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Mandalay drills 7.78 m of 65.55 g/t Au at Bjorkdal, provides six months update

Mandalay Resources Corp. on Friday provided an exploration update for the second half of 2016 at all four of its properties: the three producing properties, Bjorkdal, Costerfield and Cerro Bayo as well as the Challacollo development project

Mandalay updates on 2H progress

Mandalay Resources Corp. (TSE:MND) on Friday provided an exploration update for the second half of 2016 at all four of its properties: the three producing properties, Bjorkdal (Sweden), Costerfield (Australia) and Cerro Bayo (Chile) as well as the Challacollo (Chile) development project.

"In the second half of 2016, exploration yielded generally favourable results. Our drilling generated significant new drill intersections that are expected to support short-term and eventual long-term mineral resource and reserve additions for the company as a whole,” said Dr. Mark Sander, president and chief executive officer of Mandalay.


Bjorkdal exploration

The company has now received the mining licence to extend its mining concession to include the Lake zone and the eastern extension of Central Zone, allowing it to begin development and stoping there to improve near-term operational results.


Drilling, sampling and assaying

During the period from July 1, 2016, to Dec. 31, 2016, 151 exploration drill holes totalling 24,518 metres were completed at Bjorkdal. This total includes 32 surface core holes for 5,178 m, 44 underground core holes for 10,170 m and 75 RC holes for 9,170 m. All drill hole collars were surveyed and downhole surveys were completed in order to record hole azimuth and plunge variations.

All surface and underground exploration drilling was conducted by third party contractors, with both core (WL66, 50-millimetre diameter, and HQ, 63.5 mm diameter) as well as reverse circulation (5.5-inch diameter) methods.


Underground drilling results

Underground diamond drilling at Bjorkdal generated many new, well-mineralized intercepts in both already known and newly discovered gold-bearing quartz veins. Most underground drilling at Bjorkdal over the past six months was focused on infilling previously reported intercepts from initial extensional drilling and extending known mineralized veins immediately adjacent to currently mined areas. Particular areas of focus for these drilling programs were the eastern extensions of the Main and Central zones and the northern margin of the Lake zone.

Drilling results from the Main and Central zones indicate strong mineralization continues eastward of the current limits of underground development for at least 100 to 200 m and that the mineralization remains open in that direction.

Drilling results from the Lake zone, intended to infill previously inferred mineral resource, succeeded in generating closely spaced mineralized intercepts the company expects to support an upgrade to the indicated resource category at the next mineral reserve update.

Two holes, each approximately 600 m in length, were drilled northward from the current northern extremity of the underground workings. They intersected many new gold-bearing quartz veins up to 500 m north of previously known limits of the Bjorkdal deposit.


Open-pit drilling results

Near-mine surface drilling during the period focused on infilling and extending shallow gold resources adjacent to the Bjorkdal East pit as well as in and around the newly defined Nylunds mineral reserve extending approximately 750 m southeast of the current pit limits. The Nylunds deposit remains open to the east, southeast and to depth.


Ronnberget drilling results

The Ronnberget deposit lies four kilometres east-southeast of the current Bjorkdal open pit. The deposit was originally discovered by drilling in the late 1990s. The purpose of the 2016 drill program was to infill and extend the limited historic drilling. Drilling results show that elevated gold mineralization is stratabound, hosted within albite- and actinolite-altered intermediate volcaniclastic sedimentary rocks and tuffs. This is a distinctly different setting than at Bjorkdal and Nylunds, where mineralization occurs in sheeted, steeply dipping quartz-gold veins. As well, the average grade of the intercepts at Ronnberget is much higher than in Bjorkdal and Nylunds. The mineralized zone at Ronnberget is subparallel to regional bedding and dips approximately 25 degrees toward the northeast. The deposit remains open along strike, and downdip, and based on the drilling results reported here, the company is applying for a mining concession.


Storheden drilling results

The Storheden area is located between 500 m and 700 m to the east of the existing Bjorkdal mining area. The area contains shallow mineralization in the Storheden deposit, defined by historic drilling and hosted in a series of northeast-dipping quartz veins. During 2016, three diamond drill holes were drilled to confirm the presence of both the shallow Storheden gold-bearing veins and the hypothesized deeper strike extensions of the Bjorkdal sheeted vein system. Both targets were successfully intersected in their predicted locations; several significant gold-bearing veins were discovered in each of these drill holes. Two assayed intervals in hole ME6-029 assayed a 2.23-metre true width at 9.84 grams per tonne gold (containing an interval of 0.24 m true width, assaying 77.7 g/t Au) and 0.19 m true width at 91.1 g/t Au. Both of these high-grade intervals are interpreted to represent the depth and eastward extension of the Bjorkdal veins in the current underground mine, as do the lower-grade intervals obtained in hole MU6-030. Evidently, the Bjorkdal veins extend at least 300 to 400 m farther east than previously demonstrated. Shallow, elevated gold intercepts obtained from MU6-028 confirm previous reports of potential surface minable mineralization based on historic drilling.


Morbacken drilling results

The Morbacken area lies approximately 1.8 kilometres east of the current Bjorkdal open-pit mine and approximately one km from the eastern known limits of the Nylunds deposit. Nine diamond drill holes were drilled in this area during late 2016 using HQ-sized drilling equipment; assays on only two of these holes were returned before Dec. 31 and are included in this report. While detailed understanding of the geological setting of this prospect is not yet in hand, preliminary investigations suggest that significant gold assay intervals are encountered within strongly albite-actinolite-epidote-altered horizons of a volcanogenic succession similar to that at the Ronnberget prospect. At Morbacken, elevated gold concentrations are commonly accompanied by elevated copper concentrations contained within the minerals bornite and chalcopyrite.


Costerfield exploration

Drilling, sampling and assaying

During the second half of 2016, Mandalay drilled 17,147 m of diamond core at its Costerfield gold-antimony mine in 89 holes (including wedges) drilled on Sub King Cobra, Cuffley Deeps, Cuffley South/M lode and Brunswick lodes. In addition, the company completed 2367.5 m of on-vein operating development and associated sampling of N lode and Cuffley lode.


Exploration results

Brunswick lode

Drilling was completed in order to extend and convert the existing inferred resource along Brunswick lode to an indicated resource. Significant assays containing greater than 10.0 g/t gold equivalent over a minimum 1.8 m true mining width were obtained in seven holes. Continuity of mineralization has been demonstrated down to the Penguin fault; conversion of inferred to indicated resource above this fault is expected with the resource and reserve update to be completed and announced later in the first quarter of 2017. Furthermore, high-grade mineralization has been demonstrated to continue at least 50 m farther down to the Kiwi fault and below. Further infill and extensional drilling is planned to extend the mineral resource downward to these levels.


Cuffley Deeps and Cuffley Deeps West

Infill drill holes in the Cuffley Deeps lode and extending to the Cuffley Deeps West lode generated four intercepts greater than 10 g/t AuEq over at least the minimum 1.8 m true mining width. Mandalay expects to convert part of Cuffley Deeps to indicated resource at the coming resource update and is encouraged by the emerging set of intercepts on Cuffley Deeps West.


Sub King Cobra

The Central zone was found to be the most continuous of the mineralized vein sets in the Sub King Cobra domain. Drilling in the second half of 2016 targeted this Central zone with the intent of increasing confidence in the continuity of grade and in developing the structural model. New drill intercepts suggest mineralization to extend over approximately 300 metres of strike length.

The Central zone is situated on the eastern limb of an anticlinal structure and consists of four discreet mineralized veins over a 70-metre-wide zone. The westernmost of these subvertical veins is referred to as the Central Main, which, based on results to date, contains higher grades.


M lode

A stibnite-gold vein in between Cuffley and N lode called M lode was intercepted in three holes. M lode is subparallel to the two major Cuffley and N lode orebodies.


Cerro Bayo exploration

Drilling, sampling and assaying

A total of 18,685 m of NX and HQ diamond drill core were produced from 52 holes in the Cerro Bayo district during the second half of the year, with three holes in progress at year's end. Infill drilling has continued in and around the Laguna Verde area, with target testing drilling in Laguna Verde, the Brillantes sector and the Cerro Bayo sector.


Exploration results

Sector Laguna Verde

Delia SE, Coyita SE and Branca veins

During the second half of 2016, 15 infill holes were completed on the Branca vein and one hole was in progress at year-end. Most of these holes also intercepted the Coyita vein, as it was necessary to drill through the latter fissure in order to reach the Branca system. Assays of the Branca intercepts define a mineralized shoot approximately 300 m long by 100 m high, with a gentle plunge toward the southeast.


Delia SE vein

During the second half of 2016, nine holes were completed on the Delia SE vein for infill and ore control coverage. Four of these holes contained high gold and silver assays where they intersected the vein, two did not intersect the vein and three contained only low grades.


Laguna Verde Norte

Follow-up drilling in the Laguna Norte area on the northeast corner of the lake failed to substantiate the presence of well-mineralized veins suggested by a previous round of drilling.


Sector Brillantes

In the second half of the year 12 drill holes were completed in the Brillantes sector, with one drill hole in progress at year-end. Robust fissure systems up to a few kilometres long and a few metres wide crop out in this zone. No significant gold or silver assays were obtained in the drill holes.


Cerro Bayo sector

In the Cerro Bayo sector, the Nina vein was the only target tested during the second half of 2016. The Nina vein is located 600 metres west of the Marcela system and was probed with two drill holes during August and September. No significant gold or silver assays were obtained.


Challacollo exploration

Permission was received in January, 2017, to drill prospective water holes on two high-potential concessions at the bottom of the groundwater basin approximately 30 kilometres to the southwest of Challacollo. If this drilling is successful in encountering sufficient water, an application will be lodged for transferring the catchment point of the company's existing water rights to this new source.


Drilling, sampling and assaying

In 2016, Mandalay drilled approximately 3,535 m of HQ core at Challacollo in 13 drill holes. These holes were designed to test geophysical (self potential) anomalies detected and reported earlier in 2016, the deep extension of the main Lolon fissure, and several new targets on the Lolon and other veins generated by continuing detailed mapping, trenching and surface sampling.

All drill holes were surveyed by standard techniques with downhole instruments and logged by Mandalay geologists. Sample preparation was undertaken by ALS at its facilities in Antofagasta, with analysis performed by ALS labs in Lima, Peru. This analytic program was performed with industry-standard QA/QC protocols including checks, blanks and duplicate samples.


Exploration results

No significant grade intercepts were obtained in holes testing prominent self-potential anomalies under cover north or south of the outcrops in the Challacollo range. Sources of the anomalies proved to be pyritic black shales in DCN-01 at the north end of the range and pyritic rhyolites with minor base metal veinlets in DCS-04 and DCS-05 south of the range.

Drill holes DPA 1, 2, 3 and 4 demonstrated that the Palermo Norte vein is a robust structure with continuity at depth and strongly mineralized with lead and zinc. Silver and gold values in the drill holes, however, failed to reach the high levels seen in several surface trenches.

The deep intercept over 100 m below the deepest high-grade intercept in a previous metallurgical hole on the main Lolon central vein demonstrated a robust vein structure 2.3 m in true width but with low gold and silver values. Test holes on the Lolon Norte, Gladys IV and Lolon Sur/San Francisco veins also returned disappointing assay results and/or mediocre vein widths at depth.

Additional detailed mapping and trenching to reveal vein subcrops beneath the colluvium indicate that the Palermo Norte vein extends a few hundred metres farther north than previously mapped. In the northern area, the vein is hosted by calcareous marine sedimentary rocks and is associated with a solution-collapse breccia zone that extends a few hundred metres away from the vein to the west. This breccia zone is parallel to bedding, strongly silicified and ranges up to 2.5 m thick. It is erratically mineralized with galena and copper oxides; surface samples assay up to 50 parts per million silver. This feature is currently being evaluated as a possible setting for manto-style replacement sulphide mineralization that could be associated with the Palermo Norte vein system.

New vein splays recognized through structural reinterpretation on the main Lolon vein and drilling gaps on the Lolon Sur extension suggest that additional silver-gold resources could possibly be defined by additional drilling in some areas adjacent to the presently delineated grade blocks. These possibilities include small, high-grade splay veins in the western wall of Lolon Central, mineralized zones lying in gaps of drilling coverage due to poor vein correlation along Lolon Sur and/or along a new vein in the south area, detected beneath colluvium east of the Lolon trend.

Quick facts: Mandalay Resources Corp.

Price: 1.83 CAD

Market: TSX
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