Cerro San Pedro on hold

With no assurance its construction and operating licenses will be renewed, Metallica Resources (MR-T) has suspended construction of the Cerro San Pedro heap-leach gold-silver project in Mexico.

Metallica says the suspension will result in the layoff of around 150 employees and contractors; the company will retain a core group of technical and administrative staff. Contract miner Washington Group International will maintain its equipment and critical employees on a standby basis.

“The decision to suspend construction is a regrettable and unfortunate action that we have been forced to make,” says Metallica’s chief executive Richard Hall. “This project complies with the highest social and environmental standards, meets all applicable regulations.”

Earlier this month, Metallica warned of “significant delays” in obtaining required explosives permit from the Secretariat of Defence. The company says it believes it has met all applicable prerequisites for such a permit.

Metallica says it will continue to work to resolve matters with local, state and federal authorities, but has not ruled out legal action.

The company is also continuing its Federal Court appeal of an earlier ruling by the Agrarian Court in San Luis Potosi state that nullified Metallica’s land lease. That lease was signed in 1997 with the Ejido of Cerro San Pedro (a group representing the historic occupants of the land); the court quashed the authority of the Ejido representatives who signed. The company expects a decision in October.

Metallica began construction at Cerro San Pedro in mid-February, and was planning to begin leaching in September; the recovery plant is slated for completion in October, followed by the first gold pour in November. The operation is expected to produce an average of 90,500 oz. gold and 2.1 million oz. silver annually for more than eight years.

Construction of the mine and processing facility carries an estimated price tag of US$28.2 million. Another US$98 million is required to fund contract mining.

At last count, reserves stood at 61.1 million tonnes grading 0.59 gram gold and 24 grams silver per tonne, based on a gold price of US$325 per oz. and a silver price of US$4.62 per oz.