This has highlighted the Signal target as being similar to the South West Breccia high grade deposit but with an intact silica cap.
Rock chip sampling had returned a new sample of 32.7 grams per tonne gold at Signal that confirms a high grade trend towards the silica cap.
Importantly, this indicates the potential to find "blind" and intact high grade gold shoots similar to or better than the South West Breccia high-grade epithermal gold deposit.
Signal is located about 1.5 kilometres west of South West Breccia and its main area of gold mineralisation is interpreted to be covered by an intact zone of siliceous material or a "Silica Cap".
"The work we have done at Lobo to date has given us a much better understanding of what controls high grade gold mineralisation in that area," managing director Jon Dugdale said.
"It looks like South West Breccia is only just exposed through an eroded silica cap, that is interpreted to have formed a constraining lid, under which gold bearing hydrothermal fluids were trapped and effectively boiled, generating the very high gold grades within the South West Breccia resource.
"At Signal, only 1.5 kilometres west of South West Breccia, it looks like the silica cap is preserved, and there is evidence of very high grade gold in rock chip samples that lie along strike and vector towards the most prospective area, under the silica cap."
"We look forward to defining multiple drilling targets for the next stage of the program."
Rock chip sampling had generated the high grade result of 32.7g/t gold from the Signal target, which sits midway between previous surface rockchip sample results of 72.6g/t gold and 42.6g/t gold.
This forms part of a linear northeast trending zone over 500 metres long.
The structure is interpreted to then pass to the northeast under younger limestone cover then under the silica cap that is interpreted to overlay potentially the main area of gold mineralisation.
Notably, the discovery of a high grade gold lode trend at Signal coincides with the development of a new target model for South West Breccia and other targets at Lobo.
This is based on similarities between the Lobo prospect and other epithermal gold and copper-gold deposits including the large Lepanto-Far South East porphyry/epithermal gold-copper ore system located 250 kilometres to the north of Lobo, on Luzon Island in the Philippines.
At Lepanto-Far South East, and other epithermal systems worldwide including the Maclaughlin epithermal gold deposit in California - where the silica cap is remarkably well preserved, high grade gold mineralisation is capped by an early formed silica cap or silica.
It is interpreted that later, gold bearing, hydrothermal fluids were constrained by this cap and high grade gold mineralisation concentrated beneath it.
Red Mountain's South West Breccia deposit is another such example where the high grade hydrothermal breccia is exposed and a remnant silica cap has been mapped on surrounding ridges, indicating that a siliceous cap once sat above the deposit and has since been eroded.
The Signal high grade trend appears to pass under a preserved silica cap.
Anomalous soil geochemistry is observed on the down slope margins of the siliceous zone and limited sampling within the silica cap has produced rockchip sample results of up to 4.47g/t gold and high silver grades of up to 55g/t silver, 90.7g/t silver and 150g/t silver.
The high silver-copper values concentrated in the siliceous cap material are interpreted to lie above the gold mineralisation, a vertical zonation observed in similar epithermal deposits, including at the old Lobo mine above the new resource at West Drift.
Based on this new model, the high grade trend and the existence of an intact silica cap with anomalous silver-copper-gold geochemistry at the Signal target, and other prospective areas with the Lobo prospect, indicates potential to locate a number of "blind" and intact high grade gold shoots similar to or better than the South West Breccia mineralisation.
South West Breccia
Another recently interpreted aspect of South West Breccia gold mineralisation is that it occurs along the faulted contact between footwall andesitic volcanics and hangingwall volcanic agglomerate.
Mapping and magnetic interpretation indicates that this rifted boundary forms an east-west trend linking South West Breccia with the silica cap zone at Signal and to the east a strongly gold anomalous zone at the northeast end of the Ulupong trend.
On the northern side of the interpreted rift are the Camo, West Drift prospects and a large zone of siliceous cap material between the Calumpang and Pica targets that are characterized by high silver and copper grades.
They are also interpreted to occur at a higher relative elevation than the high grade gold zone at South West Breccia.
Other silica cap zones and targets have been highlighted within the Lobo MPSA (Mining lease equivalent) based on the new targeting model, including Ulupong, Camo, Pica and Calumpang.
Further surface sampling at key prospects including Signal, will be followed up with trenching and ultimately drilling of the prospective zone.
This will focus on areas with a well developed silica cap where a "blind" high grade gold zone may be fully preserved.
Red Mountain had recently increased the Lobo Indicated and Inferred Resource by 82% to 604,000 tonnes at 4.2g/t gold for 82,000 ounces.
This is expected to have a positive impact on the Definitive Feasibility Study expected to be completed by December 2014.
In addition, the total Resource at Batangas now stands at 6.19 million tonnes at 2.2g/t gold, containing 444,000 ounces.
Batangas covers an area of 270 square kilometres that is located 120 kilometres south of Manila on the south coast of Luzon Island, and is within a regional province that is strongly endowed with major gold and copper and gold resources and mining projects.
Shares in Red Mountain Mining should trade higher today on the new geological model and the new rock chip sample highlighting potential for a high grade gold zone located under the intact silica cap at the Signal target.
Importantly, this highlights the potential to find "blind" and intact high grade gold shoots similar to or better than the South West Breccia high-grade epithermal gold deposit, which appears to be exposed through an eroded silica cap.
This is notable given that South West Breccia has a Resource of 221,000 tonnes at 6.3g/t gold for 45,000 ounces, with 98% of that in the Indicated category.
While the Scoping Study completed earlier this year had already estimated a low cash cost of A$769 / US$690 per ounce, and a capital cost of A$16.7 million / US$15 million over a mine life of 4.5 years, this could be improved further through the discovery of more high grade deposits.
Proactive Investors has a 6-9 month price target of $0.017 - $0.025 per share.
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