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Argentex – blazing a new trail in Patagonia

Argentina's Deseado Massif is still largely an unknown quantity – a true exploration frontier where mineral prospectors are making new discoveries on a continual basis. Until twenty years ago, the region – a vast swathe of Santa Cruz province – was used primarily for sheep ranching, hosting huge estancias still operated in many cases by the modern descendants of the Welsh and Scots immigrants who settled the area in the late 1800s.

But the 1991 eruption of Mount Hudson in Chile ended that rule, as almost eight cubic km of volcanic ash, driven by a north-westerly wind, blanketed the land and destroyed the vegetation on which the sheep depended.

Enter the prospectors. Paradoxically, the event which opened up the region to exploration for precious and base metals also made surface prospecting more difficult, as the ash masked much of the outcropping visible mineralisation. However, ash is no obstacle to modern geophysical techniques, and the Massif is slowly giving up its secrets.

The mineralised “bones” of most of the region were emplaced during the Jurassic period, following a period of pull-apart tectonic activity which stretched the Precambrian basement rocks and brought about deep faulting, mostly along NNW-SEE-lying axes. Volcanic magma blasted upwards through these faults, and spread out, laying down the huge basaltic plateaus which cover much of the region today and are host to thousands of occurrences of epithermal gold and silver veins.

When Vancouver-based Argentex Mining (TSX-V:ATX; OTCBB: AGXM) began to investigate their newly acquired Pinguino property in 2004, it appeared to be a typical gold and silver-bearing hydrothermal vein and breccia system with minor traces of base metals.

The first discovery, towards the north of the property, was the Marta vein system, which bore all the hallmarks of a classic low-sulphidation epithermal system, formed as hot mineralised fluids were forced up from the depths and then cooled and solidified into fracture filling gold and silver-bearing quartz or chalcedony veins and veinlets. 

Argentex's first drilling season at Marta Norte tested several shallow targets based on surface sampling and trenching of outcropping mineralisation, and results were good enough to encourage further exploration. However, the second drill programme followed a geophysical survey, and instead of relying solely on surface indications, targeted a number of geophysical anomalies further south along the Marta trend where there was no outcrop.

The results were unexpected. Again, a number of mineralised silver-gold intervals were discovered in the northern part of the Marta vein but, in the southern portion, two drill holes intersected a substructure of the main Marta vein that revealed high base metal, silver, gold and indium values. Other drill holes in the adjacent Yvonne vein also showed a high sulphide content and anomalous base, precious and indium values over significant widths.

This was a completely new style of mineralisation, the first of its kind to be discovered in Santa Cruz. The existence of sulphides had not been suspected during any early exploration, as – due to their relative softness -  erosion and weathering had worn away any outcrops, leaving these veins “blind”.

As Argentex have advanced their exploration since that early discovery, it has become clear that Pinguino's mineralisation is hosted not in the more common Bajo Pobre and Bahia Laura magmatic rocks, but in older strata altogether – the Roca Blanca and El Tranquilo formations - which originated in Triassic to Lower Jurassic times.

In the north of the property, these older rocks are host to classic epithermal quartz veins,  but in central and southern portions, a deep-seated dioritic intrusion has formed a dome structure, resulting  in the formation of several massive sulphide vein systems.

Until this year, Argentex have focused firmly on exploring and testing both the low-sulphidation and high-sulphide systems, which contain some 75km of mineralised strike in dozens of veins, most of which run parallel to each other and are open along strike and to depth.

Mineralisation, as is often the case in this region, is steeply dipping to the SSW, with widths from 10-60 metres, and grades of up to 600 g/t indium, associated with zinc, lead and copper, as well as the more familiar silver and gold. High grade polymetallic mineralisation has so far been proven to depths of 400 metres in Marta Centro, whilst Marta Norte has produced high levels of silver grading up to 3,000+ g/t. 

Five successive phases of exploration led, in September 2009, to the project's first NI43-101 compliant resource, based on just nine of the fifteen veins drilled at the time. Given the wide variation in distribution and grade of the polymetallic mineralisation, the resource is expressed as silver equivalent, using a formula based on long term metal price estimates of US $795.45/oz for gold, $13.83/oz for silver, $1.14/lb for zinc, $0.92/lb for lead and a spot price of $465 per kilogram for indium.

Indicated resources, using a 50g/t cutoff for the silver equivalent grade, amount to 7.3 million tonnes grading 32.54 g/t Ag, 0.253g/t Au, 0.49% Pb, 1.47% Zn, 16.26 g/t In, giving a silver equivalent grade of 169.64 g/t.

This equates to approximately 38.8 million ounces of silver, whilst a further 35.4 million tonnes at 123.73 g/t silver equivalent gives rise to inferred resources of 136.7 million ounces of silver.

The driver for this widespread and occasional bonanza grade polymetallic mineralisation is – according to Argentex's geological consultant Diego Guido – a marked regional fault structure which cross cuts Pinguino almost diagonally for 11 km from the  NNW to SSE and extends downstrike off the property as far as the Cerro Vanguardia gold-silver mine some 40km to the SSE.

Comprehensive study has led to the establishment of a new model for the project which postulates that this fault –  El Tranquilo  – is the feeder for all the vein systems so far encountered, and that these parallel systems all stem from the main structure as splays or sub-faults.

This year, for the first time, El Tranquilo itself has been drilled, with outstanding results.

Four vein structures have been identified, three running right along the clearly visible fault line, at Tranquilo Norte, Tranquilo and Tranquilo Sur, with a fourth system – Luna - at the northern end situated slightly to the SW of the fault line.

By September, a property-wide programme of 89 diamond drill holes had identified the highest silver values discovered to date on the entire project. Hole P349-10 on the Tranquilo vein returned a thick intersection of high-grade silver mineralisation containing 6 meters of 2,428 g/t silver, 0.22 g/t gold, 0.32% copper and 0.74% lead from just 9m below surface. Taken with several adjacent high grade cores, the newly discovered portion of the trend is in excess of 275 meters in length and remains open ended along strike and at depth.

“These are truly spectacular silver results from Tranquilo. This prominent regional Tranquilo fault remained the largest untested structure at Pinguino until commencement of our 2010 drill program,” said Ken Hicks, President of Argentex.

“The discovery of this type of bonanza-grade silver mineralization within such a massive structure has added a new dimension to Pinguino’s potential. Tranquilo has emerged as the most significant silver discovery at Pinguino to date and we intend to focus our exploration efforts there on further expansion and definition.”

Argentex is currently hard at work on reviewing the results of a scoping study undertaken by their engineering consultant and a preliminary economic assessment (PEA) is expected to be issued shortly, defining the geological, engineering and economic potential of a mining operation at Pinguino.

Meanwhile, as part of the PEA, first metallurgical studies on ore from areas representative of the two distinct types of mineralisation at Pinguino have shown excellent recoveries.

Samples from Marta Norte and Marta Este, representative of low sulphidation high-grade silver and gold, showed cyanide leach recoveries of up to 98% gold, and 75-95% silver.

Sulphide mineralisation from Marta Centro, the largest polymetallic vein discovered to date on the Pinguino property gave favourable recoveries of lead and zinc of more than 90 percent to their respective concentrates with 60 percent of silver reporting to the lead concentrate.

If confirmation were needed of the importance of this new “first” for the Deseado Massif, it was delivered in spades last month when Argentex and the IFC, a member of the World Bank group, finalised a long-planned subscription agreement.

The IFC has taken a direct 19% stake in Argentex by purchasing 10,804,706 shares at C$0.68 each, accompanied by a full warrant with an exercise price of C$1.14 for a period of five years. Argentex plan to use the proceeds – some C$7.3 million – to further develop Pinguino and to advance key new projects selected from their large portfolio of projects in Patagonia, where the company is now the third largest landholder.

In spite of exploration success and continual progress, Argentex had a rocky ride during the summer of this year, when its share price fell as low as 45 cents. There has been a significant recovery since September,  but even so, the current fully diluted market capitalisation of C$65 million looks particularly undemanding when viewed alongside 175 million resource ounces of silver equivalent, with much more still to come...

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.