Location

The Parys Mountain property is located in the northern part of the island of Anglesey in north Wales. The mineral property is about 3 kilometres in length and covers more than 2 square kilometres. The company owns the freehold to about half of this area and a leasehold of the other half and holds the mineral rights to the entire property. The company also has a mining lease from the Crown for gold and silver over a wider area.

The property is located 2 miles south of the town of Amlwch. The port of Holyhead is 18 miles to the west. Access to the property is excellent by road, rail and sea. All necessary services and resources including power, engineering, maintenance facilities and a skilled labour force are located nearby.

History

Parys Mountain has been the site of intermittent mining activity since the Bronze age. During the 1780s Parys Mountain was the largest copper mine in the world. Open pit and underground mining were carried out over a strike length of more than 3 kilometres and to depths of about 200 metres, the deepest then achievable by known technologies. Almost all activities ceased by the beginning of the 20th century.

In the 1960s the search for a new mine at Parys Mountain commenced. Exploration in the 1960s and 1970s was focused on the extension of the old open pit workings and was directed towards copper. This exploration utilised a variety of geological, geophysical and geochemical methods together with approximately 285 diamond drill holes totalling about 60,000 metres of drilling. A resource of 30 million tonnes containing about 250,000 tonnes of copper metal was identified at depth, however this is regarded as being too low a grade to mine economically unless combined with other deposits.

The modern phase of exploration of Parys Mountain began in the early 1980s when a new important polymetallic zinc, lead, copper, silver and gold area was identified about 1 kilometre west of the old workings. Between 1988 and 1990 a shaft was sunk to a depth of 300 metres. 1,000 metres of lateral development were completed on the 280 metre level. Drilling and underground development work from 1988 to 1990 resulted in the identification of the Engine, White Rock and Chapel zones containing a resource of 6.5 million tonnes with a combined base metal grade (zinc, copper and lead) of 10.3%.

Approximately 2,000 tonnes of development ore were successfully hoisted and processed through a pilot plant constructed on the site for metallurgical testing and concentrate production of about 200 tonnes was sold to the smelter at Avonmouth.

Feasibility Study

In 1990 Kilborn Engineering completed an independent feasibility study of the project that confirmed the technical and economic viability of a 1,000 tonnes per day (300,000 tonnes per year) mining and milling operation producing zinc, copper, lead and gold concentrates. Kilborn estimated the capital cost of the mine at £22 million. This study was based on a mineable reserve of 1,963,000 tonnes at a grade of 6.43% zinc, 1.30% copper, 3.32% lead, 75 grams of silver and 0.51 grams of gold per tonne and a mine life of seven years. This mineable reserve covered the shaft development area, being only a portion of the overall geological resource of 6.5 million tonnes.

Detailed mine and plant designs were prepared and planning permission obtained. At the same time an environmental protection programme was devised also giving attention to historical and archaeological concerns. Declining metal prices and weakening stock markets in 1991 and 1992 resulted in development of the project being placed on hold. The property has been maintained on a care and maintenance basis since that time.

Reassessment

A complete geological reassessment of the property commenced in 1995 and this has resulted in the development of new geological models which indicate that there is potential for the discovery of substantial additional mineral resources in areas east and north of the known resource largely unexplored to date.

Drilling

A new exploration programme was launched in 1997. The objective of the new exploration programme is to develop significantly larger mineral deposits at Parys Mountain. Four diamond drill holes totalling 1,640 metres were completed between November 1997 and August 1998 and the results were described in last year’s report.

Geological studies

Throughout the year detailed geological work has continued at Parys Mountain with separate studies on the age and structural relationship of the volcanic rocks, palaeontology and lithogeochemistry.

A study by the British Geological Survey on the age of the volcanic rocks at Parys Mountain showed that the volcanism at Parys Mountain is early Silurian in age and not Ordovician, confirming the interpretation made by company geologists in 1995. This work, which involved sampling from the lower and upper volcanics in the immediate vicinity of the massive sulphide deposit, used high precision U-Pb isotope dating technology. This finding independently confirms the volcanogenic massive sulphide (VMS) setting of the ores. The report concludes that the ore deposit was formed during a short period of time from heat derived from Silurian volcanism and that the primary heat source which drove the hydro-thermal alteration and which generated the orebody was the volcanism.

This work has added further confirmation to the view that the setting of the Parys Mountain deposit has strong similarities with other major VMS deposits elsewhere in the world and strengthens the company’s optimism that additional reserves can be identified.

Over the past three years major lithogeochemical studies have been carried out at Parys Mountain. This work, which has been undertaken by the company’s consultants in conjunction with Cardiff University using the analytical laboratory at McGill University in Montreal, involved the re-examination of large quantities of drill core and outcrop. The work was significantly expanded during the year to include the recent drilling and to extend to other parts of the property. Over 60 drill holes were re-

logged and sampled. Based on this work it has been possible to identify and classify the volcanic rocks at Parys Mountain much more accurately than was previously possible. The work has considerably improved the understanding of the stratigraphic and structural setting of the various mineralised zones and significantly enhanced the potential for discovery of further mineralisation.

Analysis of the lithogeochemical data has also outlined areas of increased hydro-thermal alteration where hotter and potentially mineralising fluids have modified the host rhyolites and shales. In general, it is clear that the extent of alteration increases with depth below the surface, becoming more significant at about 200 metres depth. This increased alteration is considered indicative of greater exploration potential.

Potential for increasing resources

The results of the continuing geological assessment, the exploration programme and the studies carried out over the past year demonstrate clearly that the Parys Mountain property requires and justifies a major new drilling programme and that the potential for the discovery of additional mineral resources in previously largely untested areas of the property is very significant.

Beyond the immediate shaft area the Engine Zone horizon, which is the principal exploration target, has seen little exploration. Widely scattered massive sulphide intersections, however, demonstrate considerable exploration potential.

Further exploration of the Engine Zone horizon is warranted on the results to date and a plan to drill 10,000 metres in 10 to 15 holes has been developed and laid out. Much of this drilling is planned for the eastern and north-eastern parts of the property which have been largely unexplored to date. This will be one of the most comprehensive drilling programmes ever undertaken on the property. It would take at least one year to complete and is budgeted to cost about £500,000. However the programme cannot commence until appropriate financing is available.

The Company holds a Crown mining lease for gold and silver covering 11,000 acres around Pumpsaint near Lampeter, Dyfed, south Wales. The property contains the Ogofau gold mine which has a history of mining since the Roman period with the last phase of production between 1931 and 1939.

Anglesey is exploring the Dolaucothi property with the objective of discovering new or extended gold zones. Dolaucothi’s potential is for a small ‘model’ gold mining operation that would attract the price premium for Welsh gold.

Gold mineralisation is hosted in folded and tectonised shales and siltstones of Upper
Ordovician to basal Silurian age deposited near the southern margin of the Lower Palaeozoic Welsh basin.

Drilling programme

The company has supported the Cardiff University Department of Earth Sciences in the drilling of two diamond drill holes during the past year and has embarked upon a follow up programme of exploration which is currently underway.

The two holes recently completed, together with a third drilled previously, intersected significantly mineralised quartz veins within a newly identified major, northeast striking, northwesterly dipping zone of deformed sedimentary rocks.