Aguila American Gold (CVE:AGL) will soon embark on its aggressive exploration plans at its Angostura gold project in southern Peru, as the company finally expects to attain its key drilling permit in May after more than a decade of holding the asset.
Earlier this month, the gold miner inked an agreement with the Peruvian community of Mollepina, representing a key step forward for Aguila American's flagship project.
The deal grants Aguila the right to conduct exploration activities like soil studies, diamond drilling and geophysics, as well as provides complete access to the land, utilizing specialized man portable equipment to reduce surface impact, while permitting construction of basic infrastructure, camps and offices as required.
Aguila said the initial term for the agreement is two years, under which the company has also agreed to maximize local employment and help enhance the community’s basic infrastructure.
The deal represents the final requirements to submit Aguila's 8,255 metre drill plan for the property, with the receipt of a drill permit expected in early May.
President and CEO John Huguet says the community agreement is a milestone for the company, with the receipt of the permit set to jump start activities at the project, which has been held by Aguila American for eleven years.
The acreage in southern Peru covers about 9,100 hectares and consists of nine exploration concessions and two claims that cover the main portion of the Angostura gold prospect.
The community agreement announced this month was borne from a long process that started after the Mollepina community began mining illegally at Angostura in 2008. Aguila American launched proceedings to remove these miners, and through this process, developed a "sustainable relationship" says Huguet, allowing the community to mine legally as artisanal miners.
Under the collaborative deal, the company also agreed to assist in the formalization process of Mollepina's artisan miners on the Delicia concession, where it has given them 10 hectares for their exclusive use.
Aguila said that the artisan miner agreement grants it a one percent royalty of total sales and the right to purchase artisan miners’ production at market value.
"The responsible position we have taken has led us to a beneficial one. We will continue to assist the Mollepina miners with education and infrastructure and we plan to live in harmony with them," says Huguet. "The company has now done all the fundamentals to allow the government to issue a drill permit."
Indeed, Aguila American plans to drill 8,200 metres of core into what it considers to "very prospective ground".
Huguet says there has been extensive trenching completed on the project, with grades as high as 6 grams per tonne (g/t). Previous trenching results include 75 metres at an average grade of 3.67 grams per megatonne (g/Mt) gold.
"We do anticipate a very productive resource. Our initial target for an NI 43-101 compliant resource is one million ounces, with half in the inferred category and the other half in the indicated category."
Huguet went on to say that he has "extreme confidence" in the first 3,000 metres of planned drilling as predictable outcomes are expected because of the extensive trenching programs on over 5,600 metres of strike length.
"We have determined the width, and are now proving up the depth, with very interesting tonnage and grades expected," Aguila's CEO adds.
The anticipated drill plan has been broken up into two phases, with the first 3,015 metres aimed at delineating a near surface resource, while phase two aims to advance the potential resource down dip and along strike.
The property is located 180 kilometres southwest of Cuzco, with paved highway and gravel roads linked directly to key zones. Huguet says there is also a power line, and a small camp on site, which will eventually have to be increased for drillers. However, he doesn't anticipate any difficulties in achieving infrastructure requirements.
Aguila American has a cash position of around $3 million, which Huguet expects should be enough to fund the drill program and last through the year.
"After a slow build up, investors have been very patient, but can now expect an aggressive drill program in 2012, with plans to add even a third rig. Shareholders will now have something very worthwhile on their hands," Huguet concludes.
Drill results for the program, which is anticipated to kick off in May, will be released as soon as they are received, Aguila said.
The Vancouver-based junior company's stock has risen more than 7.4 percent year-to-date, and is currently changing hands around 29 cents.