MEXICO AND CENTRAL AMERICA — Salvadoran peace lures Mirage Resource and other juniors

With several years of peace under its belt and friendlier mining regulations now in place, El Salvador has become an attractive destination for juniors such as Mirage Resource (MGP-T).

The company has been working in the Central American country since July 1993, when it was already at peace under the temporary supervision of the United Nations.

“El Salvador still has problems,” says Mirage President John James. “It’s a small country with too many people and too many cars. And the war didn’t really solve the problem of the [disparity between] haves and have-nots.” He notes, however, that none of the country’s social or political problems has had an effect on Mirage’s El Dorado gold project.

“We’ve been happy to work there. We have a good relationship with the government; they’re actively seeking foreign investment, and they want to develop the mining industry. We’ve not been subjected to any corrupting or attempts of graft.”

Neither is security for its operations a concern for Mirage. “It’s more of a problem of crime amongst their own than against gringos,” James says. “We maintain a fairly low profile, and our headquarters is out in a provincial city.”

El Dorado is 65 km northeast of San Salvador, the capital. Previous mining at the site, carried out between 1948 and 1953, yielded 72,500 oz. gold from 270,200 tonnes of ore grading 9.59 grams gold.

Mirage has identified 36 vein systems on the 73-sq.-km El Dorado licence area. Exploration has mainly focused on three veins, though another seven have been explored to a lesser extent.

The area’s geology is dominated by fine-grained andesite porphyry and agglomerate. The gold-bearing veins generally exceed 1 metre in width and exist in a 50-sq.-km area. Vein mineralization is characterized by chalcedonic quartz and varies in width from 1 to 15 metres in surface exposures. The steeply dipping veins are up to 2 km long, and generally form ridges.

A typical vein at El Dorado contains less than 1-2% sulphides. Metallurgical tests showed that the material to be mined from the area can be easily crushed and, if finely ground, responds well to cyanidation. Leach extractions ranged from 91% to 98% for gold and 66 to 89% for silver.

The latest exploration drilling at El Dorado is predominantly in new areas, though some definition drilling of known mineralization is also being conducted. The new program will add another 15,000 metres of drilling.

“What we’re trying to do is get ourselves in a position where we’ve got sufficient resources and developed reserves for a 10-year mine life at 1,500 tonnes a day, for an 80,000-100,000-oz.-per-year production rate,” says James.

Mirage has thus far identified 900,000 oz. gold and 5.2 million oz. silver at El Dorado, and James believes this resource can be increased by between 50% and 100%.

Probable reserves stand at 3.7 million tonnes grading 6.04 grams gold and 44.19 grams silver.

The prefeasibility study, which was completed in October 1995, suggested that the mine should be primarily an underground operation, employing a sub-level, open-stoping method. Total preproduction capital expenditures are estimated at $53.9 million.

If a feasibility study can be completed by the end of 1997, says James, El Dorado could be in production by mid-1999 — perhaps sooner, depending on how much open-pit material can be found.

Although El Dorado is owned by Mirage, Kinross Gold (K-T), which holds 48% of Mirage’s common shares, once held a back-in right for a 50% direct interest.

Kinross decided in July not to exercise those rights.

“It’s been a fairly successful project for us, and it ought to be more so, now that we no longer have the Kinross back-in agreement over our heads,” James explains.

“Still, Kinross says it is going to maintain its equity position in Mirage, and that gives us a good strong backing.”