VANCOUVER (miningweekly.com) – Precious metals-focused explorer and producer Alio Gold (formerly Timmins Gold) has intersected 10.8 g/t gold over 99.4 m at its Ana Paula development project, in Mexico, the company reported on Tuesday.

The Vancouver-headquartered company reported the latest results from an ongoing 2 000 m drill programme, which involves twin 11 holes within the proposed pit, to confirm previous drilling and to obtain samples for metallurgical testing.

Alio said the first two holes confirmed the presence of high-grade mineralisation and the lithology of the previous drilling that were incorporated in the current mineral resource estimate (MRE), dated May 16.

Drill hole 17-04 intersected 99.4 m from 51.9 m to 151.3 m grading 10.8 g/t gold and drill hole 17-05 intersected 74 m, from 96 m to 170 m, grading of 6.2 g/t gold.

“The results of our first two metallurgical sample drill holes are a reminder of the high-grade nature of the breccia system within our proposed openpit at Ana Paula. These holes are similar in grade and lithology to the previously drilled holes and compare favourably to the block model. These results further validate our decision to proceed with constructing an underground decline to test the known extension of the high-grade breccia system outside the current MRE, below the proposed pit,” stated CEO Greg McCunn.

Results from the third and fourth holes are expected in early November and drilling of the sixth hole is currently in progress. Representative samples from the drill core will be sent for metallurgical testing, which is expected to be completed in the first quarter of 2018. The metallurgical results will be part of a definitive feasibility study, which is currently under way, and expected to be published in the second quarter of 2018.

Recently, Alio started an extensive exploration programme at Ana Paula comprising twin hole drilling within the proposed openpit for metallurgical samples; exploration drilling from an underground decline targeting an extension to the high-grade breccia below the proposed openpit and a skarn target below the breccia, for which the decline construction will start shortly and with drilling to commence before July 2018; surface drilling to test a high-priority target that is 100 m north of the proposed openpit, for which drilling is set to start after metallurgical sample drilling in the first quarter); and regional exploration work on the 56 000 ha land package, including an airborne magnetic survey targeting further breccia or skarn targets, which is ongoing into 2018.

POTENT PROJECT
Alio acquired the Ana Paula project in May 2015, through the C$140-million acquisition of Newstrike Capital. The company has also acquired the processing plant and select infrastructure facilities used in the operation of Goldcorp’s El Sauzal mine, in Chihuahua state. The El Sauzal mine was operational until December 2014, when its closure process began. As at December 31, 2016, disassembly and removal of the El Sauzal plant was fully completed.

During the third quarter of 2016, Alio announced a pre-construction programme for the Ana Paula project, including the start of feasibility studies, infill drilling, metallurgical testwork, and environmental baseline and permitting activities. Over the last several quarters, Alio achieved significant milestones on the pre-construction programme, including environmental baseline studies, infill drilling and metallurgical testwork, which culminated in the completion of a prefeasibility study (PFS) for Ana Paula.

The PFS results were based on proven and probable mineral reserves of 13.4-million tonnes at 2.36 g/t gold, for 1.02-million contained ounces of gold, with reserves calculated at a base case price assumption of $1 200/oz.

The PFS calculated an after-tax net present value, using a 5% discount rate, of $223.4-million and an internal rate of return of 34% at $1 250/oz of gold.

The initial capital cost was estimated at $137.2-million.

The project is expected to have first quartile operating costs coming in at $489/oz, and all-in sustaining costs of $524/oz.

The mine life is pegged at 7.5 years, using an openpit producing 868 000 oz of gold.

The operation has underground potential as highlighted with measured and indicated resources below the proposed pit of three-million tonnes, grading 2.8 g/t for 266 700 contained ounces.