Exall looks to Mazaruni for profit, Santo Tomas for its future

Despite its wide array of properties, Exall Resources (TSE) has narrowed its focus to the development of two key assets: the Mazaruni River gold-diamond project in Guyana and the large Santa Tomas copper-gold mine in Mexico’s Sinaloa state.

“Our other interesting, but much smaller, projects will be carried by our partners,” Exall President Stephen Roman told shareholders at a recent meeting in Toronto.

Roman said he is counting on placer diamonds and gold from the Mazaruni River project to provide the cash flow needed to carry out work on Santo Tomas and Exall’s other projects, which are situated elsewhere in Mexico and in Guyana and northwestern Ontario. Mazaruni is scheduled to start up in the fall.

“We felt that rather than go to the Northwest Territories and spend millions of dollars on exploration, we could put a small dredging operation into production and actually produce diamonds, rather than just look for them.” He said a commercial production decision on the Mazaruni project will be made within 12 months.

Through a recently negotiated strategic alliance, the company will also use its plant to improve recoveries and throughput on the adjacent concessions of M.C. Correia Holdings. This alliance gives Exall an option to earn 50% of the profit from production on the Correia concessions.

“This agreement gives Exall more flexibility and a larger land package,” Roman said.

But Exall’s real prize is Santo Tomas, Roman told shareholders, where reserves exceed 1 billion tonnes, making it one of the largest copper-gold projects in the world. Santo Tomas remains open on strike and at depth.

A prefeasibility study by Bateman Engineering, Mintec and Mountain States R&D envisions a 60,000-tonne-per-day operation that would produce, on an annual basis, 139,000 tonnes copper, 2.1 million grams gold and 71.5 million grams silver. However, a study early this year by Kilborn and Mintec proposed a more modest 40,000-tonne-per-day operation in which only the highest-grade portion of the north pit would be mined, leaving the south pit area for future consideration.

Exall intends to follow this plan, which features estimated metal recoveries of 1.25 billion kg copper, 20.8 million grams gold and 622 million grams silver. The cost of producing a pound (0.45 kg) of copper is estimated at 63 cents.

Roman said mine operators in the Arizona-Mexico copper-gold belt have developed “lean and mean” operations, adding that “we expect to operate Santo Tomas in an equally efficient manner.”

Roman said the fall of the Mexican peso bodes well for Exall because production costs at Santo Tomas will be payable in pesos, whereas the mine’s output will be sold on international markets in U.S. dollars. Also advantageous is the Mexican government’s strong support of the project and the highly developed infrastructure already in place, including a new port facility at Topolobampo.

Bechtel, a major U.S. engineering firm, has agreed to complete the $1.5-million final feasibility study on Santo Tomas, including drilling, metallurgical testing and an environmental impact study. It is expected to take eight months to complete.

If Exall proceeds with commercial production (the earliest possible date is January, 1998), Bechtel will build a lump-sum, turn-key plant, and its financial arm will consider financing the project.

Roman said Exall is continuing to negotiate with major mining companies that it sees as potential joint-venture partners for Santo Tomas, and has received several letters of intent.

“With the project now moving forward, and copper prices hitting new highs, we will be in a good position to negotiate a favorable deal for the company. I expect the Bechtel study will enhance the value of the property, and at that time we will see a lot more interest.”