US Gold Corp. has announced that exploration drilling within the El Gallo Complex, located in Sinaloa State, Mexico, has intersected significant gold and silver mineralization at the San Dimas prospect. To date, results have been received from 7 holes. An additional 7 holes have been completed and assays are pending.
"The first series of holes from San Dimas has returned significant near surface intersections of gold and silver mineralization. In addition, the discovery is close to US Gold's planned production facilities, increasing San Dimas' possible economic significance," stated Rob McEwen, Chairman and CEO.
US Gold believes the results are important for several reasons: 1) the gold grades and widths are comparable to the zones that will be mined during Phase 1. In addition, the silver grades are considerably higher, 2) the prospect is near infrastructure, located 11 km from the proposed mill site at El Gallo. It is located immediately south of the main access road and, 3) the mineralization is shallow and amenable to open pit mining.
The San Dimas prospect is a former producing property that operated on a small scale until 1998. Excellent potential remains within the immediate area for additional targets. An extensive reconnaissance exploration program, consisting of percussion drilling, an airborne magnetic survey, soil sampling and detailed prospecting and sampling is being undertaken south of San Dimas.
One core drill is currently operating at San Dimas in order to extend the known mineralization. A series of metallurgical tests are being planned to determine the optimum process method.
Phase 1 mining at the El Gallo Complex is expected to commence during the second quarter 2012. The El Gallo Complex includes the El Gallo and Palmarito silver deposits and the Magistral gold deposits, which are all located within a 13 km (8 mile) radius. Phase 1 will focus on the permitted gold deposits and is expected to produce 30,000 ounces of gold per year after initial ramp up. Capital costs have been estimated at $15 million and the projected cash flow will help fund Phase 2, which is forecasted to produce an additional 5 million ounces of silver per year, beginning in 2014. Readers should note that mineral resources that are not classified as mineral reserves do not have demonstrated economic viability.
US Gold has learned that yesterday the government of Argentina announced a change to a 2004 decree which had previously exempted the mining industry from a requirement to repatriate revenues from exports. As further information becomes available, we will evaluate what impact this may have on the combined US Gold/Minera Andes entity (McEwen Mining). US Gold will keep its shareholders apprised as more information becomes available.