Rounding out the Company’s mineral property portfolio is a large, stable of exploration-stage properties; principally in Santa Cruz.

The 100% owned El Tranquilo block, comprising 27 contiguous tenements for a total area of 81,000 ha, is located on the western margin of the Deseado Massif, Santa Cruz Province, Argentina and encompasses the Cap-Oeste deposit and its higher-grade COSE-Style zone. The block is located approximately 50km by gravel road east of the National Highway 40 and is largely located on land owned by the Company.

Highlights

• 81,000 ha property hosts the Cap-Oeste gold and silver deposit
• Surface rights for much of the area owned by Patagonia Gold S.A.
• Hosts numerous exploration prospects where significant ore grade intersections have been reported from exploration drilling
• Bonanza grade gold and silver mineralization occurs within this epithermal mineral system

Geology and MineraliZation

The stratigraphy of El Tranquilo project area comprises Triassic schist basement overlain by andesitic volcanics of the Bajo Pobre Formation followed by a thick, shallow SW-dipping sequence of dacitic to rhyolitic pyroclastic deposits and flow-domes of the Chon Aike Formation – the major host to precious metal mineralization in the province. Persistent, thin, organic material rich sedimentary horizons define temporal breaks between eruptive pyroclastic events. A NE-SW oriented, graben style caldera is interpreted to truncate the project area. Hydrothermal sinters and eruption breccias have been documented. There are significant areas masked by Tertiary marine deposits and Quaternary glacial outwash deposits and basalt flows.

NE-SW extensional tectonics during the Jurassic Period resulted in the development of a series of NW-SE striking normal faults with vertical movement exceeding 300m in places.

Work to Date

El Tranquilo project area was first targeted in the mid-1990’s by Western Mining Corporation and Homestake Mining on the basis of clay alteration associated with NW-SE oriented lineaments. By 2002, Barrick Gold Corporation had taken control of the project. Barrick conducted widely spaced geochemical surveys and some Dipole-Dipole IP surveys and conducted a small drilling program at the Brecha Valentina prospect. Three trenches were excavated at Cap Oeste, two of which intersected significant mineralization coincident with an IP Chargeability anomaly.

Patagonia Gold S.A. acquired the project from Barrick during February 2007 and subsequently drilled 697 holes for 140,000 m in the Cap Oeste – COSE structural corridor with 164 holes for 24,000 m drilled at other prospects in El Tranquilo block. Significant prospects of interest outside of the Cap Oeste – COSE corridor include:

• Don Pancho: Located 1.3 km east of Cap Oeste, on a similar NW-SE striking structure. Drilling at Don Pancho intersected gold-silver mineralization associated with the emplacement of a subvolcanic trachyte dome of the same series as occurs beneath the Cap Oeste deposit. The best intersection reported to date:
  • DPA-003-R, 5.0 m at 8.13 ppm Au and 250.3 ppm Ag from 23.0 m

• Brecha Valentina: A rhyolite dome complex located 5 km SE of Cap Oeste, with abundant phreatomagmatic breccias. Barrick drilled 11 diamond holes during 2007, intersecting wide zones of low grade gold mineralization, including:
  • BVA-002-D, 12.5m at 2.38 ppm Au and 12.1 ppm Ag from 26.0 m
  • BVA-007-D, 26.0 m at 0.86 ppm Au and 7.1 ppm Ag from 54.0 m

• El Valle: Located 3.3 km east of Cap Oeste, El Valle hosts an extensive hydrothermal eruption breccia system with pervasive gold-silver mineralization and exceptionally high pathfinder elements such as As-Hg-Sb-Tl. Initial exploration at the prospect has not been able to locate the feeder to this hydrothermal vent but has identified a subvolcanic trachyte dome of the same series as occurs at Cap Oeste and Don Pancho. Best results include:
  • TR-035-VLE, 47.0 m at 0.64 ppm Au and 5.0 ppm Ag
  • VLE-003-D, 29.0 m at 0.32 ppm Au and 5.3 ppm Ag from 12.0 m

• Monte Leon: Located 10 km south of Cap Oeste, the Monte Leon prospect shows widespread low grade gold-bearing black silica-Sulfide mineralization hosted in the margins of a dacitic -rhyodacitic dome complex with associated sinter and hot spring deposits. In addition, narrow very high grade chalcedonic silica veins occur. Significant intersections include:
  • MLN-003-D, 65.95 m at 1.16 ppm Au and 114.8 ppm Ag from 31.1 m
  • MLN-019-D, 3.0 m at 23.31 ppm Au and 53.2 ppm Ag, from 137.0 m
  • MLN-O27-R, 38.0 m 1.68 ppm Au and 2.3 ppm Ag from 14.0 m

An extensive area surrounding Monte Leon is masked by Quaternary sediments and has yet to be explored.

• La Marciana: An extensive and regionally significant preserved Jurassic sinter deposit with associated breccia facies, located 20 km southeast of Cap Oeste. Only 5 holes drilled in the district which intersected high concentrations of As-Sb-Tl, indicating shallow levels of the system. Best intersection includes:
  • 0.85m at 1.68ppm Au and 204ppm Ag in a quartz-Sulfide vein hosted by brecciated rhyodacitic crystal tuff

Exploration Potential

Numerous areas of the 81,000 ha El Tranquilo block remain inadequately tested, especially the strike extensions of the Bonanza – Esperanza Fault system where there is high potential for repetitions of bonanza grade shoots such as COSE. Parallel structural corridors have been identified and remain untested.