INTRODUCTION TO LOW-SULPHIDATION EPITHERMAL VEINS

Much of the worlds gold has been produced from quartz veins. Veins are formed when quartz or
other minerals precipitate from a cooling fluid in a planar zone of weakness known as a fault. Quartz
can precipitate from several different types of fluids, one of which is responsible for low sulphidation
epithermal gold-silver veins and geothermal systems such as the hot springs at Yellowstone or the
Geysers in California. The fluids are typically a mixture of groundwater and fluid emanating from
molten rock at depths of around 5 to 10 kilometers below surface. These hot fluids are under very
high pressures at those depths, and as they rise along faults to depths of about two kilometers from the
surface, they begin to boil. As the fluids boil, they cool rapidly, causing the quartz to precipitate in the
fault, forming the vein. Calcite and adularia (a feldspar mineral) also precipitate in response to boiling
as well as any gold and silver present in the fluid. Eventually the rising fluids breach the surface and
form a hot spring.

Recognizing that gold precipitates near the surface in these systems, the great American geologist
Waldemar Lindgren coined the term epithermal in 1933, epi meaning shallow and thermal referring to
the heated fluid. The chemist Werner Giggenbach further subdivided epithermal gold deposits into
low and high-sulphidation types (illustrated right 1). Low and high do not refer to each types relative

amount of sulphide minerals (metal complexes of sulfur with metals). Rather the distinction is based
on the different sulfur to metal ratio within the sulphide minerals of each subtype. While this paper
deals with low-sulphidation (which are also known as quartz-adularia)epithermal vein systems, it is
worth mentioning that high-sulphidation epithermal systems also form economic gold deposits
although they develop under vastly different chemical conditions.
High sulphidation deposits result from fluids rapidly channeled directly from a hot magma (where
often bulk-mineable porphyry copper deposits form) along a fault where, after interacting with a much
lesser amount of groundwater than low sulphidation veins, highly acidic fluids are formed. These
acids rot and dissolve the rock leaving only silica behind often in a sponge-like formation known as
vuggy silica. Metal-rich brines that also ascend from the magma then precipitate gold and often
copper in the spongy vuggy silica. As a result these deposits are commonly broad, bulk-tonnage mines
often with lower grades. In contrast, fluids that form low sulphidation veins interact with the rock for
a much longer period of time. As a result of the extended duration of the fluids interaction with the
rock, the fluids become dilute and neutralized and the silica dissolves (later precipitated as quartz). In
low sulphidation veins, protracted boiling of these fluids produces high grade gold (greater than one
ounce gold per ton) and silver deposits over vertical intervals of generally 300 to 600 metres. Within
this vertical dimension, gold grades can be very high and result in large amount of easy to mine gold
in a narrow compact area.

TEXTURES & GOLD PRECIPITATING PROCESSES

EPITHERMAL VEINS

IN

LOW-SULPHIDATION

The formation of low-sulphidation veins can be quite dramatic and results in minerals being
precipitated and transported along several different faults above the depth at which the fluids start to
boil. As quartz crystals precipitate in a particular fault, the fracture gradually becomes sealed. When
this happens the boiling fluid finds another fracture along which to rise. In the meantime gases build
up in the fluid underneath the sealed fault until the pressure ruptures the closure. At this point the
pressure changes rapidly resulting catastrophic boiling. This type of violent phase separation results in
gold, a distinctive bladed form of calcite and fine grained gel-like silica (amorphous silica) all
precipitating rapidly and being swept along by the moving fluids. Eventually the fluids return to
equilibrium and quartz crystals begin to precipitate under passive conditions, sealing the vein again
until the entire process repeats itself.

The episodic nature of quartz precipitation, rupturing followed by gold precipitation, results in banded
veins (the picture above illustrates a banded quartz vein exposure at the Hishikari gold deposit,
Japan2) with each band representing a different phase in the process. The bands of coarse quartz
crystals represent passive conditions. Bands of bladed calcite, fine silica (that has over time turned to
quartz), and dark metal rich sludge (containing high concentrations of gold in the form of electrum),
precipitate under conditions of violent boiling and fluid flow. The catastrophic boiling seems to
happen only within a narrow vertical interval, generally about 300 to 600 meters thick. This is the
high grade productive part of the vein system which I will refer to as the ore zone.
By virtue of the fact that the gold is transported, increasingly smaller amounts of gold are found at
elevations above this level. Finding anomalous, but non-economic amounts of gold in a vein that is
clearly eroded to a level above that of the ore horizon is viewed as a good sign of the potential for
high-grade gold below. Above the ore zone the bands of quartz are much finer grained (smaller
crystals) since different forms of silica precipitated other than quartz, such as opal and chalcedony. In
addition, the highest concentrations of bladed calcite are typically found at the top of the ore zone,
while mercury and arsenic are found in higher grades above the zone. Beneath the ore zone the veins
are generally made up of bands of coarse quartz crystals with little to no fine-grained quartz present.
Gold and silver are highest in the ore zone and lead and zinc concentrations increase with depth,
although there are significant exceptions to this rule. Erratic gold and silver values can be found
immediately above the ore-zone in the lattice-textured part of the vein. Sometimes elevated
molybdenum can occur above the ore zone as well.
When the fluid boils along with water vapour, CO 2 and H2S also separate. These gases rise vertically.
H2S condenses above the water table where it naturally forms sulphuric acid. Sulphur can precipitate
as well, resulting in the foul smell of many hot springs. At the surface, the sulphuric acid reduces
many rocks to clay and sulphate, and in the process the acid can dissolve any silica that may be
present in the rocks. The resulting silica-laden fluid trickles down to the water table and reprecipitates the silica. If a permeable unit (such as a volcanic rock) is situated at the water table, a
large area can be flooded with silica. This process results a resistant quartz-rich rock that occurs above
many vein systems, commonly known as a silica cap. Since gold is not transported by either the gases
or sulphuric acid, the silica cap is usually devoid of gold although generally highly elevated in

mercury, arsenic and antimony. Antimony tends to occur in and within close proximity to the veins
while arsenic and mercury are often widely dispersed into the rocks around the veins.

TECHNIQUES FOR LOOKING FOR GOLD IN LOW-SULPHIDATION VEIN SYSTEMS

Ultimately, drilling is the means to discover ore in a vein system, and multiple holes are sometimes
necessary to find the productive ore-zone. In the past, directing drill holes was a rarified art. Today,
however, much input is available to geologists to guide drill programs, of which the interpretation of
vein textures and the vein geochemistry are the most important. The textures of the minerals that form
the veins (dominantly quartz, calcite and adularia) vary along the fluid flow path and, therefore, also
vary with respect to depth. By observing these textures and understanding their variation according to
depth and gold content as described above, gold mineralization can be targeted and predicted with
accuracy. Observing fluid inclusions is another technique that can aid in determining depth of a vein
system. When quartz precipitates from the hot fluid, tiny amounts of the fluid itself can be caught in
the forming crystals as microscopic bubbles. These are known as fluid inclusions. If fluid inclusions
are examined under a microscope as they are heated and cooled, the temperatures at which they freeze
and at which they becomes a homogenous fluid can be determined. From this test, the temperature
and salinity of the original fluid at the time of the inclusions formation can be estimated. This
information can then be used to corroborate observations made from vein textures and geochemistry
about the depth at which to expect gold mineralization.

LOW-SULPHIDATION GOLD-SILVER VEINS IN OR NEAR PRODUCTION TODAY

Kupol Deposit, Russia
One of the most significant recent low sulphidation discoveries is that of the Kupol vein system in
Russia. In 2003 Bema Gold announced a measured and indicated resource of 1.9 million ounces of
gold at an average grade of 22.3 g/t and an inferred resource of 4.2 million ounces with an average
grade of 18.4 g/t. This is a spectacular deposit with some significant similarities to the Fuego
prospect.

One of the most important similarity is that, like at Fuego, abundant lattice textured calcite has been
identified in veins on the Kupol property. At Kupol, as with many other vein systems, the lattice
textured calcite is distributed generally above areas of significant economic gold and silver
mineralization. Illustrated above is a longitudinal section (a view of the plane of the vein relative to
depth) and to the right a cross section demonstrating thigh grade drill intercepts at Kupol.

The El Penon Gold Deposit, Chile

The El Penon epithermal banded quartz vein system was found and is operated by Meridian Gold
Corp. At present the deposit has 1.76 million ounces of gold at a grade of 9.1 g/t in the proven and
probable categories and a further 0.87 million ounces of gold at a grade of 10.0 g/t in the measured
and indicated categories. One of the most intriguing aspects of the exploration and discovery of the El
Penon deposit is that the vein is not well mineralized at surface; high gold and silver grades were
blind and intersected by drilling at depth. Illustrated right is a cross section and below, a longitudinal
section respectively that show the blind nature of the mineralization 4 indicating the number of holes
that were necessary to find ore deposit.

Pajingo, Australia
The Pajingo deposit has resources and production that total 9 million tonnes averaging 12.2 g/t for a
total of 3.5 million ounces of gold. High gold grades were encountered at deeper depth, and
diminished closer to surface. A cross section (left) and longitudinal section (below) illustrate the
distribution of ore grades.5 This deposit is an excellent example of how high grades frequently occur
at deeper levels within a vein while near the surface little indication may be evident of the high grade
deposit below. The longitudinal section below demonstrates how many drill holes (hollow circles)
were necessary to define the deposit since many holes missed the ore zone altogether, which is shaded
from lowest (grey) to highest (black) grade.

Hishikari Gold Deposit, Japan

The Hishikari gold deposit is one of the largest epithermal gold vein deposits in the world. It was
discovered in 1981 by drilling underneath erratically mineralized quartz veins. This drill program
encountered spectacular high grades at depth. In 2004, the total contained gold, both mined and in
reserve, totalled 264 tonnes (8.5 Million ounces) comprising 3.5 Mt @ 60 to 70 g/t Au and 2 Mt @ 20
to 25 g/t Au.
The image to the right illustrates that the high grade veins were intersected well beneath veins which
had returned low gold grades.

Low Sulphidation Epithermal Veins in Mexico

Mexico is particularly well endowed with epithermal low-sulphidation vein systems. This is because
there was an abundant source of fluids and metals emanating from hot magmas over a long period of
time. In addition there has been little erosion since the formation of the vein deposits. This means that
veins in Mexico are often well preserved. Listed below are some of the most significant vein systems
that have been mined in Mexico.6 The Fuego prospect is thought to be similar in age to these deposits
and associated with the same belt of volcanic rocks.

THE FUEGO LOW-SULPHIDATION VEIN SYSTEM

The Fuego property was found during a helicopter reconnaissance program carried out by Almaden
Minerals Ltd. in 2003. An area of hydrothermal alteration and veining was recognized from the air
and the initial prospecting returned gold grades as high as 29.9 g/t and silver values up to 881 g/t
silver. The Fuego Project is optioned to Horseshoe Gold Mining Inc. (Horseshoe) who can earn a 60%
interest in the property by spending US$3 Million exploring the project and issuing 1,000,000 shares
of Horseshoe to Almaden. Upon earning a 60% interest in the property, Horseshoe would have 120
days to acquire Almaden's remaining 40% interest in the property in return for a 40% interest in the
issued capital of Horseshoe, to be issued by Horseshoe to Almaden at that time.

The Fuego project is road accessible and located in Oaxaca State, roughly 140 kilometers southeast of
Oaxaca City. The property covers an area of low-sulphidation epithermal veining exhibiting classic
low vein textures commensurate with a highly preserved dynamic mineralizing environment. The
textures include colloform banded fine grained quartz which has replaced non-crystalline amorphous
silica, quartz which has replaced lattice-textured calcite and sulphide-rich bands containing electrum
which exhibits graded bedding. These textures are interpreted to represent a high level of exposure
within the mineralised portion of a large epithermal vein system. The veins on average are very wide,
and locally up to 10 meters in width. Several parallel veins have been identified along the roughly
1,000 meters of strike length that is presently known. Based on these observations, along with fluid
inclusion studies and geochemistry, the Fuego vein system is interpreted to represent a level of
erosion immediately above an ore forming environment. Significant gold grades have already been
encountered at surface, indicating that consistent, high-grade gold-silver ore zones should be sought at
shallow depths beneath the exposures of the vein with drilling.
In 2004 and 2005, Horseshoe completed a surface geologic mapping and rock and soil sampling
program on the Fuego property. This program outlined the main vein zone which has been traced in
outcrop roughly 1,000 meters along strike. Along this exposed strike length vein widths vary from 3
to 10 meters wide. Several parallel veins were identified in outcrop as well. Where exposure allowed,
continuous chip sampling was carried out on the main vein. The results included a 4 meter exposure
averaging 4.52 g/t Au and 86 g/t Ag with individual samples up to 10.6 g/t Au and 162 g/t Ag and a 3
meter sample that returned 7.8 g/t Au and 191 g/t Ag. Soil sampling highlighted the main vein zone
with elevated Au, Ag, Sb and As values in samples collected. Additional zones of elevated Au, Ag, Sb
and As in soil samples spatially unrelated to the main vein zone suggest that unexposed parallel
structures may exist. A small Induced Polarization (IP) geophysical survey was carried out to test the
effectiveness of this methodology in identifying vein structures that are not exposed. This work
identified the known veins as resistivity and chargeability highs. Additional resistivity and
chargeability highs were identified in this work which suggests that further veins may exist.
Additional geologic mapping, sampling and IP surveys are planned to better define these results and
Horseshoe has informed Almaden that permits are presently being acquired for a planned diamond
drill program to commence as soon as possible. Samples were analysed by ALS Chemex Labs of
North Vancouver and taken under the direction of qualified persons Mr. H. L. King, P.Geo., Mr.
William Wengzynowski, P.Eng., Mr. Andris Kikauka, P.Geo and the author.
Illustrated below is a sample taken from the Fuego project (sample assayed 29.9 g/t gold and 550 g/t
silver) compared to that of a high grade ore sample from the Hishikari deposit, Japan 7. Similar
features are evident; however the Fuego specimen contains lattice-textured calcite (replaced by
quartz) which is indicative of a level immediately above an ore zone.