Do you remember the Aurelian Resources discovery of the Fruta del Norte epithermal gold deposit in the Ecuadorian Andes in 2006? The hidden under overburden, gold discovery in the South American jungle, of 13 million ounces of gold was the most exciting gold discovery story for the last decade. The stock price of Aurelian Resources soared from 60 cents to over $40 over the course of half a year of spectacular drilling results. Aurelian was eventually merged together with Kinross Gold Corporation (KGC) in 2008 for value of $1.2 billion USD. The author has a particular interest in this type of epithermal precious metal deposits.

Secret to Finding

What is the secret behind a company finding this type of spectacular gold deposit? Well, Dirk Masuch, a Nevada gold investor, postulates that it is result of methodical exploration tactics. He says the signs were all there on the company website, detailing progress in unravelling the geological story. The first step was selecting the prospect area and sampling the streams for indicators of gold bearing minerals. Once something was found, then more detailed sampling followed to try and narrow down the source upstream. The rock types and mineral traces are analyzed. The presence of gold indicator minerals of arsenic and mercury in the local rocks is very important. Also the discovery and recognition of the local geological fault structures becomes critical as the controls for possible precious mineral deposits. Then remote sensing technologies are applied to try and understand the underlying geology. Finally after coordinating all the results and selection of targets, drilling is initiated. All this information was available to prospective investors in the Aurelian company website.

Epithermal Gold Geology

There is a key word mentioned in the first paragraph of this article, “epithermal.” To this author’s understanding, epithermal refers to shallow (less than 1km depth) deposits formed from low temperature, 50-300 degrees centigrade reaction of hydrothermal fluids and ground water under moderate pressure. Dr. Peter Megaw, writing for Mag Silver (MVG) about its Juanicipio high grade silver vein, gives a great definition of epithermal:

“Epithermal” literally means “shallow heat,” and is applied to hydrothermal systems emplaced at shallow depths (<1 km) in the earth’s crust. “Low Sulfidation” refers to a style of epithermal system developed in a geothermal or hot springs environment versus “High Sulfidation” epithermal systems which develop in the volcanic hydrothermal environment. There can be significant overlap between these two end-members. So epithermal is good, meaning a shallow and easily accessible and mineable mineral deposit. Now what are characteristics of epithermal precious metals deposits? White and Hedenquist in 1995 wrote a scholarly article about this subject from which this following distinguishing factors chart is adapted: Epithermal Form of Deposits Low Sulfidation (Adularia- sericite) High Sulfidation (Acid Sulfate) Open-space veins dominant Veins subordinate, locally dominant Disseminated ore mostly minor Disseminated ore dominant Replacement ore minor Replacement ore common Stockwork ore common Stockwork ore minor The chart above gives the main characteristics as that the Low Sulfidation type forms mainly as veins whereas the High Sulfidation type forms mainly as a disseminated type of deposit. This is because the High Sulfidation type is formed from acidic fluids that eat the host country rock and deposit the metals within, whereas in the Low Sulfidation type, the hydrothermal fluids upon encountering local ground water, then boils and the metals precipitate out in the faults. The author's main interest is in the Low Sulfidation types, as the vein deposits signify higher concentrations and higher grades for the precious metals. Following is a graphical depiction of the funnel shape of a classic epithermal vein model.

Source: www.magsilver.com

Note the red colored core vein where the high grade precious metals will be deposited. Following is the author’s interpretation of the Low Sulfidation Epithermal Gold Model at work:

1. The metals bearing hydrothermal fluids come from deeper in the crust and comes to the surface through faults and fissures in the host rock. This is a low pressure, lower temperature system.

2. The hydrothermal fluids encounter the local ground water at location 5 in the diagram and boils furiously, releasing some of the metals. The resulting steam carries traces of arsenic and mercury to the surface. The rapid boiling deposits the minerals on the fault hollows and eventually seals off the opening.

3. The pressure and temperature builds up again, and eventually breaks through the blockage and the previous cycle of boiling and precipitating and depositing the minerals works through again.

4. The above cycles in 2 and 3 happen repeatedly and the pressure may seek other directions for the flow dependent upon the faults and fissures in the geology. The amounts and grades of the gold and silver deposited is dependent upon the numbers of cyclic events that happened.

5. It is also important to note that multiples of these types of deposits may have formed at differing locations of the fault at the same time in Geologic history. Therefore, if one deposit is found, more may be nearby, if the fault structure can be traced there.

6. This process of metal depositing and heat and steam being released alters the surrounding rock structure. The structure tends to look similar to an upright funnel. The alteration zone of rocks is colored green in the above diagram. One residue of the alteration by the fluids and heat action and found near the surface of this geologic funnel is the mineral kaolinite, which is a type of clay.

Understanding the above mineralization process helps the investor interpret the potential of particular mining prospects.

Marco G Goombarh’s Edge

from seekingalpha.com

December 13th, 2010
Categories: Uncategorized . Author: caliche