Mining under way at La Victoria

Vancouver — With the acquisition of El Callao Mining (ECM-V) under its belt, Crystallex International (KRY-T) has started mining the La Victoria open-pit mine on the Lo Increible gold property in Venezuela.

“We are bringing La Victoria into production quickly and it is living up to its promise,” says Marc Oppenheimer, Crystallex’s CEO.

Crystallex took control of the property in February through a US$12-million share-swap deal with El Callao, whose main asset was the Lo Increible gold property. It is located in southeastern Venezuela and lies adjacent to Crystallex’s newly acquired Revemin mill.

La Victoria is one of six gold deposits on Lo Increible (the others are Victoria, La Cruz, El Tapon, La Sofia, La Loca and El Extranjero). Last year, following completion of geostatistical drilling of open-pit reserves, El Callao moved one step closer to developing the property.

Prefeasibility work arrived at a diluted minable open-pit reserve of 11.4 million tonnes averaging 3.14 grams gold per tonne, or 1.1 million contained oz. The waste-to-ore stripping ratio has been calculated at 6.74-to-1. The reserve was based on data culled from 268 holes drilled between 1994 and 1997.

The La Victoria and La Cruz deposits account for 780,000 oz., or 71% of the recoverable gold.

Indicated and inferred resources from all six deposits total 24.1 million tonnes grading 3.28 grams gold. The estimate is equivalent to a contained resource of 2.5 million oz. All the deposits remain open at depth and along strike in at least one direction.

The prefeasibility study recommended a 3,000-tonne-per-day operation over the first six years of the mine’s 11-year life. Ore will be processed in a conventional carbon-in-leach circuit, with gold recoveries averaging 92%. El Callao estimates the operation will produce 97,000 oz. gold per year at an average operating cost of US$167 per oz. The total cost, including capital, is pegged at US$235 per oz.

The project carries a pretax internal rate of return of 26.1% at US$325 per oz. gold, and 19.9% at US$300 per oz.

Due to weak gold prices, El Callao was unable to raise the financing to advance the project through a bankable feasibility study.

Crystallex is using the ore to supplement feed for its nearby Tomi mine. Ores from both mines are being treated at the Revemin mill. The company is about to launch a 10,000-metre drill program aimed at boosting the inferred resources at La Victoria into minable reserves. It has already studied the possibility of expanding the Revemin mill to 3,000 tonnes per day from its current level of 1,150 tonnes.

“The expansion of the Revemin mill goes hand in hand with the additional material provided by the Lo Increible property,” says Oppenheimer. “We will continue to mine La Victoria to maximize the existing capacity at Revemin.”

El Callao’s largest shareholder, Bema Gold (BGO-T), tendered its 20.7 million shares, or 45% stake, to Crystallex, based on a 1-for-15 share swap that pegs the value of El Callao at 17.2 per share.

Crystallex agreed to purchase US$14.3 million of debt owed to Bema, as well as a 2% royalty on cash flow, from Lo Increible for US$7.6 million and a 1% net smelter royalty return, which is payable after the first 300,000 oz. gold is produced and only when the price of gold averages more then US$300 per oz. An initial payment of US$3 million was paid to Bema on Sept.13. The remaining US$4.6 million is scheduled to be paid in two equal installments (payable in cash or stock) six and 12 months after the deal closes.

El Callao holds a 51% stake in the central property that hosts the resource and a 70% interest in the surrounding properties. The remaining interests belong to the company’s Venezuelan partners. The junior has the right to up its stake in the central portion to 70%.