RESOURCE & DEVELOPMENT

Metallurgical testing was initiated for which preliminary results indicate an lower level average of 71% extraction in 6 hours and 85% extraction in 12 hours for mineralized oxide material, some samples returned >90% recovery after 12hrs.

In October 2007 an independent  43-101 compliant resource calculation for Lomada de Leiva was completed by Chlumsky, Armbrust and Meyer, LLC (CAM) of Lakewood, Colorado which defined a resource of 235,000 ounces Au with an average grade of 0.84 g/t Au (at 0.3 g/t cut off), as shown in Table 3. At least 60% of the resource is classified as Indicated and Inferred.

In late 2007 CAM was commissioned to undertake a Scoping Study on the Lomada de Leiva resource which will include preliminary mine design and planning and  recommendations for further infill drilling in order to upgrade resources to reserve category and advance towards Pre-feasibility stage

PGD completed a Scoping study in 2008, the study was compiled by Chlumsky, Armbrust and Meyer, LLC. (CAM) of Lakewood, Colorado, and was based on the previously released gold resource estimate on Lomada de Leiva.

The study involved investigating three processing cases; Direct Milling of the ore in a conventional mill; Heap leaching with a crushing stage to minus 12.5 millimetres for improved recovery and Run-of-Mine (ROM) heap leaching with lower capital cost and lower recoveries.

The ROM heap leaching was clearly the most attractive and profitable process and will now be used to advance the project towards production.

Highlights of the ROM heap leaching study (all currency in United States dollars):

Low pre-production capital cost of $8.5 million recovered within 14 months of startup. 7 years mine life based on an initial resource of 182,369 ounces of gold, with a production of 21,000 plus ounces of gold per year at a cash cost of $299 per ounce.

Project cash flow, before tax, is $35.3 million based on a price of $650 per ounce gold (oz.Au) and a recovery of 80%. After tax NPV at a 10% discount rate is $18.9 million.

Project cash flow, before tax, is $63.6 million based on $850 per ounce gold, and a recovery of 80%. After tax NPV at a 10% discount rate is $36.9 million

Significant upside remains by increasing the size of the resource at Lomada de Leiva and the adjacent Breccia Sofia which would significantly extend the life of the Project.

CAM reported that there was a high potential to develop additional resources at Lomada de Leiva, both down dip and along strike to the south and in parallel structures identified by geophysics and drilling.  In addition exploration drilling on the adjacent Breccia Sofia confirmed the presence of high grade gold and silver in mineralisation similar to Lomada de Leiva.

Metallurgical testing using the ‘bottle roll’ technique on a significant number of composite samples showed the ore at Lomada de Leiva to be very amenable to leaching with excellent recoveries averaging 97% in just 12 hours with material crushed to minus 0.075 millimetres.

For this reason and based on the 1.0 gram per tonne resource CAM elected to conduct the Scoping study utilizing a conventional heap leach operation and because of the prevailing high gold price a duplicate study utilizing a milling operation.

Processing-CAM prepared three conventional processes to be considered for the project. These include:

Conventional grinding and milling followed by cyanide leaching and gold recovery from the activated carbon.
Conventional heap leaching, with the ore crushed to 80% passing 12.5 millimetres, leached in 6 metre lifts and gold recovered on activated carbon.
Conventional ROM heap leaching, with no crushing of the ore, leached in 6 metre lifts and gold recovered on activated carbon.

All of these processes are currently used in the industry.

The Capital costs for each process           Total operating cost per oz.Au           Gold Recovery
1-Milling                   $31.7 million                            $533                                           97%
2-Crush/Heap          $19.5 million                          $385                                          93%
3-ROM                     $8.5 million                             $301                                          80%

Mining-Based on the estimated mineable material, CAM developed a mine and processing schedule at an average of 0.73 million tonnes of ore per year for 3 processing scenarios for the Lomada de Leiva Project.

Mining for the ROM heap leach scenario has an open pit mine shell designed for the mining of 4.7 million tonnes of ore and 5.9 million tonnes of waste (stripping ratio of 1.25) over a 7 year Life of Mine.

The average gold grade of ore mined is 1.2 grams per tonne for 182,369 contained ounces of gold. The recovery for the ROM heap leach process is estimated at 80% giving a total gold production of 145,895 ounces.

CAM assumed a contract miner would be used for the project since the project mining time frame is short.

Cash Flow and Sensitivity Analysis-The estimates of metal production, capital costs and operating costs are combined in the discounted cash flow evaluation. The economic evaluation is performed on a project basis, assuming 100 percent equity financing, with the base case utilizing a gold price of $650 per ounce of gold. All applicable royalties and export taxes have been allowed for in the cash flow analysis. The cash flows are pre-income tax for Argentina.

Factors assumed in the development of the above cash flow model include:
Sunk costs are not included.
Payment of applicable royalties is included
Working capital allowance has been included.

Based on the results obtained to date the ROM heap leach is by far the most attractive and profitable process and will be utilized to advance the project through Feasibility studies towards production.

As a result of the positive Scoping study PGD has decided to progress the Project towards development with the aim of commencing production in the first half of 2010.

Bulk metallurgical column testing is in progress at SGS Lakefield Research in Chile to test the ore over varying times with varying quantities of reagents to optimise the recovery of the gold, (estimated to be 80% in the Scoping study).

Vector Argentina SA (Vector), who has been responsible for all of PGD’s exploration, environmental permitting for the past 3 years, has been engaged to provide the Environmental Impact Report (EIR) service for the production stage, scheduled for completion in June 2009.

Vector has also been engaged to develop an integral Base Line Study (BLS) for the Lomada De Leiva Gold project, scheduled for completion in October 2009.

A 1,500 metre drilling program will be carried out for geotechnical and sterilization purposes in May 2009 after which a full feasibility study will commence, scheduled for completion by the end of 2009.

PGD, assisted by Vector, is also preparing an application for an environmental permit, which would allow advanced exploration, for a trial Heap leach operation (trial) of 50,000 tonnes of ore. The trial is designed to field proof the column tests and to demonstrate that the Heap leach process is not harmful to the environment.

Once permitted, construction of the trial pad, mining and loading would take 3 months to complete. Irrigation would then commence with the first gold produced soon there after. The trial, based on 80% recovery, should yield circa 2,500 oz. of gold for the first 6 metre loading.

Management has estimated the total cost of development in 2009, up to the construction of the main Heap leach project, including all metallurgical testing, permitting, drilling and the cost of the trial, at approximately $1.9 million

Subject to permitting and performing to expectations, the trial could be loaded with at least 3 further 6 metre layers which should produce sufficient gold to contribute a substantial portion of the capital required for the main Heap leach operation.

Once in full production the main Heap leach should make PGD self sufficient in funding requirements for on going exploration at current levels of expenditure.