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Exploration Activities
Introduction
Company has chosen to extend its asset base by pursuing advanced exploration opportunities to complement any cash flows which may flow from royalty rights.
In 2004 Royalco identified the Philippines as providing outstanding opportunities with advanced exploration potential at low entry cost. Following that assessment, the Company initiated discussions with Oxiana Limited. Subsequent to reviews of projects and assessment of the management group, the Company negotiated to acquire Oxiana’s Philippine interests.
The Filipino tenement package, in our opinion represents one of the most attractive porphyry copper targets globally available, with our particular interests being associated high grade epithermal gold systems. These areas have been accumulated over a substantial period of time and represent advanced exploration plays.
Royalco has drill-ready targets on three of its four exploration regions, with all planned to be drilled in the year ending 30 June 2008. Philippines exploration expenditure has been budgeted at A$3.3 million per annum for two years.
The Philippines Projects
Royalco’s Philippine exploration assets comprise those of Oxiana Philippines Incorporated and related entities as well as the Samay Project farm-in from a subsidiary of Phelps Dodge Corp.
The summaries set out below are of the principal projects. These and other projects are detailed in the Prospectus.
GAMBANG PROJECT
The Gambang project area is strategically situated within the Central Cordillera of Northern Luzon in the geological terrane known as the Philippine Mobile Belt. The mineral endowment of the belt is high due to its tectonic setting, offering world class prospectivity.
Deposits immediately north of this tenement include Far Southeast, Lepanto, Victoria, Guinaoang and Suyoc. To the south of the tenement lies the old goldfields of Baguio and the porphyries at St Tomas/Santo Ni-o, a belt stretching approximately 50 kilometres, with Gambang covering the strategic and under-explored central portion.
Oxiana has been active in the Gambang area since 1995 and has conducted exploration comprising stream sediment and soil geochemical sampling, geological mapping, and geophysical surveys. This exploration has delineated seven target areas with porphyry copper-gold style mineralisation.
The Hermans Find Prospect consists of a 200m long exposure of porphyry copper-gold style mineralised intrusive which has been exposed by relatively recent rapid erosion of colluvium/alluvium in the Gambang River (refer to the Prospectus cover photo). There is not only spectacular malachite staining but also stockwork vein zones with oxidized copper sulphide minerals and disseminated chalcopyrite, bornite and pyrite in the highly fractured and altered intrusive rocks exposed.
This exposure is situated between the Eastern Breccia and Bolbolo prospect areas. Channel sampling along the mineralized outcrops at Herman’s Find generated Cu-rich intersections which included 42m@ 2.35% Cu, 0.20g/t Au and 45m@ 2.82% Cu, 0.17g/t Au and 54m@ 1.32% Cu, 0.12g/t Au.
The Cableway Prospect is centred on the largest of a cluster of gold and copper anomalies that were defined by a soil geochemical survey. The surface alteration comprises minerals that are commonly observed at high-levels in porphyry copper-gold systems. Drillhole GBD-9, drilled at Cableway, yielded 0.27g/t Au and 0.22% Cu over a 60m interval down hole from surface, followed by another 20m interval grading 0.42g/t Au and 0.49% Cu. This drillhole shows evidence of grade increasing systematically at depth and offers significant potential to the west towards elevated geochemical sampling.
The Manga Prospect lies near the northeast boundary of the Gambang application area and south southwest of the Suyoc Mines region. It is a copper-gold breccia prospect that is developed within strongly clay-altered diorites. Reconnaissance stream-sediment and grid-based soil sampling by OPI generated both copper and gold anomalies in Manga Creek and the adjacent area.
PAO YABBE PROJECT
The Pao Yabbe project area is situated in the Southern Sierra Madre Ranges of Northern Luzon and adjoins the Didipio copper gold project of Climax Mining Limited (reserves of 23.7MT @ 0.65% Cu and 1.8g/t Au)
The regional geology of the area is dominated by a sequence of early Tertiary age volcanics of alkaline composition. This sequence was intruded by suites of intrusives of both calc-alkaline and alkaline compositions in the mid-Tertiary. Base and precious metal mineralisation is associated with these intrusives. Modern mineral exploration commenced in the area in the 1980s and exploration by Oxiana commenced in 1998. Geochemical, geological and geophysical exploration programs have resulted in the delineation of three main prospect areas in the north of the project area, Ambedbed, Manidyo and Digyan, and one in the south, Yabbe.
There is good exploration potential for high-sulphidation style Cu-Au mineralization and deeper porphyry Cu-Au mineralisation within the Pao-Yabbe tenement areas.
Drilling has been conducted at Ambedbed where a best intercept of 2.5 metres of 11.98g/t Au was reported. Drilling at Manidyo returned a best intercept of 32 metres of 0.51g/t Au. This mineralisation is considered to be high-level epithermal vein and stockwork-style gold mineralisation. A chip sample from the Manidyo vein assayed 49.42g/t Au, 348g/t Ag, 3.94% Cu , 1.7% As.
No drilling has been conducted at the Digyan and Yabbe prospects. A sample of the vein at Digyan assayed 95g/t Au, 272g/t Ag, 13.6% Cu, 6.7% As and 0.10% Pb.
MALANGZA PROJECT
The Malangza tenement application, situated on Panaon Island in Southern Leyte, is an historic gold mining area and is considered to be highly prospective for further discoveries. The island is cross-cut by splays of the Philippines Fault, the most important structural element in respect of localizing mineralization within the Philippines. Throughout the tenement large continuous zones of silica-clay-pyrite alteration were observed for approximately five kilometres of coastline, which provide further encouragement that this area is highly prospective for gold-copper deposits.
The intense alteration extends for several kilometres along the coast between Catig and Bahay, and comprises widespread clay-silica-pyrite alteration, intense ferruginisation of surface outcrops, hydrothermal brecciation and silicification. Given the multiple-kilometre-scale extent of the hydrothermal alteration along the coastline, the distance which this alteration system extends inland is likely to be significant. The Malangza alteration system is likely to be part of a high-sulphidation epithermal Au system with high potential for underlying porphyry Cu mineralization below the district-scale alteration lithocap.
SURIGAO PROJECT
Surigao del Norte is part of the Eastern Mindanao Gold Province and hosts a number of historic gold mines. The recent discovery of the buried copper-gold Boyongan deposit and the adjacent Bayugo deposit of Anglo-American, as well as new porphyry targets to the south of the old Siana mine of Red 5 Limited at Madja have further contributed to the enhanced prospectivity of the province, not just for high level gold only systems, but also for large scale copper gold porphyry targets.
The Malimono Block has been subjected to some reconnaissance exploration by Oxiana. Three prospects have been delineated: a high-grade copper occurrence in Tinago Creek; a zone containing porphyry copper mineralisation at Hanagdong and a zone containing gold mineralisation at Gis-Aw.