CORBETT GEOLOGICAL SERVICES Pty. Ltd.

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Post Office Box 282, Willoughby, N.S.W. 2068, Australia 4-8 Oakville Road, Willoughby, N.S.W. 2068, Australia Phone (61 2) 9958 4450 Fax (61 2) 9958 4430 E-mail: greg@corbettgeology.com Web: www.corbettgeology.com

CONTROLS TO Au MINERALISATION AT THE PASO YOBAI EXPLORATION PROJECT, PARAGUAY AND SUGGESTIONS FOR THE CONTINUING EXPLORATION PROGRAM

Greg Corbett September 2007

2 SUMMARY At Paso Yobai Au mineralisation, which is developed in association with mafic dykes displays many similarities to low sulphidation epithermal Au mineralisation recognised in many other Pacific rim occurrences. The dykes link the currently exposed veins, interpreted to have been eroded to expose only the uppermost portion of the hydrothermal system, to a deep level magmatic source for Au mineralisation. Controls to Au mineralisation are apparent as: Host rocks display good competency as the mafic dykes and silicification of the adjacent sandstones, so that significant mineralisation occurs at the dyke margins. Structural control to mineralisation is apparent as better mineralisation, typically as sheeted quartz-MnO veins, which is commonly developed in WNW trending flexures in the generally NW structural corridor. Although many normal faults with steep slickensides are recognised, and these host better mineralisation in steeper dipping portions, the flexure-related ore shoots are interpreted to have developed in response to a localised (in time) component of sinistral strike-slip fault movement, as evidenced by sub horizontal slickensides in the vicinity of the flexures. Geological mapping initiated during this inspection is intended to delineate the extent of these ore shoots which represent important drill targets. Ore shoots are currently speculated to plunge vertically but this will need to be established by drilling, which may have to accommodate a close spaced drill grid in order to identify and evaluate the ore shoots. Two main styles of low sulphidation epithermal mineralisation occur as: Quartz-sulphide Au in which generally lower grade Au occurs within coarse cubic pyrite either disseminated within the dykes or as commonly sheeted pyrite + massive crystalline quartz veins or shear-hosted breccias. During oxidation Au is easily liberated from pyrite grain boundaries and supergene enriched. Epithermal quartz Au-Ag mineralisation is interpreted to overprint the earlier pyrite mineralisation and occur as commonly sheeted several mm wide veins characterised by fine widely spaced quartz crystals commonly with free Au. Mechanisms of Au deposition influence the Au grade such that Au grade progressively increases with changes in the mechanism of Au deposition as: Low Au grades in the pyrite veins deposited by slow cooling of the ore fluid, to Higher Au grades in settings of mixing of ore fluids with bicarbonate waters as evidenced by MnO in the ore assemblage, and Highest Au grades for mixing of ore fluids with low pH acid sulphate waters as evidenced by the presence of hypogene kaolin in the ore assemblage. In the currently exposed oxide environment it is difficult to distinguish hypogene from supergene kaolin. Supergene Au enrichment provides false geochemical anomalies in many Pacific rim low sulphidation epithermal Au deposits which contain significant components of quartzsulphide Au mineralisation. At Paso Yobai much of the Au in soil, and mined by the informal miners is of this style, but the extent of any supergene component in the quartzMnO-Au veins remains uncertain. Paso Yobai occurs as a high priority drill target.

3 Introduction At the request of Waldo Perez 3 days were spent in a review of the Paso Yobai exploration project, Paraguay, with a brief to provide an analysis of the controls to Au mineralisation to be used in the design of the planned drill program. Lectures were presented on site to discuss some of the geological concepts used in the evaluation of this project. The assistance is gratefully acknowledged during this work of Waldo Perez, Mirma Medina, Hugo Morimigo, Juan Carlos Beuitez and Miguel Molina. Geological setting The Paso Yobai Project, located 250 km east of Asuncion, Paraguay, contains Au mineralisation in association with mafic dykes which have been emplaced into a Cretaceous to Jurassic sedimentary sequence comprising sandstone, shale, conglomerate and minor calcarenite, formed as part of the Amazon basin to the north. The mafic dykes are described as of an alkaline affinity localised on regionally significant structures. The project displays Mesozoic NS, NW and NE elements in the structural grain, possibly projected through the cover sequence from the underlying older basement. The NW structures are interpreted to have been active as extensional structures and NE and orthogonal fractures during Cretaceous opening of the Atlantic Ocean, and so as deep crustal fractures could tap deep mafic intrusion source rocks for Au mineralisation. Although many NW trending mafic dykes appear to dip to the NE in outcrop, SW dips have been determined by an analysis of the aeromagnetic data and to a certain extent electromagnetic data. Local offsets on dykes contribute towards the development of the structural model described below. In addition to the dykes, a pencil-shaped stock is speculated to occur at Cerro Mboy where a knob like feature results from erosion of marginal softer kaolin-pyrite (FeO) altered rocks (photo 1). Here, scree of mafic rock rich in spherulites is typical of material developed by the concentration of volatiles in the uppermost portion of a blind magma chamber (photo 2). Marginal silicified sandstones contain well developed quartz veins, varying to quartz fill breccias at the top of the hill, typical of alteration associated with a buried intrusion source (photo 3). CONTROLS TO LOW SULPHIDATION Au Controls to Au mineralisation determined from comparison of many other Pacific rim low sulphidation epithermal Au occurrences are categorised in a comparison to Paso Yobai as: Host rock competency influences the ability to form vein-hosting fractures, Structures which provide dilatant zones for the transport and deposition of Au mineralisation, Style of low sulphidation Au mineralisation as different styles display varying Au contents, metallurgical responses and Ag:Au ratios. Mechanism of Au deposition typically influences Au grades and enhanced mechanisms of Au deposition are the main cause of elevated Au grades, Dilution commonly provides a post mineral influence on Au contents, Supergene effects which account for the development of false Au anomalies in many low sulphidation epithermal Au systems should be taken into account during exploration.

4 Host rocks Host rock control at Paso Yobai is fairly straight forward as the relatively competent mafic dykes which are emplaced into moderately permeable sandstone host rocks, which have been rendered competent by silicification grading for about 30 cm into the sandstone from the dyke contact, and so this silicification is amenable to vein-hosting fracture development. Veins therefore occur: Within the competent mafic dyke (photo 4), At the dyke/sandstone contact (photo 5), Extending for about 30 cm into the sandstone.

Figure 1. Structural model illustrating nature of changes in the NW trend of the structural corridor and development of speculated steep plunging ore shoots in WNW trending flexures and steep fault portions. Structure Au mineralisation occurs in association with the NW trending dykes interpreted to exploit pre-existing structures active as normal faults. Many dykes appear to display steep to moderate NE dips in outcrop but may dip to south on the geophysical data. In detail the NW dyke trend is disturbed by small scale structures (figure 1) recognised in this inspection as: Local dextral offsets in dyke segments are apparent on intervening interpreted NS trending cross faults. Other cross faults such as the NE structural set apparent on the remote sensing data may also provide similar offsets of the main structures. In several instances better Au mineralisation such as within dilatant sheeted veins occurs where the NW structures display flexures to the WNW-EW, or where veins in this trend overprint the general NW structures (photo 6).

5 More steep dipping fault portions than the general moderate dip also display better mineralisation apparent as more extensive open space quartz crystal growth (photo 7)

Ore shoots (clavos) are therefore interpreted to occur as flexures where the dykes trend more towards the west, and these vein portions generally dip more steeply, as is typical of a dilatant setting in normal fault environments (figure 1). Elsewhere in the Pacific rim sheeted veins developed in dilatant structures transport and host Au mineralisation and so are commonly display elevated Au grades, and similar veins host higher Au grades at Paso Yobai (photos 8 & 9). While most slickensides on faults within the mineralised structural corridor display sub-vertical trends, in the vicinity of the flexures subhorizontal or inclined slickensides are commonly discerned. Thus, as recognised in other low sulphidation epithermal vein systems, the Paso Yobai ore environment is characterised by overall normal fault extension, with localised (in time) components of transpression (strike-slip) fault activation. At Paso Yobai the localised sinistral strike-slip fault activation is responsible for the development of ore shoots in the fault flexures and the ore shoots are interpreted to dip steeply (figure 1; photo 6). Normal fault activation would provide flat plunging ore shoots within the steep dipping fault portions, and inclined ore shoots could result from mixed components of dip-slip and strike-slip fault activation (figure 2).

Figure 2. Relationship between plunge of ore shoots and structural style in epithermal vein systems. Style of mineralisation Different styles of low sulphidation epithermal Au mineralisation (figure 3) account for varying Au contents, Ag:Au ratios and metallurgical responses and mineralisation styles recognised in this inspection can be compared to mineralisation styles documented from elsewhere in the Pacific rim (in the classification of Corbett and Leach, 1998: Corbett

6 2002, 2004, 2005). Two main styles of Au mineralisation are apparent in this inspection as: Quartz-sulphide Au style mineralisation commonly forms early in the paragenetic sequence of the development of intrusion-related Au deposits and comprises Au within crystalline pyrite, typical of that recognised at Paso Yobai. Elsewhere in the Pacific rim, this similar quartz-sulphide Au mineralisation is characterised by Au on grain boundaries and fractures in pyrite and so Au is easily liberated to provide good metallurgy in coarse grained ores. However, the easily liberated Au may undergo supergene Au enrichment during weathering (below). Quartz-sulphide mineralisation is interpreted to commonly account for relatively low grade Au where fluids have cooled slowly, but the Au grade may locally increase in settings of fluid mixing (below). Although most pyrite is now oxidised to iron oxides (FeO), forms of quartz-sulphide mineralisation recognised in this review include: Disseminated pyrite within the dykes and wall rocks (photo 1), Pyrite veins with local coarse crystalline tightly packed quartz, as individual veins or packages of sheeted arrays (photo 9), Shears and breccia zones with matrix of FeO and similar tightly packed crystalline quartz (photo 4).

Figure 3. Conceptual model for varying styles of magmatic arc epithermal and porphyry Cu-Au-Ag mineralisation illustrating the links between these. Epithermal quartz Au-Ag style low sulphidation mineralisation (in the classification of Corbett and Leach, 1998; Corbett, 2002, 2004, 2005; figure 3) overprints the quartzsulphide Au mineralisation in many Pacific rim occurrences, although at Paso Yobai the overprinting relationships remain inconclusive. At Paso Yobai epithermal mineralisation comprises several mm wide open quartz veins lined with fine wide spaced quartz crystals with variable FeO and MnO stain (photos 10-12). The quartz-MnO vein are best

7 developed as sheeted veins in the dilatant structural zones defined by WNW flexures in the NW structural corridor (photo 6 & 8), and better developed open quartz is also apparent at outcrop scale on steeper dipping portions of moderate dipping faults. At Cerro Mboy minor open space breccias lined with fine crystalline pyrite are interpreted to represent mineralisation of this style (photo 2). Many quartz-MnO veins examined in this review contained wire like free Au growing in open space (photos 11 & 12). Elsewhere in the Pacific rim this style of epithermal mineralisation is associated with bonanza Au grades, commonly overprinting earlier auriferous pyrite (Porgera, Mt Kare, Papua New Guinea; Emperor, Fiji; Round Mountain, Nevada). While the possibility cannot be ruled out that, the bonanza Au in these veins has been upgraded by supergene processes, a quality hypogene Au source might still be expected at depth.

Figure 4. Conceptual geological model for the varying styles of hydrothermal fluids apparent in low sulphidation Au deposits. Mechanism of Au deposition More efficient mechanisms of Au deposition account for elevated Au grades. Slow cooling of an ore fluid provides coarse cubic pyrite in the quartz-sulphide mineralisation which hosts generally low Au grades on grain boundaries and fractures (photo 9). Mixing of bicarbonate waters with the ore fluid provides an enhanced mechanism of Au deposition. Cooling intrusions may exsolve CO2 which condenses to form blankets of

8 bicarbonate waters at elevated portions in the fossil hydrothermal system (figure 4; Corbett and Leach, 1998). If rising ore fluids intersect the weakly acidic bicarbonate waters, which are evidenced by carbonate as a late stage portion of the ore assemblage, the complexes carrying Au may break down through oxidation and promote Au deposition (Corbett and Leach, 1998). The more acidic bicarbonate waters, characterised by the deposition of siderite or rhodochrosite, deposit higher Au grades than less acid bicarbonate waters, evidenced by carbonates such as dolomite or calcite within the ore assemblage. Rhodochrosite represents the most common carbonate associated with good Au grades in many Pacific rim epithermal deposits where it is evidenced in the weathered environment by MnO. At Paso Yobai there is a clear relationship between MnO and good Au grades in the epithermal quartz-MnO-Au veins described above, as examined in several workings in this review (photos 11 & 12). This MnO is expected to pass to primary rhodochrosite or other Mn-bearing carbonates below the base of oxidation within fresh rocks. MnO is also locally recognised in association with FeO after pyrite where it may also encourage the development of more elevated Au grades than are typical for the quartz-sulphide ores.

Figure 5. Model for the development of Au mineralisation at Paso Yobai illustrating the interpreted pencil like stock at Cerro Mboy and blankets of bicarbonate and acid sulphate waters. Mixing of low pH waters with rising ore fluids results in highest Au grades. In many low sulphidation epithermal Au deposits, H2S volatiles derived as a result of the cooling and deposition of sulphides from hydrothermal fluids, along with localised boiling during pressure release, are oxidised above the water table to produce warm acid ground waters (figure 4; Corbett and Leach, 1998). Reaction of these acid waters with the host rocks produces acid sulphate alteration characterised by kaolin, alunite, cristobalite and sulphur

9 with anomalous Hg. If ore fluids mix with these acid waters which may collapse into the hydrothermal system, the complexes which carry Au become destabilised by oxidation and deposit Au mineralisation. Kaolin commonly deposited late in the paragenetic assemblage provides evidence of this most efficient mechanism of Au deposition, which is commonly associated with elevated Au grades (Corbett and Leach, 1998). Heating of the low pH waters may locally result in dickite deposition. In near surficial portions of deeply weathered hydrothermal systems such Paso Yobai, it is difficult to determine whether kaolin is of a supergene or hypogene origin. Below the base of oxidation in drill core hypogene kaolin may be evidenced by contact with fresh unoxidised sulphides. The informal miners at the Granada pit report that highest Au grades occur with kaolin in contact with jarosite (photo 13). The kaolin-jarosite association recognised in this review suggests that quartz-pyrite Au mineralisation may have been upgraded by fluid mixing. Kaolin was recognised in the field in this review in several other settings of reported elevated Au grades. At Cerro Mboy the silicified sandstones contain interstitial kaolin, possibly derived from a collapsing acid cap. Supergene Au enrichment Intrusion-related epithermal Au mineralisation is notorious for supergene Au enrichment, particularly in climates characterised by wet/dry cycles and tropical environments of deep weathering. During oxidation Au located on pyrite grain boundaries is easily liberated while vein and wall rock pyrite break down to form acidic ground waters. In steeply dipping structures Au may be concentrated by mechanical processes, while the acid ground waters may dissolve and redeposit it at Eh boundaries, commonly in clay zones. Au becomes concentrated in the surface in gossanous rocks or soils, at the base of oxidation and also collapsing down faults. The presence of boxworks after pyrite and abundant jarosite provide evidence of conditions in which supergene Au enrichment may account for false Au anomalies. Consequently, Paso Yobai is interpreted to be similar to may other Pacific rim quartz sulphide Au occurrences where low Au grade hypogene low sulphidation quartz-sulphide style Au mineralisation may oxidise to provide strongly anomalous Au in soil results, and Au may also concentrate within faults in oxidised material rising to highest levels at the base of oxidation. Many old mines developed in these conditions do not penetrate into sulphide ores which are lower grade and more difficult to treat. Note that informal mine workings are not well developed at Cerro Mboy where pyrite vein mineralisation was not recognised in this review, and so here, even weakly Au anomalous soil anomalies may be indicative of a quality target at depth. Crustal level Paso Yobai is interpreted to have been eroded to expose the upper portion of the epithermal vein system. Green smectite clay alteration is common and opal recognised at Cerro Mboy, while Juan Carlos Beuitez reports that marcasite (the low temperature form of pyrite) has been recognised. Poorly eroded low sulphidation epithermal vein systems are more likely to host epithermal veins which contain elevated Au in other Pacific rim hydrothermal systems, and elevated Au grades associated with collapsing low pH waters derived from near surficial acid caps. Poorly eroded hydrothermal systems are more likely to provide depth potential.

10 Conclusions Paso Yobai displays many similarities to Pacific rim intrusion-related low sulphidation epithermal Au occurrences and so is categorised as mineralisation of that style, eroded to expose only the upper level of the fossil hydrothermal system, as evidenced by generally low temperature alteration and mineralisation. Two main styles of low sulphidation epithermal mineralisation are recognised as: Quartz-sulphide Au in which generally lower grade Au occurs within coarse cubic pyrite either disseminated within the dykes, locally adjacent wall rocks, as commonly sheeted pyrite + massive crystalline quartz veins, or shear-hosted breccias. Au is easily liberated from pyrite during oxidation and so this low grade mineralisation is typical of that which accounts for false anomalies derived from surficial supergene Au enrichment in many Pacific rim epithermal systems. Epithermal quartz Au-Ag mineralisation is interpreted to overprint the earlier pyrite mineralisation and occur as commonly sheeted several mm wide veins of fine widely spaced quartz crystals commonly with MnO and free Au. A structural control to ore shoot development is apparent as better Au mineralisation, commonly as sheeted quartz-MnO veins developed within WNW trending flexures in the generally NW trending structural corridor by a small component of sinistral strike-slip fault activation. Steeper dipping faults also host better mineralisation within these settings. These ore shoots are currently speculated to plunge steeply, but drilling will be required to establish the orientation of structurally controlled ore shoots. Au grade progressively increases with changes in the mechanism of Au deposition from low grades in the pyrite veins deposited by slow cooling of the ore fluid, to higher Au grades in settings of mixing of ore fluids with bicarbonate waters as evidenced by MnO in the ore assemblage, and highest Au grades for mixing of ore fluids with low pH acid sulphate waters as evidenced by the presence of hypogene kaolin in the ore assemblage. In the currently exposed oxide environment it is difficult to distinguish hypogene from supergene kaolin. Near surficial supergene Au enrichment provides false geochemical anomalies in many Pacific rim epithermal Au deposits characterised by quartz-sulphide Au mineralisation. At Paso Yobai much of the Au in soil and mined by the informal miners is of this style, but the extent of any supergene component in the quartz-MnO-Au veins remains uncertain. Paso Yobai occurs as a high priority drill target. Recommendations The focus of the current exploration program at Paso Yobai should be to prepare the project for drill testing. Highest priority targets occur as the WNW trending flexures in the generally NW trending structural corridor, where the higher grade quartz-MnO-Au veins might occur. Careful geological mapping begun during this inspection should continue with the aim of delineating these targets. An attempt should be made to define the length of the flexures so that drill holes can be placed in the centre of these shoots. While the structurally controlled ore shoots are speculated to occur as steeply plunging bodies on near vertical faults, these relationships can only be clarified by drill testing.

11 Initial drill holes should test the uppermost portions of the mineralised structures to establish vein dips and only then should deeper drilling proceed on veins of known dip. Should the ore shoots not be encountered, consideration might be given to close spaced grid drilling (<25 metre spacing) to search for these features along strike of known outcrops. References Cited Corbett, G.J., 2002, Epithermal Gold for Explorationists: AIG News No 67, 8p. Corbett, G.J., 2004, Epithermal and porphyry gold Geological models in Pacrim Congress 2004, Adelaide, The Australasian Institute of Mining and Metallurgy, p. 15-23. Corbett, G.J., 2005a, Epithermal Au-Ag deposit types implications for exploration: Proexplo Conference Peru May 2005, published on CD. Corbett, G.J., and Leach, T.M., 1998, Southwest Pacific gold-copper systems: Structure, alteration and mineralization: Special Publication 6, Society of Economic Geologists, 238 p. Photos

Photo 1. Mboy disseminated pyrite cubes (now FeO) within kaolin altered sandstone

Photo 2. Mboy breccia lined with fine crystalline quartz

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Photo 3. Mboy mafic dyke dominated by spherulites

Photo 4. Extraction of a FeO + quartz breccia in the centre of a dyke at the Dolphin mine.

Photo 5. Mineralisation along the dyke margin at Minas Paraguay.

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Photo 6. Deflection from NW (fore ground) to the WNW (distance) forming a dilatant ore shoot which hosts sheeted quartz-MnO fractures at the Guaira mine.

Photo 7. Accumulation of FeO in a small scale fault jog formed by the change in normal movement between two structures at the Las Nascimientes workings.

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Photo 8. Sheeted quartz-MnO-Au veins from the Guaira mine.

Photo 9. Sheeted pyrite + quartz veins at Minas Paraguay

Photo 10. Several mm thick open crystalline quartz vein with FeO stain from Minas Paraguay

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Photo 11. Face of a sheeted crystalline quartz-MnO- Au vein from the Guaira mine.

Photo 12. Wire Au within a crystalline quartz-MnO vein at the Guaira mine.

Photo 13. Kaolin-jarosite form high grade zone at the Granada mine.