MANAGEMENT DISCUSSION - Third Quarter
January 31, 1998
FYI, gang...
The third quarter has been an exciting one for Pacific Rim. The Company's aggressive acquisition program continued with the addition of the Nunez Cateo and Fantasma properties contiguous to the southwest of the company's core asset, the Diablillos property. These properties are both strategically and geologically important to Pacific Rim.
At the end of the quarter, higher silver prices and announcements by Berkshire Hathaway Corp. that they had acquired a large investor position in the metal, increased interest in silver. That in turn bolstered Pacific Rim's share price, and investor awareness of the high silver content of the Oculto deposit moved Pacific Rim to the forefront as a solid silver play.
Cash reserves remain strong to fund exploration and acquisition. Pacific Rim anticipates a banner year in 1998.
Diablillos
In December, Pacific Rim announced results from Barrick's previous round of drilling and metallurgical testing on the Diablillos property in northwestern Argentina.
Preliminary metallurgical work (bottle roll tests, heap leach simulation tests, agglomeration tests and grind tests) indicated that Diablillos is amenable to standard cyanide leaching with no abnormal costs expected for crushing or reagent consumption. The median recovery from 22 bottle roll tests is 83% for silver and 88% for gold. The average Bond Ball Mill Work Index is 14.8.
High silver recovery and kinetics indicate that Oculto is an exceptional deposit. These factors provide encouragement that Diablillos has the potential to become a profitable heap leach silver-gold mine in which almost 85% of the gross value of the deposit is derived from silver. (Based on Pacific Rim's July 10th, 1997 resource calculation and current silver and gold prices.)
Most of the drilling was concentrated along the southern portion of the Oculto deposit and encountered only thin intervals of mineralization (drill holes: RC97-105, 106, 113, 114 and 116-120). Drill holes RC97-110 and 112 were infill holes and provide additional confidence in the continuity of the resource. Drill hole RC97-109 effectively closes off the mineralization immediately to the west, although the deposit still remains open to the southwest. Drill holes RC97-107, 108 and 111 were drilled across a north-south fault zone to the east of the Oculto and did not encounter significant mineralization. Drill hole RC97-121 was drilled across a northeast striking fault and encountered only low grade mineralization
The commencement of a 7000 meter reverse circulation drill program, under Barrick's supervision, was also announced during the quarter. The drilling is designed to increase confidence in the continuity of the Oculto northeast extension. Core drilled in 1997 is being combined into three composites with three column tests being conducted on each composite at three different crush sizes. Additionally, the metallurgical samples are being used to conduct screen analyses and bottle roll tests using only water to determine the water-soluble silver content. The testwork is being conducted by Lakefield Research Limited in Santiago, Chile.
Upon receipt of the updated resource calculation and results of the metallurgical test work, Pacific Rim will have sufficient information to conduct an independent scoping study which should be completed in the second quarter.
Fantasma Claims and Nunez Cateo
On January 30th, Pacific Rim announced the entering into of a Letter of Intent for the option to acquire 100% of the Fantasma Claims (600 Ha) and the Nunez Cateo (6000 Ha, collectively the "Fantasma Claims") in the Salta Province of Argentina, from Corriente Resources Inc., subject to completion of due diligence and approval by Pacific Rim's board and regulatory bodies within 45 days of signing. The property lies adjacent to the Diablillos property in northwestern Argentina. A formal Option Agreement was subsequently completed in early March.
The proximity of the Fantasma claims to Diablillos is both strategically and geologically important to Pacific Rim as the claims cover a portion of a large fault block that hosts the Oculto deposit. Most of this block is covered by wind blown sand on the Fantasma Property.
Under the terms of the Option Agreement, Pacific Rim can acquire a 100% interest in the property by issuing to Corriente up to 400,000 common shares as to: (a) 100,000 within 10 days of the execution of the formal Option Agreement; (b) 100,000 on the first anniversary of the execution of the Option Agreement; (c) 100,000 on the second anniversary of the execution of the Option Agreement; and (d) 100,000 on the third anniversary of the execution of the Option Agreement. Upon exercise of the option, a 1% net smelter royalty will apply with a $Cdn one million buyout.
The Cateo is subject to an option agreement between Cavok SRL and Corriente, and Pacific Rim has agreed to assume all rights as set out in that agreement. These obligations include underlying payments totaling $US 1.3 million over a period of three years and a 2% net smelter royalty with two buyout payments of $US 582,500 each.
The addition of the Fantasma claims solidifies PFG's strategic land position adjacent to the Diablillos concession.
Leticia
During the third quarter, Pacific Rim (51% ) and Miranda Industries (49%) announced results from the remainder of 23 reverse circulation drill holes at Leticia. The program consisted of 3217 meters. Results ranged from sub-ore grade to very high grades, as reported last quarter. Pacific Rim subsequently analyzed the data and determined that the Leticia project did not fit the Company's profile for ongoing exploration projects. Pacific Rim CEO, Thomas C. Shrake, concluded ".although our drilling did encounter some mineralization, the continuity and potential size are not sufficient to warrant additional work by Pacific Rim Mining Corp.".
Investor Relations
Pacific Rim's strong financial position and property portfolio, leveraged to the price of silver continued to draw attention from the financial community during the third quarter.
CEO, Thomas C. Shrake and Corporate Secretary, Kathryn Church attended the Toronto Stock Exchange Listing Ceremony on January 22nd 1998. Mr. Shrake used this opportunity to present Pacific Rim's progress to several institutional investors, and retail brokers at investment houses in Toronto.
Pacific Rim's exposure was augmented by the aforementioned increased market interest in silver and silver plays. To date, Pacific Rim has received nine buy recommendations from the investment community and newsletter writers, including C.M. Oliver, Yorkton, First Marathon, Haywood, CIBC Wood Gundy, Canaccord, as well as the Hard Rock Analyst and Carter's Choice newsletters.
Financing
During the quarter, 746,000 non-transferable share purchase warrants were exercised at $0.75 each, netting $559,500 Cdn to Pacific Rim's treasury.
Year 2000 Issue
The Year 2000 Issue is a result of computer programs being written using two digits rather than four to define the applicable year. Computer programs that have date sensitive software may recognize a date using "00" as the year 1900, as opposed to the year 2000. This may have the result of a system failure or miscalculation causing disruption of operations.
We do not anticipate any future costs associated with the Year 2000 issue, based on current information. We have assessed our software with this issue in mind, and believe that we will not need to modify or replace any significant portions of our software. The Year 2000 Issue will have no material impact on Pacific Rim, as the majority of our software is less than a year old, our systems are not used to generate revenue for Pacific Rim, and we are not reliant on the reliability of any third party's software. |
