Persian Gold is thinking big in Iran

Exploration entrepreneur John Teeling is no stranger to political risk. He is also indefatigable in the pursuit of opportunity. When he can combine the two, and grab first mover advantage in an uncertain situation, you can almost smell the potential rewards?.

Persian Gold is just such a situation. Founded in 2003 to explore for gold in the Tethyan volcanic belt which traverses Iran on its journey from Armenia to Pakistan, the company is ? by Teeling?s own admission ? exposed to a level of political risk. But as virtually the only western exploration outfit currently operating in Iran, Persian Gold has a huge opportunity.

What drew Teeling to Iran initially were vast deposits of alunite, as found in the Andean Cordillera of South America. Yanacocha, the second largest gold mine in the world, is a gold in alunite deposit, as is Barrick?s La Pierina. For Persian Gold?s Technical Advisor Mike Thomsen, who in earlier days had been involved in the development of Yanacocha, the securing of ground in these huge Iranian alunite deposits became a must. His target discovery is a multi-million ounce, low grade, low cost, open pittable deposit similar to those in Peru and Chile.

By the time Persian Gold listed on AIM in June 2005, work was well advanced on a large land area in north western Iran, containing an estimated 1 billion tonnes of alunite deposits. As Thomsen said at the time "Our concessions are geologically exciting. Not only are there massive alunite reserves but they share key features with mineral rich regions of Latin America which could be the key to a significant gold find. We have the possibility of a multi million ounce gold find in our concessions. Initial results are positive."

Surface exploration resulted in the awarding of 8 exploration licences, covering some 320 sq km, and early success was focused on the Takestan-Twin Hills project area, where the largest concentration of anomalous gold values of up to 2 g/t cluster on a range of low hills. An underground vein system at Zehabad ? an old zinc/lead mine ? also proved worth further testing, having returned sample grades ranging between 3 g/t and 15.7 g/t. This large project area is now ready to trench and drill once permitting can be obtained in a region where some nature preservation concerns still need satisfying.

But in the meantime, the emphasis has changed. The mere presence of Persian Gold in Iran led to the company being offered several opportunities, and the first of these came their way in May 2006 in the shape of the relatively advanced Chah-e-Zard property, 550 km southeast of Tehran. A review of earlier work by Rio Tinto showed that the project had significant potential, and Persian Gold entered into an option agreement with the Iranian owner of the project under which they would acquire a 70% interest. A two stage drilling and trenching campaign over the last 18 months has turned up intercepts ranging from 122m at 1.75 g/t to 2 m at 45.4 g/t, making Chah-e-Zard the company?s most advanced project and host to an estimated resource of 160,000 ounces of gold and a million ounces of silver.

The company has now applied for a Discovery Certificate ? the necessary precursor to an Exploitation Licence - for the near surface oxide zone at Chah-e-Zard, and will commence a pre-feasibility study this year to investigate the viability of an open pit heap leach mine to deliver up to 40k ounces a year. Costs, according to John Teeling in a recent interview with Tom Winnifrith, will be approximately $9 a tonne or $200 per ounce, with capex at no more than $20 million. The philosophy with this project, which is likely to be commercially viable, is to use it as a pilot which will aid the company in future navigation of the permitting system for the larger projects.

In September 2007, there came another change in focus as two additional projects were announced: a 70% interest in Dalli, a copper-gold porphyry project 200 km southwest of Tehran previously looked at by Rio Tinto, and Dustbiglu, another gold-in-alunite prospect in the far north west of the country, 100% owned by Persian Gold.

Dustbiglu was previously explored for copper, but also shows numerous gold anomalies over a large 10 km x 2-3 km area. Persian Gold will be grid-sampling this over the next several months, to assess whether the gold grades are consistent enough to give potential for a very large low grade deposit.

The Dalli prospect centres on two hills, 1.7 km apart, each of which hosts anomalous gold at the surface. Exploration drilling at Dalli has confirmed that the project is a gold rich copper porphyry system. The two drill cores from the South Hill showed intercepts from 0 - 211 m grading 0.68 g/t gold and 0.45% copper and 0 - 213 at overall grades of 0.75 g/t and 0.57% copper, with a sweet spot of 66 m grading 1.28 g/t and 1.08% in the second core. The two holes were 200 metres apart, and show the probability of a medium sized copper-gold porphyry deposit, with slightly above average grades for their setting.

Drilling on the North Hill also showed continuous mineralisation from surface down to 233 m with gold at 0.57 g/t though a lower copper grade of 0.13%. The second core in the North Hill revealed a shallow surface zone to 28 m grading 0.60 g/t and 0.12% copper, with a deeper 100 m intercept running at 0.53 g/t and 0.17% copper.

Whilst the two hills are currently being treated as two separate occurrences of copper-gold mineralisation, lying on a NW/SE structural trend, the company feel the two systems could be connected by a deeper underlying structure. Geophysics and surface work have so far failed to prove any such link, but the drill programme which has just commenced may test this hypothesis, as well as following up new geophysical targets and drilling to depth on the South Hill.

This project is important because of its potential size, and mostly above average grades. The trick with copper-gold porphyries is to discover a big one ? it?s their sheer size and scale which makes their low grades not only viable, but highly profitable. Bob Foster of Stratex recently put it in a nutshell when, discussing his company?s work in Turkey, he said: ?A good copper porphyry can be the making of a small country, let alone a small company?.?.

The importance the company is attaching to this kind of deposit is underscored by recent in-country appointments and by Dr Teeling in his 2007 results statement, where he wrote: ?While we continue to work on our earlier projects, one of which is now at pre-feasibility stage, our focus is turning to gold-copper porphyries. We are working on one, Dalli, we have looked at another, Shadan and currently we are at an early stage in examining three additional prospects.?

Whilst the large gold-in-alunite projects will be easily manageable, should Persian Gold succeed in their goal to uncover one or more multi-million ounce copper-gold porphyry systems in Iran, they would not be able to finance or manage it alone. A JV partner would be required, and the current political climate in Iran could present difficulties for potential western partners who are impacted by sanctions. However, as Dr Teeling says ?Geology doesn?t change ? politicians do!? A large copper-gold porphyry is the ?holy grail? of exploration, and there is a cluster of projects at each end of the Tethyan belt where it emerges from Iran into Turkey and Armenia and Pakistan. Persian Gold will need at least two years to prove up any of their current portfolio of porphyries, and by that time, western policy regarding Iran may be very different. If it is not, then US and UK mining companies are not the only option. ?If we find a large copper-gold porphyry,? says Teeling, ?miners from many countries of the world will come to us!?

In the meantime, the political environment is proving no hindrance to Persian Gold. Keeping to their task of exploration, the company expresses no political opinion, indulges in no political acts, and generally stays well below the radar. The areas in which they operate are fairly remote, and they make little impact upon their neighbours or on the environment in general.  Iran?s mining law is straightforward and clear cut, and should present no difficulty when the time comes to apply for the various levels of permitting required to develop the project portfolio.

Nonetheless, investors seem to have lost their enthusiasm for this exploration junior. The share price is well below the level of the AIM listing, and at just 7.5p mid-price, the market capitalisation is a niggardly £4.75 million. The pursuit of high-tonnage, low grade gold deposits and the lengthy timescales involved are not exciting enough for today?s volatile short term trader, whilst longer term investors are focused primarily on production ounces, avoiding exploration and its attendant dilution.

But it?s a fact that some of the world?s largest gold mines are in exactly the same type of geological setting that Persian Gold are currently exploring. They have as good a chance as any other explorer of coming up with the next Yanacocha?..