Patagonia Gold Regulatory News (PGD)

29 Sep 2006 07:00

Patagonia Gold PLC29 September 2006 Patagonia Gold Plc INTERIM STATEMENT for the six months ended 30 June 2006 CHAIRMAN'S STATEMENT The financial outcome for the six month period was in line with our forecastsshowing a loss of £1,276,395 (2005 loss £1,520,517). This amount reflectedexploration expenditure and administrative expenses partially offset by acontribution of approximately £873,000 from the disposal of our investment inHPD New Zealand Limited to Glass Earth Limited. Chubut Mining Suspension As previously announced, the Provincial Government in Chubut has passed a lawsuspending mining and minerals exploration activities (with the exception ofalluvial gold operations) in a specified area on the west side of the Provincefor up to three years. This area covers a number of our exploration propertiesincluding the Huemules project, Leleque and Nahuel Pan areas and the CrespoProject. We have been advised by our lawyers that this provincial law violates theCompany's constitutional right to perform mining and mineral exploration withinthe existing legal framework within which we operate. Accordingly we have takenlegal action in the Argentinean courts to preserve our rights. We welcome the opportunity for an open and objective study of the environmentalimplications of mining and exploration in the Province and believe that itsconclusions should remove the concerns that have resulted in this temporarysuspension. The result of such a study should aid the development of a viableand environmentally sound mining industry in Chubut which will accrue benefitsto the community in terms of employment and tax revenues and thus create aclimate in which the mining industry and the communities can work together inharmony with shared objectives. We have therefore stated that we would be delighted to work with the Governmentand its experts to assist in the development of a code of conduct for thecontinuation of mining and mineral exploration in the Province of Chubut. In the light of these developments the Board has decided to concentrate ourexploration resources, both financial and human, in other pro-mining provincessuch as San Juan and Santa Cruz, until such time as the position becomes clearerin Chubut. OPERATIONS Drilling During the first six months of 2006, Patagonia Gold completed exploratorydrilling campaigns on three of its advanced exploration prospects, Crespo andGastre in the province of Chubut and El Morro in the province of Rio Negro. Results of the drilling at Crespo, West Veins, are sufficiently encouraging(16.18 g/t gold, 334.0g/t silver and 5.22% zinc over individual 1 metreintersections) to carry out further drilling as and when the Chubut Government'srecently imposed 'mining suspension' for this area is lifted. CRESPO The Crespo Project area is located in western Chubut Province, Argentina,and comprises 14 claims for a total of 59,655 hectares. Exploration of this large prospective area has reached an advanced stage withall accessible areas being thoroughly explored mapped and sampled. Drill-targetsgenerated by this work have included, the Cabana, Jasper and Crespo vein zones,drilled in 2004, and the West and North vein zones, together with thePaleosurface zone, drilled in this recent campaign. West veins - Seventeen reverse circulation (RC) holes were drilled for a total of 1,565 metres into a suite of sub parallel, gold, silver and basemetals-mineralized quartz-carbonate veins, exposed along strike for about 800metres. Individual quartz veins range up to 1 metre wide on surface. Assayresults are sufficiently encouraging (16.18 g/t gold, 334.0 g/t silver and 5.22%zinc over individual 1 metre intersections) to carry out further drilling as andwhen the Chubut Government's recently imposed 'mining suspension' for this areais lifted. Paleosurface Zone - Six RC holes were drilled for a total of 1,135 metres holes,175 to 199 metres deep, designed to test this conceptual drill target andintersect veins or structure below the sub-horizontal silica cap. Assay resultsreturned one value of 0.110g/t gold and numerous anomalous to high arsenic andantimony. North veins - Eleven RC holes were drilled, for a total of 999 metres, into twoseparate suites of gold, silver and base metals-mineralized quartz-carbonateveins exposed along strike for about 1,200 metres. Assay results reported lowerthan those at surface outcrops indicating surface enrichment and were restrictedto narrow intersections of 1 metre width. GASTRE The Gastre project is located in northern Chubut Province and comprises12 claims for a total of 89,330 hectares A comprehensive stream sediment and BLEG exploration programme was completedwithin the Gastre claims and led to identification of precious and base metalsvalues in veins and sheeted vein zones in the southern most claim blocks locatedimmediately northwest of the Navidad silver Project. Fifteen RC holes were drilled, for a total of 1,481 metres, to test potentialbulk tonnage copper mineralization below the surface at Copper Hill as well asthe lateral and subsurface extensions of gold-silver- base metals mineralizedveins. Copper values were elevated in places but were generally lower thanoutcrop sampling indicating surface enrichment. Potentially economic gold andsilver values were restricted to narrow intersections. Exploration is currently being undertaken at a silver and base metals rich zonein the south west of the Gastre block near to the Navidad silver project. CERRO EL MORRO Cerro El Morro is located in southeast Rio Negro Province,Argentina and comprises two claims for a total of 9,999 hectares. A comprehensive geological mapping and sampling programme, together with ageophysical survey, was completed within the claims, identifying a suite ofnorthwest-striking, narrow (mostly