Spanish Gold Play Returns Promising Grades

The Canadian company, based in Vancouver, British Columbia, is bullish on its prospects for developing the Salave gold deposit in northwest Spain, based on an updated NI 43-101 report showing “fantastic grades” at depth, according to CEO Cary Pinkowski.

The report by Scott Wilson Mining, dated February 25, 2010, shows a measured and indicated resource of 1.68 million ounces of gold graded at 2.9 grams per ton, and .33 million ounces inferred, giving 2 million total ounces of mineable gold.

“That makes us either the largest gold deposit or one of the largest in Western Europe,” says Pinkowski, noting that the last hole drilled in 2005 assayed 33.9 g/t over 39.8 meters, at depths of between 250 and 300 metres. “Those are fantastic grades.”

Astur Gold acquired the Salave deposit from Lundin Mining Corporation (TSX:LUN) in April, paying 500,000 euros for the 433-hectare property. It issued 5.2 million shares to Lundin, which retains 15.6% of the 33 million outstanding shares.

The company completed a brokered placement this year for $5 million, issuing 6,700,000 shares at 75 cents apiece, with net proceeds going towards developing the deposit into an open-pit or underground mine.

Whether the mine goes underground or open pit is the key point in the Salave story.

The 70-hole drill program completed by the previous owners, Rio Narcea Gold Mines Ltd., in 2005, was predicated on an open pit mine extending up to 100 metres from the coastline.

But when the regional government of Asturias changed the regulations to require the open pit to end 500 metres from the coast instead of 100, Rio Narcea’s hopes for an open pit mine were dashed.

The zoning change prompted the owners to launch a lawsuit against Asturias for 320 million euros, based on a gold price of US$525 per ounce, which is still in the courts and not expected to be decided anytime soon.

The legislation did not, however, preclude Rio Narcea from applying for an underground mine permit, leaving new owners Astur Gold free to pursue other options, beyond an open- it mine, for developing the deposit.

Joe Mazumdar, an analyst with Haywood Securities Inc., who visited the site earlier this year, says that the pending court case need not deter investors because Astur Gold is no longer restricting itself to an open pit mine. The company has submitted an application to permit a 3,000 to 5,000m drill program for testing targets below the current resource base. It is also looking to permit a geotechnical program for a drift, at approximately 1,300 metres, to reach the bottom of the conceptual pit outline.

Pinkowski says that the drift would function as a platform for more exploratory drilling, and the company’s strategy is to blend the 3-gram material with the 30 g/t grades found at deeper depths.

The technical report suggests that the underground resource is more suitable to selective rather than bulk mining methods.

With Astur Gold hitting grades over 30 g/t at 250-300m, and the gold price hovering around US$1,325 an ounce, an underground mine is certainly more viable than when gold was trading at $525 in 2005, although Pinkowski says that Astur Gold is still shooting for an open pit.

“We’re going to be submitting this directly for a mine permit,” says Pinkowski, who founded Entrée Gold (TSX:ETG) when he acquired the Lookout Hill property, part of Ivanhoe Mines’ massive Oyu Tolgoi complex in Mongolia, which is one of the largest undeveloped copper-gold projects in the world.

The Salave deposit, part of a gold belt stretching across the top of northern Spain, was first mined by the Romans 2,000 years ago when Emperor Augustus introduced the Roman gold standard, the aureus.

The need to produce gold coins precipitated the search for gold ore, and Spain emerged as an important gold mining region.

The mines, which included ore bodies containing gold, silver, lead, zinc, copper and iron, were controlled by the Roman army, whose second-in-command, General Gaius Marius, became the governor of Spain. Enriched by the region’s mineral wealth, Marius would go on to become consul, the highest military office in Rome, during which time he rebuilt Rome’s armies and defended the Empire against the Saxon invaders, thus cementing his place as one of Rome’s great military leaders.

The imprints of Roman mining can still be seen throughout Asturias, where hundreds of mine sites are known to exist. Hydraulic systems were used to remove the overburden and mine the gold-bearing rocks, and historians estimate that 600 million cubic metres of alluvial and hard rock was mined, with 6.2 million ounces of gold exploited, through 300 years of operation.

Modern gold exploration commenced in the 1970s and continued through to 1996.

The El Valle-Boinás/Carlés deposit, located 70 kilometres from Salave, produced about 950,000 ounces of gold and nearly 14,000 tonnes of copper between 1997 and 2006, about 90% by open-pit methods, according to Orvana Minerals Corp. (TSX:ORV), which acquired the project in 2009 through the purchase of Kinbauri Gold Corp.

Orvana’s updated NI 43-101 report estimates a seven-year mine with annual production of over 100,000 ounces of gold and 3,900 tonnes of copper.

Pinkowski points out that Orvana’s project lies in the same mineralization zone as Salave, where gold is strongly correlated with the host granodiorite. “A lot of gold discoveries in this part of Spain have been in similar rock,” he says.

About 70 percent of the gold is refractory and would require a three-stage crushing and grinding process, according to Maxumdar’s report, with an estimated recovery rate of 95 percent. He says that Rio Narcea’s original plan was to produce concentrate at Salave for transport to the company’s plant at El Valle, in order to save capital costs.

The property lies within one kilometre of a paved highway, with power and telephone available at nearby Tapia. Water is available from wells and the Porcia River.

As to the likelihood of drilling and mine permits being granted by the regional government, both Pinkowski and Mazumdar say that the economic situation in Spain, with unemployment hovering around 20%, could work in Astur Gold’s favour.

“They’ll be looking for development projects and investment opportunities,” says Mazumdar.

Pinkowski adds that they are presuming they will win public opinion, since everything starts with the people. “If people want the mine, it’ll go through,” he says, noting that the open pit mine plan would produce 250 direct jobs and pump 500 to 700 million euros annually into the tax coffers of Asturias. “We’d become the sixth or seventh largest company in Asturias. These are things the principality has to think about.”

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