De Grey has secured exploration rights over approximately 3,800 sq km of ground in Santa Cruz Province, Argentina.  The properties lie within the highly prospective Deseado Massif, an under-explored but rapidly emerging gold-silver province that has seen a prolific number of new and high-grade discoveries in recent years.

Jurassic rocks of the Deseado Massif, in southern Patagonia, host numerous low-sulphidation epithermal gold-silver deposits, making it one of the world's premier exploration regions for this style of mineralisation.

The majority of projects were originally acquired following target generation using regional aeromagnetic data and Aster multi-spectral satellite imagery to identify exploration targets.  Further properties were selected based on monitoring of tenement activity in areas of prospective geology.

Santa Cruz is a mining friendly state that actively encourages mining and exploration. In November 2009 an ‘Area of Special Interest for Mining', in which mining activities are encouraged, was defined by the provincial government.  De Grey's projects fall entirely within the “Special Interest” area.

De Grey has established an Argentine subsidiary, De Grey Argentina S.A., to facilitate its exploration push into Argentina.

Locations of De Grey Argentina S.A. projects

Prospectivity of the Deseado Massif

The Deseado Massif is a distinct geological province extending over a 400km by 240km area, between the Andes Mountains to the west and the Atlantic Ocean to the east, in the Patagonian region of Argentina.  Epithermal gold-silver vein systems are spatially and temporally associated with Jurassic volcanic activity, with most mineralisation hosted by felsic volcanic rocks of the Chon Aike Formation.

The gold and silver potential of the Deseado lay unrecognized until 1989 when the giant Cerro Vanguardia vein field (7Moz Au and 104Moz Ag) was discovered.  A boom in exploration activity in recent years has seen new mines opening, high grade Au-Ag resources announced and a continuing procession of new exploration discoveries.  The high-grade epithermal style of mineralisation presents an attractive exploration target.

Notable mines and recent discoveries include:

• Cerro Vanguardia mine (AngloGold Ashanti and Fomicruz, remaining reserves plus historic production totaling 7Moz Au and 104Moz Ag);
• Mina Martha, (Coeur d'Alene, 30,000oz Au and 22.6Moz Ag produced to December 2010);
• Manantial Espejo mine (Pan-American Silver, reserves plus resources of 0.69Moz Au and 55.1Moz Ag);
• San Jose mine (Hochschild Group and Minera Andes, resources of 0.63Moz Au and 42.1Moz Ag);
• Cerro Negro project (Goldcorp Inc, 5.36Moz Au and 43.7Moz Ag in reserves and resources);
• Cerro Moro project (Extorre Gold Mines Ltd, 0.547Moz Au and 27.3Moz Ag in resources including the exceptionally high grade Escondida vein containing 357,000 oz Au and 15.3Moz Ag a t a gold equivalent grade of 32.3g/t.  Recent bonanza intersections announced in April 2011 from a new zone (Zoe) include 4.84m at 64.6g/t gold and 7,530g/t silver and 1.36m at 227.3g/t gold and 25,428g/t silver);
• the Joaquin project (JV between Coeur d'Alene Mines Corporation and Mirasol Resources Ltd, discovered 2005, resources of 79,000 oz Au and 67.6Moz Ag defined to date);
• the Don Nicolas project (Minera IRL, resources of 359,100 oz Au at Sulfuro and Martinetas deposits);
• Patagonia Gold’s Cap Oeste, COSE and La Manchuria deposits (combined resources of 567,000 oz Au and 19.5Moz Ag)

Other advanced gold-silver prospects and resources discovered in recent years include:

• Hunt Mining's La Josefina project;
• Argentex's Pinguino vein system (recent drill intercepts including 13m @ 0.22g/t Au, 525g/t Ag);
• Mirasol Resources' grass roots Virginia silver vein field, discovered in November 2009 with surface channel samples up to 1.79m at 2,234g/t silver and recent drill intercepts including 33.6m @ 251g/t Ag, 28.3m @ 230g/t Ag;
• Mariana Resources' Las Calandrias project with drill intercepts including 91.5m @ 1.6g/t Au, 17g/t Ag, 71m @ 1.1g.t Au, 23g/t Ag and 102m @ 1.2g/t Au, 17g/t Ag.

Because the mineral endowment of the Deseado has only recently been recognized, the region remains comparatively under-explored.  Exploration to date has largely comprised surface prospecting for outcropping vein systems, with few companies reporting systematic application of geophysics or geochemical sampling except in brownfields situations after an initial discovery.  Some recent discoveries have been blind at surface (e.g. Patagonia Gold’s very high grade COSE deposit) or of an unexpected style of mineralization (e.g. the bulk tonnage disseminated mineralization at Mariana Resources’ 2009 Calandria Sur discovery).

De Grey believes that application of more sophisticated exploration techniques will result in a “second wave” of discoveries of mineralization that have only subtle surface expressions and that enormous potential remains for discoveries beneath shallow surface cover.

About Argentina

In Argentina minerals are vested in the provinces and provincial governments administer mineral rights and mining under Federal Mining Law 24196 (1993).  The mining law allows for 100% ownership of projects by foreign entities and enshrines the right of the holder of an exploration permit to convert to an exploitation concession.  It also provides for 100% offset of exploration and development costs against profits and specifies that provincial government royalties may not exceed 3% of the mine gate value of product.  Upon presentation of a feasibility study, a mine developer has the right to negotiate a 30 year fiscal stability agreement.

Argentina and Australia are signatories to a Bilateral Investment Agreement that protects foreign investment, allows repatriation of profits and avoids double taxation.  Argentina's corporate tax rate is 35%.

Mineral exploration tenements are of two types.  A cateo gives exclusive prospecting rights for the requested area for a set period of time, with area reduction requirements depending upon the cateo area. The maximum size of each cateo is 10,000 hectares, which confers one thousand days to explore the area.  A maximum of 20 cateos can be held by a single entity (individual or company) in any one province.  A manifestación de descubrimiento (manifestation of discovery, MD) can be filed as either a vein or disseminated discovery.  A protection zone of up to 840 hectares for a vein MD or up to 7,000 hectares for a disseminated discovery can be declared.  An MD grants the discoverer exclusive rights for an indefinite period during which the discoverer must present a annual reports describing exploration and evaluation progress.

An MD can later be upgraded to a mina (mine claim), which gives the holder the right to progress to commercial extraction of minerals.  A mine concession is unlimited in time and only ends when exploitation ceases.  Titles can be transferred by any of the means used for transfers of common property.

All of the tenements in Santa Cruz Province to which De Grey has rights are at the application stage.  It is common practice to maintain tenements as applications during preliminary, non-ground disturbing exploration programs, with progression to grant only upon commitment to substantial expenditures such as trenching and drilling.

About Santa Cruz Province

Santa Cruz is a mining friendly province that actively encourages mining and exploration.  In November 2009 an ‘Area of Special Interest for Mining', in which mining activities are encouraged, was defined by the provincial government.  De Grey's properties lie entirely within the permitted mining zone.

The region is sparsely inhabited, semi-arid, treeless and has low topographic relief comprising plains and low hills. The climate is cool and dry.  During most winters, snow is sufficient to prevent access to remote areas and to obscure the ground surface.