TORONTO (miningweekly.com) – Canadian exploration firm Golden Arrow Resources has discovered a significant silver deposit in north-west Argentina that potentially could be “a deposit for the times”, according to president and CEO Joseph Grosso.

Grosso, who is also the company’s executive chairperson and who was one of the early mining pioneers in Argentina in 1993, after the sector was opened to foreign investment, told Mining Weekly Online the Chinchillas discovery ticked all the right boxes when evaluated against current negative market conditions.

“The light comes on when one makes a basic discovery and gradually expands it into a runaway giant,” he quipped, having already discovered three significant silver deposits in Argentina.

He is credited with the discovery of the world-class Gualcamayo project, now in production by Yamana Gold; the Navidad silver deposit, now held by Pan American Silver; as well as the Rio Tabaconas gold project; and now he is on the trail of yet another significant discovery with the Chinchillas silver project.

At a cutoff grade of 50 g/t silver equivalent, the Chinchillas deposit currently has an indicated resource of 7.2-million tons of ore near the surface, averaging 119 g/t silver, 0.5% zinc and 0.6% lead for 33-million ounces silver equivalent. The inferred resource currently stood at 72-million ounces of silver equivalent and, owing to the resource being open in all directions, holds significant expansion upside.

Golden Arrow in May released its maiden National Instrument 43-101 resource estimate for the project. Grosso said that, despite the company being eager to undertake a third round of drilling on the project, it had engaged consulting engineering firm Knight Piésold to first provide a detailed snapshot of the project and the various environmental and social responsibilities that need to be addressed before moving forward.

The company was undertaking an internal economic analysis of the Chinchillas project to determine whether to complete a preliminary economic assessment before, or after, completing the drill programme. Independent consultant Ken Kuchling, a mining engineer specialising in economic reviews, is coordinating the internal review.

“We have created a national profile for our company and we have engaged with local stakeholders and government. The project is located in a very relaxed, pro-mining region, but we are taking a conservative management approach to moving the project forward,” he said.

Initial calculations point to an openpit mine that could be built for about $200-million to $250-million and the resources could, at this point, support a mine life of about 13 years.

The company reported 98.7% silver recovery during initial bench-scale metallurgy tests, saying the samples responded well to flotation and were found not to be sensitive to grind size. The lead recoveries were also very high, at between 96.5% and 98.1% for all rougher tests, while zinc recoveries were generally lower, between 66% and 96.1%.

The company is currently busy optimising the flow sheet with the goal of producing a separate high-grade, silver-bearing lead concentrate and a zinc concentrate, especially when considering that conventional flotation methods with standard reagents were used successfully.

Grosso said the company had also recently tripled the area of the Chinchillas property to 1 160 ha.

This additional ground would be the focus of the next exploration phase, with surface mapping, geochemical sampling and geophysics planned. The Phase 3 drill programme would incorporate additional drill targets with the aim of increasing the size of the indicated and inferred silver/lead/zinc resource.

Grosso pointed to the discovery cost per ounce at Chinchillas being $0.04, which was at the low end of the scale in the industry.

The Chinchillas deposit is located 30 km away from the productive nine-million-ounce-a-year Pirquitas silver mine, run by Silver Standard Resources, and about 70 km away from El Aguilar zinc/lead mine and the Palpala smelter, both owned by mining giant Glencore Xstrata. In December 2012, Coeur d’Alene Mines paid $1.78/oz for Mirasol Resources’ 30-million-ounce silver deposit.

Golden Arrow has an option agreement to earn 100% of the Chinchillas project by paying $1.8-million over four years and $1.2-million once commercial production starts, with no royalty attached to the option agreement. The company has about $10-million cash in the bank and about half the company's shares are held by insiders.

The TSX-V-listed company has a market capitalisation of about C$9.61-million and has about 41.8-million shares outstanding.

Grosso said the excellent flotation recovery of the rich ore found near surface, and the potential quick development of an openpit operation looked feasible, despite the depressed state of the mining sector.