Yorkton Securities says buy
Peruvian Gold Limited PVO
Shares issued 14,227,466 Oct 29 close $0.53
Mon 1 Nov 99 Research
Mr. Doug Leishman and Mr. Art Ettlinger say why
In April of this year, Peruvian Gold entered into an option agreement with
Imperial Metals Corp. (IMC) on the Silvertip deposit in northern British
Columbia. Under the terms of the agreement, the company may earn up to a
60-per-cent interest in the property by spending $5-million over a
three-year period, with a minimum expenditure of $450,000 in 1999. IMC has
the right to earn back a 20-per-cent interest by spending $2-million in 18
months. Silvertip (formerly Midway) has an identified resource of 2.57
million tonnes grading 325 grams per tonne (9.5 ounces per ton) silver
(ag), 8.8 per cent zinc (zn), 6.4 per cent lead (pb) and .63 grams per
tonne (.02 onces per ton) gold (au). IMC previously spent $42-million on
exploration on the property in 1997 and is the operator of the current
program. The company should have no trouble in meeting its expenditure
requirements as it currently has approximately $10.4-million in the
treasury.
The Silvertip ore body is comprised of mantos (blanket-like bodies) of
massive sulphides containing lead, zinc, and silver minerals hosted by
limestone. This is similar to the large replacement deposits found in
Mexico and Central America (Santa Eulafia, Ojuela, El Mochito.) The source
of the mineralization ( which likely has been channelled along steeply
dipping structures, resulting in tubular bodies of sulphides known as
chimneys) has not been found.
After completion of a CSAMT geophysical survey this summer, a three-hole,
HQ-core program was initiated. The three holes were drilled vertically and
were designed to test geophysical anomalies (resistivity lows) and expand
the known area of mineralization. The first hole was a 250-metre step out,
to the southwest from the resource area, that encountered a 3.22-metre
thick manto grading 9.7 per cent zn, 2.1 per cent pb and 117 grams per
tonne (g/t) ag and represents an expansion of the known boundaries of the
mineralized system.
Hole SSD-99-2 returned the best results and may have intersected a chimney.
The hole encountered an interval of 31.4 metres grading 8.65 per cent zn,
5.53 per cent pb, and 331 g/t ag from a depth of 289.2 to 320.6 metres.
Throughout the interval metal grades are variable, with massive zones of
sphalerite, galena and pyrite-rich lenses being present. The interval
reported is ore grade material and consistent with the estimated grades for
the 2.57 million tonne resource. The hole is located near the southwestern
edge of the resource area, between two previously drilled holes. One hole,
approximately 30 metres to the west, was barren of mineralization while the
second hole, approximately 50 metres to the east, did encounter sulphide
minerals of similar grade and variability. Hole SSD-99-3, approximately 150
metres northwest of SSD-99-2, was drilled to test a fault zone suspected of
being a hydrothermal conduit. Altered limestone and a pyrite zone were
encountered.
Manto and chimney deposits are known for their high-grade, but erratic,
distribution of ore minerals and they commonly display an irregular shape.
It would not be unusual for the true magnitude of a manto/chimney system to
be unknown until it is virtually mined out. With this in mind, the company
has budgeted $1.15-million for underground exploration this fall/winter.
Access from previous underground development is possible to within 100
metres of the potential chimney intersected in Hole SSD-99-2. This will
allow for fan drilling of this zone, which will give a much better
indication of its geometry and continuity than can be obtained from surface
drilling. The development workings have to be dewatered; however, the
existing infrastructure includes a winterized camp and water-settling
ponds. Permits for this work are expected to be received shortly and
drilling is anticipated to begin in early December.
While we have previously recommended Peruvian Gold for its projects in
Peru, we have renewed interest in the company because of its recent success
at Silvertip. All indications are that there will be an active, underground
exploration program throughout the winter. This exploration program is also
timely, from a market perspective, as the fundamentals for zinc are strong
and inventories of this metal are at their lowest levels in about seven
years. Based on the pending underground program at Silvertip, we are
recommending Peruvian Gold as a buy for speculative investors seeking
exposure to a zinc exploration program with a chance for success.
Additional information about the company can be obtained from its Web site
at peruviangoid.com.
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