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Mariana's Busy Exploration Schedule Set To Energise Prospects

A busy schedule of exploration promises to energise Mariana Resources' (LON:MARL, TSX:MRY) prospects.

The explorer has already banked a 500,000 ounce resource at Las Calandrias, its most advanced project, and it is now looking to progress a broader regional portfolio in a highly prospective part of Santa Cruz, known as the Deseado Massif.

It is now also looking seriously beyond Argentina with the addition of an exciting but as yet untested project in Northern Peru.

Delivering on this exploration mandate will be the key to growing value for shareholders, according to City broker RFC Ambrian, which rates the AIM quoted stock as a 'speculative buy'.

With AngloGold Ashanti and Hochschild on the register, respectively owning 19.9% and 5% of the company's shares, the Mariana already has backers should the next phase of exploration unearth something significant.

Mariana is primarily focused on unearthing bulk tonnage, near surface, prospects. In terms of strategy these are the type of projects it believes AngloGold and other majors favour. Along the way, smaller higher grade targets will likely be generated.

AngloGold is already well established in the Deseado with its world class Cerro Vanguardia mine, which produces over 200,000 ounces a year.

The area hosts three other mines, as well as key mine development projects like GoldCorp's huge Cerro Negro project which AIMs to produce over 500,000 ounces a year and the 2mln ounce Cerro Moro project - bought by Yamana for $400mln in June.

The region also hosts the smaller Don Nicholas mine, which is being developed by Minera IRL and will come online to produce 55,000 ounces of gold a year - potentially starting in 2014.

In recent years, the emergence of the Cerro Negro and Cerro Morro projects has focused attention on this part of the world and it is now a busy district, with growing infrastructure and many projects at various stages of development.

Mariana's landholding is concentrated in a more narrowly defined belt which it describes as the Eastern Deseado - strategically located in between Cerro Vanguardia (to the southwest) and Cerro Morro (to the east).

The bulk of Mariana's acreage is at the northern end of the Eastern Deseado belt.

The Las Calandrias project is found here and in recent weeks Mariana has begun to reveal encouraging first pass exploration results which have unearthed new prospects in previously unexplored tenements in this emerging district.

While the complex metallurgy of its Calandria Sur primary zone has been something of a drawback, there is still plenty of scope for additional work. For example, the company has flagged higher gold recoveries in newly discovered surrounding zones and just two of the project's eight rhyolite domes have been drilled in any detail so far.

And analysis of the 2012 drilling could provide a resource update in the months ahead.

"We've got the half a million ounces, that we've drilled out in the past two years, and it is becoming apparent that we're still finding more outside the resource limits," Mariana chairman John Horsburgh told Proactive Investors.

"I think we've done enough, at Las Calandrias, to show that we've got more potential resources than we reported a year ago. We've yet to quantify that and we plan to do that in the first quarter of next year."

It has been speculated for some time that the ultimate fate of the Las Calandrias project may be tied to the neighbouring Minera IRLEscondido project. It is believed that the respective deposits are in fact one larger system.

City broker RFC Ambrian clAIMs there are clear synergies to be had should the two projects continue to move forwards.

In the immediate future, though, Mariana is focusing on unlocking the other projects in the next quarter.

Early stage work has already discovered the Los Cisnes project at the southern extent of the Eastern Deseado belt, near the coast.

Horsburgh says Los Cisnes, a rhyolite dome field, which appears to be even bigger than Las Calandrias.

"There is plenty of cover at Los Cisnes, so there is a good chance that what we can see in limited outcrop and float extends beneath the surface gravels.

"It has good scale, which is what you need with bulk tonnage projects."

"Apart from strongly anomalous gold at surface, the geologists have been getting high grade silverin certain areas."

He says the team will be back at Los Cisnes in the first quarter of next year, carrying our more definition work to outline drill targets for a programme that could possibly follow later in the year.

There are also plans to develop drill targets at the newly discovered Bozal prospects, found 35km north of Las Calandrias, at some point.

Last month, Mariana released encouraging prospecting results from this area. Horsburgh says the good results together with what neighbours Agnico and Renaissance Gold are finding at El Monte could point to a local hotspot.

Like many booming regions Santa Cruz has this experienced a common side-effect - fiscal uncertainty.

Amid record high gold prices and the emergence of a booming district, investor interest was for a time shaken by Argentine talk of higher taxes and possible indigenisation plans.

Investor's worst fears were further compounded with Argentina's nationalisation of Repsol's majority stake the YPF business - which was reportedly worth US$10bln.

Horsburgh, however, says that the new regime that the government ultimately decided on - which involves a 3% mine-gate royalty - was 'fairly reasonable in the end'.

That said, Mariana has in the past year moved to add some diversity to the portfolio.

In October it struck a US$15mln deal with Canadian firm Condor (CVE:CN) that will see Mariana earn a 51% controlling stake in the Condor de Oro project - which spans a highly prospective 102 sq kms in northern Peru.

"It is a big target, potentially a real company maker - it is a gold porphyry, but there is also copper there and potential for more copper and moly at depth."

Horsburgh explains that the area is well known to Ray Angus, Mariana's COO, from his time with Monterrico Metals - which was developing the nearby Rio Blanca mine before it was bought by the Chinese in 2007.

No drilling has taken place yet at Condor de Oro. As part of its earn-in commitments to the joint venture Mariana will carry out the first 1,500 metres. And this is expected to start in the first quarter of next year, subject to final permitting.

Positive results are likely to lead to a quick step-up in activity, Horsburgh says.

"If this project is what we think it is, we'll soon know in the first drilling. And if it stacks up we will hopefully continue the programme to begin proving a resource."

Given the known resource at Las Calandrias, and the other prospects across the portfolio there is lots of potential for Mariana to step-up its exploration work- should the promising early stage exploration deliver material results.

But although the current programme is fully funded, with around $2mln of cash, an accelerated or expanded programme will probably require additional capital.

In the Deseado, the acreage is largely wholly owned and therefore MARL has more flexibility to do something at project level, but as the Peru venture is already subject to an earn-in the company would likely require cold hard cash.

Having majors like AngloGold (owning 19.9%) and Hochschild Mining (with 4.8%) on register may provide an ideal first point of call for a raise, if and when it comes, but a broader investor base in London, Australia and Canada may well be sought.

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