Mariana Resources – discovering solid value in South America

In August 1991, the eruption of Mount Hudson in Chile ejected over 8 cubic kilometres of ash in a plume reaching 18 km into the atmosphere. Driven by strong north westerly winds, the ash plume carried its burden into Patagonia - where it blanketed the Deseado Massif, smothered all vegetation and ruined the food source on which the vast sheep rearing ranches depended. An entire tract of northern Santa Cruz became a desert.

Enter the prospectors. Gold had previously been discovered at Cerro Vanguardia, but it was not until AngloGold began serious work on the project in the 1990s that the potential of the Deseado Massif to host significant epithermal gold and silver deposits was recognised. The Precambrian basement rocks and Permian sedimentary layers which overlie them are in their turn overlain by Jurassic-age volcanic rocks, including the Bajo Pobre and Chon Aike formations, which were emplaced by volcanic eruptions occurring within predominantly NW-SE lying fault systems. It is these rock formations which host most of the gold and silver, found in low-sulphidation veins, veinlets and stockwork which formed in Jurassic times as hot mineral-bearing fluids were driven up from below and then deposited as quartz or chalcedony in faults and fractures.

Ironically, the volcanic ash which had presented the exploration opportunity also made life more difficult for prospecting, as it masked many of the obvious surface indicators and mineralised outcrops. But modern exploration is no longer reliant solely on surface prospecting, and the Massif now hosts four operating mines, several significant resources under development and many more as yet undefined discoveries.  

The most recent of these belongs to Mariana Resources (AIM:MARL), who have just scored an enviable "first" at their Dos Calandrias prospect with the discovery of a new style of gold mineralisation. Dos Calandrias - originally known as Tongoril and acquired as part of a package of new exploration land in Santa Cruz last year - was identified from satellite imagery and subsequent surface exploration, which delineated a NW trending belt some 700m long and up to 150m wide, consisting of poorly exposed quartz-sulphide stockwork veining. Rock chip samples of up to 21.7 g/t of gold encouraged further work, and it was not long before a second area of mineralisation was found 600m to the north, where multiple sub-outcropping vein breccias ran NE for more than 400m. More rock chipping produced assays of up to 18.9 g/t of gold, some of it visible, while follow-up channel sampling yielded further positive results. It was at this point that Mariana called in Dr Richard Sillitoe - the internationally known expert on hydrothermal mineralisation - who summarised his findings thus: "The newly discovered Tongoril prospect is a rhyolite dome-related epithermal vein system, possibly of low-sulphidation type. The partly brecciated veins are chalcedonic and arsenic, antimony and mercury rich, suggesting a shallow exposure level. Given the high gold values (up to 19 g/t) obtained during initial surface sampling, Tongoril is assigned high exploration priority." Emphasis was originally laid on the further exploration of the vein systems, but Dr Sillitoe did add the rider: "...breccia around the dome margins should not be ignored, because it is a permeable unit capable of hosting bulk-tonnage gold mineralization." (Breccia is rock which has been fragmented, and then cemented together again by the intrusion of another mineral – in this case largely quartz. The clasts – or fragments – are usually sharply angular.)

And thus it unfolded. Soil sampling and trenching defined further mineralised zones within the two target areas of Calandria Sur and Calandria Norte, and by September, a scout drilling programme of 16 holes had commenced to test six separate target zones to shallow depths. When the assay results came in, Dr Sillitoe's rider was seen to be notably prescient! The results from Calandria Norte's vein systems were in general disappointing, as is often the case with first pass, widely-spaced scout drilling, but seven of the eight holes at Calandria Sur hit the spot. All had been drilled in hydrothermal breccia, angled downwards and outwards towards the sub-surface easterly margins of the interpreted dome structure. Best of all was Hole 13, which started and ended in mineralisation and ran out at 102 uninterrupted metres averaging 1.2 g/t gold overall, with the last 20 metres showing a higher grade of 2.6 g/t gold. Six other cores demonstrated intersections of at least 40-50m containing gold running generally between 1-2 g/t, with the occasional sweet spot. Hole 15 is the best example, showing 91.5  metres averaging 1.6 g/t overall, in which was included a 20 metre section at 4.5 g/t with its own 2 metre hot spot grading 28.1 g/t. 

Impressive results indeed, and it’s clear Calandria Sur has the potential to become a low-grade, high-tonnage deposit as further drilling – due early next year – continues to define the mineralisation. According to Dr Sillitoe’s post-drilling review, it is the first example of bulk-tonnage gold-silver mineralisation hosted in a dome-related hydrothermal breccia to be found in the Patagonian Jurassic province. It is unusual in that the gold is not hosted in sporadically occurring veins/veinlets, but is disseminated throughout the brecciated rock, with the higher grades lying at the contact between the volcanic dome – which has the approximate shape of an inverted cone - and the rocks through which it erupted. Given that this initial discovery is located in just 400m of the eastern side of the dome’s perimeter, the potential to discover further mineralised zones elsewhere in the perimeter is high, and Mariana intend to investigate this possibility as soon as possible.

Not surprisingly, this discovery – presently unique in Patagonia – has catapulted Dos Calandrias to instant fame, and it has become the prime focus of both the company and its followers. However, the Mariana project stable goes way beyond what – until now – had been just another promising exploration prospect. Concentrated on South America, in mining-friendly and relatively stable jurisdictions, Mariana’s experienced team has built a very respectable portfolio of gold, silver and copper projects.

Elsewhere in the Deseado Massif Mariana have amassed a large portfolio of prospects, and have already made a significant discovery at their joint venture with IAMGold at Sierra Blanca, located 50km N of AngloGold's 6Moz Cerro Vanguardia mine. Mariana currently own 70% of the joint venture project, but have just secured the option to purchase IAMGold’s interest, barring a 1.5% NSR and subject to minimum exploration requirements, for an immediate payment of 1 million Mariana shares, and the payment on exercising the option of £1 million in cash and shares. The property hosts 25-30 kilometres of discrete vein systems, but the best discoveries to date have been at the EW trending Veta Chala vein system, where channel sampling revealed bonanza silver grades of up to 5,694 g/t silver and 1.77 g/t gold, which has been compared by Richard Sillitoe to the mineralisation at Mina Martha, some 100km to the south. Whilst drilling did not find corresponding high grades at depth, Dr Sillitoe has recommended further drilling to test for ore shoot development at depth at both Veta Chala and the potentially linked Lucila vein, which will be carried out in early-mid 2010 following an induced polarisation survey.

Most recently, Mariana have announced a new joint venture with Hochschild – who are already a major shareholder in the company. Mariana will put its Los Amigos I and II properties into the joint venture whilst Hochschild will contribute its adjoining San Augustin property. Initial terms are 49/51 ownership, with a 40/60 contribution from Mariana and Hochschild respectively to the first three years of exploration funding. But Hochschild can increase its stake to 70% by contributing 60% of exploration funding for a further two years, funding the feasibility study or providing project finance. The three properties are currently under-explored, but offer significant potential for vein-hosted gold-silver epithermal mineralisation in well developed NW and NNW trending structures. Fieldwork will commence immediately, and follow-up drilling is anticipated in 2010.

Outside Argentina, Mariana has interests in two iron-oxide-copper-gold (IOGC) prospects on Chile’s prolific Atacama belt at Buenaventura – which lies between Anglo America’s Manto Verde and Freeport’s Candelaria - and Perro Chico. Strong gravity anomalies have been identified on both properties, and a drilling programme to test these potential copper/gold targets has been completed recently, with results now imminent.

With news coming thick and fast, more news imminent, the endorsement supplied by the new Hochschild JV and a brand new discovery under its belt, Mariana’s share price has seen a significant increase in the last few weeks. From just 2p in the dark days of January, the price has now returned to levels not seen since the company listed on AIM back in 2006. Not even a £2.9 million fund-raising at 13p per share has dented investor enthusiasm, and given the current market capitalisation of under £26 million, there seems yet to be plenty of headroom for further gains.