is being stepped out to the southeast to test the extensions. With a turnaround time of about a week for results, Arequipa is running against the clock in order to accumulate as much information as possible before Barrick's offer expires.
Securing surface rights and getting approvals has been helped along by an early start, says Lowell. "I'm familiar with another company that took a different approach to this, to their sorrow, and I decided to jump into surface rights acquisition and water rights. I think we're almost home-free on both scores at the moment."
Securing title
Arequipa now has clear title to about 40% of the land it will need. Another 20% is awaiting a court ruling on a dispute between two other parties, but both have negotiated a sale agreement with Arequipa. The remaining properties are at earlier stages of negotiation, but Lowell expects there will be no difficulty in coming to terms.
The company has applied for a permit to take enough water from the Rio Santa to operate a full-size mill. River water will have to be pumped about 1,000 metres, so Arequipa has also applied for a permit to explore for groundwater.
Arequipa shares were trading at $28.70 at the close of trading at presstime, suggesting that some investors believe another bidder could still appear.
Management was still awaiting news. As Lowell says, "it's been an exciting project, with a huge element of good luck involved."