End-of-Year Exploration Updates for Its Costerfield, Bjorkdal, and Cerro Bayo Mines and Its Challacollo Project
TORONTO - Mandalay Resources Corporation provide exploration updates for the second half of 2016 at all four of its properties: the three producing properties, Bjorkdal (Sweden), Costerfield (Australia) and Cerro Bayo (Chile); and the Challacollo (Chile) development project.
Mark Sander, President and CEO of Mandalay, commented, “In the second half of 2016, exploration yielded generally favorable results. Our drilling generated significant new drill intersections that are expected to support short-term and eventual long-term Mineral Resource and Reserve additions for the Company as a whole. At Bjorkdal, we obtained excellent results, suggesting we are well on the way for another significant Mineral Resource and Reserve expansion in late 2017, following the 200,000 ounce gold Reserve increase announced on December 15, 2016. At Costerfield, we generated encouraging results, with infill drilling results suggesting possible mine life extensions. At Cerro Bayo, while new drilling from the shore of Laguna Verde has infilled mineralization on Branca vein to support addition to reserves, new development data along Delia SE suggests a pending reduction in minable reserves along the vein at the coming Mineral Resource and Reserve update scheduled for later in the first quarter of 2017. As well, target testing of our highest priority surface targets failed to generate positive results. Lastly, at Challacollo, we received our permit for exploring for an alternate source of water. This is a breakthrough in our development of the property.”
Sander continued, “At Bjorkdal, assays obtained too late to be included in the recently announced reserve addition of over 200,000 ounces of gold suggest we will achieve another significant reserve addition at the next update in late 2017. In the underground mine, we have completed infill and extension drilling of existing Inferred Mineral Resources in the Lake Zone, Central Zone, and Main Zone. For the open pit mine, we have completed infilling previously Inferred Mineral Resources in the Bjorkdal East Pit and in the new Nylunds Pit. As well, we have completed infilling shallow mineralization at Ronnberget, approximately 4 kilometers east-southeast of the Bjorkdal Pit, which we also expect to convert to open pit reserves. With our wider step-out drilling at Bjorkdal, we have demonstrated that well-mineralized gold-quartz veins continue several hundred meters to the north of the defined reserves in the Lake Zone in long holes drilled from underground. As well, both shallow and deep gold intercepts in the Storheden area northeast of the open pit suggests that more drilling in this area could define additional resources in future years.”
Sander continued, “At Costerfield, we continued infill and extensional drilling in and around the Cuffley and Brunswick lodes. The impact of these results will be contained in the Mineral Resources and Reserves update to be released later in the first quarter of 2017. As well, new high-grade intercepts were generated on the Cuffley Deeps West lode, the Central East and Central Main lodes below the King Cobra fault, and on the M-lode, all of which encourage more drilling in 2017.”
Sander continued, “At Cerro Bayo, detailed development sampling refined our understanding of gold and silver distribution in the Delia SE vein. Whereas the limits of ore grades at shallow development levels of the vein approximated the drilling-based block model, the deepest three levels have exposed more internal waste in the mineralized shoot than was previously thought. This finding is being investigated as part of the updated Mineral Resources and Reserves estimate for year-end 2016, expected to be released later in the first quarter of 2017. We have been successful at infill drilling on that part of the Branca vein reachable from collars on the shore of Laguna Verde. We expect conversion of Branca mineralization to Mineral Reserves in the coming update to offset part of the anticipated reduction in Delia SE. Meanwhile, initial testing of our highest priority vein targets elsewhere in the district failed to generate significant results.
Sander concluded, “At Challacollo we received permission for water exploration in January, 2017, a major milestone in the development of the project. During late 2016, drill testing of several large geophysical anomalies intersected widely distributed, disseminated pyrite, which naturally gives rise to the anomalies but is unrelated to silver-gold mineralization. However, hand trenching and sampling along the Lolon vein has revealed several hundred meters of previously undocumented strike length that contains high silver grades at the surface. As well, reinterpretation of our previous drill results has identified high-grade splays along Lolon. Both these targets represent opportunities to expand the resource when we next have drill rigs on-site to infill the current Inferred Mineral Resource of approximately 6 million ounces of silver.”
Björkdal Exploration, We have now received the mining license to extend our mining concession to include Lake Zone and the eastern extension of Central Zone, allowing us to begin development and stoping there to improve near-term operational results.
Drilling, Sampling and Assaying
During the period from July 1, 2016, to December 31, 2016, 151 exploration drill holes totaling 24,518 meters (m) were completed at Bjorkdal. This total includes 32 surface core holes for 5,178 m, 44 underground core holes for 10,170 m and 75 RC holes for 9,170 m (Table 1). All drill-hole collars were surveyed and downhole surveys were completed in order to record hole azimuth and plunge variations. All surface and underground exploration drilling was conducted by third party contractors, with both core (WL66--50 millimeter (“mm”) diameter and (HQ--63.5 mm diameter)) as well as Reverse Circulation (“RC” -- 5 ½ inch diameter) methods.
Core and RC samples were logged by Mandalay geologists on-site. Assays of Björkdal samples were completed at CRS Minlab Oy (CRS) in Kempele, Finland and at ALS in Pitea, Sweden. Whole core samples (WL66-size) were sent directly to the independent laboratories for sample preparation and assaying, while HQ diameter core was half-sawn off-site at the laboratories before sample preparation. Assaying was conducted utilizing the PAL1000 (CRS) and LeachWELL (ALS) cyanide leaching processes. A rigorous QA/QC program included the use of standard reference samples, blanks, duplicates, repeats, and internal laboratory quality assurance procedures. More details on the drilling, logging, sampling, and assaying procedures are contained in the Technical Report “Mandalay Resources Corporation Technical Report on the Bjorkdal Gold Mine, Sweden” filed March 31, 2015.
Bjorkdal assay results reported in this press release are those that were obtained after the cutoff dates (August 31, 2016, for underground drilling and September 30, 2016, for open pit drilling) for inclusion in the updated Björkdal resource and reserve estimations recently published by Mandalay Resources (see Mandalay December 15, 2016 press release). Therefore, they indicate potential to expand resources and reserves beyond those recently announced.
Underground diamond drilling at Bjorkdal generated many new, well-mineralized intercepts in both already known and newly discovered gold (“Au”)-bearing quartz veins. Most underground drilling at Bjorkdal over the past six months was focused on infilling previously reported intercepts from initial extensional drilling and extending known mineralized veins immediately adjacent to currently mined areas. Particular areas of focus for these drilling programs were the eastern extensions of the Main and Central Zones and the northern margin of the Lake Zone.
Drilling results from the Main and Central Zones indicate strong mineralization continues eastward of the current limits of underground development for at least 100-200 m and that the mineralization remains open in that direction.
Drilling results from the Lake Zone, intended to infill previously Inferred Mineral Resource, succeeded in generating closely spaced mineralized intercepts the Company expects to support an upgrade to the Indicated Resource category at the next Mineral Reserve update (Figure 2).
Two holes, each approximately 600 m in length were drilled northwards from the current northern extremity of the underground workings. They intersected many new gold-bearing quartz veins up to 500 m north of previously known limits of the Bjorkdal deposit. Near-mine surface drilling during the period focused on infilling and extending shallow gold resources adjacent to the Bjorkdal East Pit as well as in and around the newly defined Nylunds Mineral Reserve (see Mandalay December 15, 2016 press release) extending approximately 750 m southeast of the current pit limits (Table 4; Figures 1 and 4). The Nylunds deposit remains open to the east, southeast and to depth.
Ronnberget drilling results
The Ronnberget deposit lies 4 km east-southeast of the current Bjorkdal open pit (Figure 1). The deposit was originally discovered by drilling in the late 1990’s. The purpose of the 2016 drill program was to infill and extend the limited historic drilling. Drilling results (Table 5 and Figure 5) show that elevated gold mineralization is stratabound, hosted within albite- and actinolite- altered intermediate volcaniclastic sedimentary rocks and tuffs). This is a distinctly different setting than at Bjorkdal and Nylunds, where mineralization occurs in sheeted, steeply-dipping quartz-gold veins. As well, the average grade of the intercepts at Rönnberget is much higher than in Björkdal and Nylunds. The mineralized zone at Rönnberget is sub-parallel to regional bedding and dips approximately 25° towards the northeast. The deposit remains open along strike, and down-dip, and based on the drilling results reported here, the Company is applying for a mining concession.
The Storheden area is located between 500 m and 700 m to the east of the existing Bjorkdal mining area. The area contains shallow mineralization in the Storheden deposit, defined by historic drilling and hosted in a series of north-east dipping quartz veins. During 2016, three diamond drill holes were drilled to confirm the presence of both the shallow Storheden gold-bearing veins and the hypothesized deeper strike extensions of the Björkdal sheeted vein system. Both targets were successfully intersected in their predicted locations; several significant gold-bearing veins were discovered in each of these drill holes. Two assayed intervals in hole ME6-029 assayed 2.23 m true width at 9.84 g/t Au (containing an interval of 0.24 m true-width, assaying 77.7 g/t Au), and 0.19 m true width at 91.1 g/t Au (Table 6). Both of these high-grade intervals are interpreted to represent the depth and eastward extension of the Bjorkdal veins in the current underground mine, as do the lower grade intervals obtained in hole MU6-030. Evidently, the Bjorkdal veins extend at least 300-400 m further east than previously demonstrated. Shallow, elevated gold intercepts obtained from MU6-028 confirm previous reports of potential surface minable mineralization based on historic drilling.
Morbacken drilling results
The Morbacken area lies approximately 1.8 km east of the current Bjorkdal open pit mine and approximately one km from the eastern known limits of the Nylunds deposit (Figures 1 and 7). Nine diamond drill holes were drilled in this area during late 2016 using HQ sized drilling equipment; assays on only two of these holes were returned before December 31 and are included in this report (Table 7 and Figure 7). While detailed understanding of the geological setting of this prospect is not yet in-hand, preliminary investigations suggest that significant gold assay intervals are encountered within strongly albite-actinolite-epidote-altered horizons of a volcanogenic succession similar to that at the Rönnberget prospect. At Morbacken, elevated gold concentrations are commonly accompanied by elevated copper concentrations contained within the minerals bornite and chalcopyrite.
During the second half of 2016, Mandalay drilled 17,147 m of diamond core at its Costerfield gold gold-antimony (“Sb”) mine in eighty-nine holes (including wedges) drilled on Sub King Cobra, Cuffley Deeps, Cuffley South/M Lode and Brunswick lodes (Table 8 and Figure 8). In addition, the Company completed 2367.5 m of on-vein operating development and associated sampling of N Lode and Cuffley Lode.
Drill core was logged and sampled by Costerfield geologists, who also mapped and sampled the development advances. All samples were sent to Onsite Laboratory in Bendigo, Victoria, Australia for sample preparation and assay. Site geological and metallurgical personnel have implemented a QA/QC process that includes the regular submission of standard reference materials and blanks with drill and face samples submitted for assay. Standard reference materials have been certified by Geostats Pty Ltd.
Drilling was completed in order to extend and convert the existing Inferred Resource along Brunswick Lode to an Indicated Resource. Significant assays containing greater than 10.0 g/t gold equivalent (“AuEq”) over a minimum 1.8 m true mining width were obtained in seven holes. Continuity of mineralization has been demonstrated down to the Penguin fault; conversion of Inferred to Indicated Resource above this fault is expected with the Resource and Reserve update to be completed and announced later in the first quarter of 2017. Furthermore, high-grade mineralization has been demonstrated to continue at least 50 m further down to the Kiwi fault and below. Further infill and extensional drilling is planned to extend the Mineral Resource downward to these levels.
Infill drill holes in the Cuffley Deeps Lode and extending to the Cuffley Deeps West Lode generated four intercepts greater than 10 g/t AuEq over at least the minimum 1.8 m true mining width. Mandalay expects to convert part of Cuffley Deeps to Indicated Resource at the coming Resource update and is encouraged by the emerging set of intercepts on Cuffley Deeps West.
The Central Zone was found to be the most continuous of the mineralized vein sets in the Sub King Cobra domain. Drilling in the second half of 2016 targeted this Central Zone with the intent of increasing confidence in the continuity of grade and in developing the structural model. New drill intercepts suggest mineralization to extend over approximately 300 meters of strike length. The Central Zone is situated on the eastern limb of an anticlinal structure, and consists of four discreet mineralized veins over a 70-meter wide zone. The westernmost of these sub-vertical veins is referred to as the ‘Central Main’ which, based on results to date contains higher grades.
A stibnite-gold vein in between Cuffley and N Lode called ‘M Lode’ was intercepted in three holes. M Lode is subparallel to the two major Cuffley and N Lode ore bodies. A total of 18,685 m of NX and HQ diamond drill core were produced from 52 holes in the Cerro Bayo district during the second half of the year, with three holes in progress at year’s end. Infill drilling has continued in and around the Laguna Verde area, with target testing drilling in Laguna Verde, the Brillantes sector and the Cerro Bayo sector.
All drill holes were directionally surveyed by standard techniques with a downhole instrument. Drill core was logged and sampled by staff geologists and all core samples (including blanks, standards and duplicates) were submitted to the on-site assay laboratory of Compañia Minera Cerro Bayo. The Cerro Bayo assay laboratory was audited in 2011 by SGS Lakefield Research Ltd., and routinely sends check samples to the ALS laboratory (ISO 9001:2008 and ISO/IEC 176025:2005 certified) in La Serena, Chile, following QA/QC practices established by Mandalay Resources.
During the second half of 2016, fifteen infill holes were completed on the Branca vein and one hole was in progress at year end. Most of these holes also intercepted the Coyita vein, as it was necessary to drill through the latter fissure in order to reach the Branca system.
During the second half of 2016, nine holes were completed on the Delia SE vein for infill and ore control coverage. Four of these holes contained high gold and silver assays where they intersected the vein, two did not intersect the vein, and three contained only low grades. Figure 20 also displays the results of development samples taken at successively deeper levels in the vein. These show increasing amounts of internal waste in the vein with increasing depth, a factor which is expected to result in a negative impact on Delia SE Mineral Reserves at the coming update.
Follow-up drilling in the Laguna Norte area on the northeast corner of the lake failed to substantiate the presence of well-mineralized veins suggested by a previous round of drilling.
In the second half of the year twelve drill holes were completed in the Brillantes sector, with one drill hole in progress at year’s end. Robust fissure systems up to a few kilometers long and a few meters wide crop out in this zone. No significant gold or silver assays were obtained in the drill holes. In the Cerro Bayo sector, the Nina vein was the only target tested during the second half of 2016. The Nina vein is located 600 meters west of the Marcela system and was probed with two drill holes during August and September. No significant gold or silver assays were obtained.
Permission was received in January 2017 to drill prospective water holes on two high-potential concessions at the bottom of the groundwater basin approximately 30 kilometers to the southwest of Challacollo . If this drilling is successful in encountering sufficient water, an application will be lodged for transferring the catchment point of our existing water rights to this new source.
In 2016, Mandalay drilled approximately 3,535 m of HQ core at Challacollo in thirteen drill holes (see Figures 24, 25, 26 and Table 17). These holes were designed to test geophysical (“self-potential”) anomalies detected and reported earlier in 2016, the deep extension of the main Lolon fissure, and several new targets on the Lolon and other veins generated by ongoing detailed mapping, trenching and surface sampling.
All drill holes were surveyed by standard techniques with downhole instruments and logged by Mandalay geologists. Sample preparation was undertaken by ALS at their facilities in Antofagasta, with analysis performed by ALS labs in Lima, Peru. This analytic program was performed with industry-standard QA/QC protocols including checks, blanks, and duplicate samples.
No significant grade intercepts were obtained in holes testing prominent self-potential anomalies under cover north or south of the outcrops in the Challacollo range. Sources of the anomalies proved to be pyritic black shales in DCN-01 at the north end of the range and pyritic rhyolites with minor base metal veinlets in DCS-04 and DCS-05 south of the range.
Drill holes DPA 1,2,3, and 4 demonstrated that The Palermo Norte vein is a robust structure with continuity at depth and strongly mineralized with lead and zinc. Silver and gold values in the drill holes, however, failed to reach the high levels seen in several surface trenches. The deep intercept over 100 m below the deepest high-grade intercept in a previous metallurgical hole on the main Lolon central vein demonstrated a robust vein structure 2.3 m in true width but with low gold and silver values. Test holes on the Lolon Norte, Gladys IV, and Lolon Sur / San Francisco veins also returned disappointing assay results, and/or mediocre vein widths at depth.
Additional detailed mapping and trenching to reveal vein subcrops beneath the colluvium indicates that the Palermo Norte vein extends a few hundred meters further north than previously mapped. In the northern area, the vein is hosted by calcareous marine sedimentary rocks and is associated with a solution-collapse breccia zone that extends a few hundred meters away from the vein to the west. This breccia zone is parallel to bedding, strongly silicified, and ranges up to 2.5 m thick. It is erratically mineralized with galena and copper oxides; surface samples assay up to 50 ppm silver. This feature is currently being evaluated as a possible setting for manto-style replacement sulfide mineralization that could be associated with the Palermo Norte vein system.
New vein splays recognized through structural reinterpretation on the main Lolon vein and drilling gaps on the Lolon Sur extension suggest that additional silver-gold resources could possibly be defined by additional drilling in some areas adjacent to the presently delineated grade blocks. These possibilities include small, high-grade splay veins in the western wall of Lolon Central; mineralized zones lying in gaps of drilling coverage due to poor vein correlation along Lolon Sur and/or along a new vein in the south area, detected beneath colluvium east of the Lolon trend.