EXPLORATION 1998 — Auspex Minerals sizing up Aljustrel project in Portugal

An on-site mill, related infrastructure and four polymetallic deposits in close proximity, make the Aljustrel project an attractive asset.

Vancouver-based junior Auspex Minerals (APJ-V) and its joint-venture partners, Redfern Resources (RFR-T), Cumberland Resources (CBD-T) and International Vestor Resources (IVS-V), hope to reactivate and capitalize on this resource, situated in the world-famous Iberian pyrite belt.

Two outcropping deposits in Aljustrel, the Sao Joao and the Algares deposits, have been intermittantly exploited for more than 2,000 years.

Evidence of extensive historic mining activity has been found in the form of two brass plates of Roman origin dating back to the first and second century A.D. that were discovered in the nearby slag heaps. These tablets bore the inscriptions of laws governing mining operations of the time.

The Iberian pyrite belt is one of Europe’s most prominent metallogenetic provinces, and one of the oldest. It has been estimated that the pre-erosional amount of sulphides contained within 90 known deposits was 1.7 billion tonnes. Of that amount, about 20% has been mined and another 10 to 15% is estimated to have been lost to erosion.

The pyrite belt corresponds to an area of volcanic and sedimentary rocks that form an arcuate belt 250 km long and up to 60 km wide. Starting near Seville, Spain, the belt trends westerly, then arcs to the northwest into southern Portugal.

Geologically, the pyrite belt can be divided into three groups. The oldest is the Upper Devonian Phyllite-Quartzite group (PQ), which is dominated by phyllites and quartzites, with a few rare limestone lenses in the upper part of the sequence.

The PQ group is conformably overlain by the Volcanic-Siliceous (VS) complex, which is characterized by submarine felsic and mafic volcanics with interdigitated sediments.

The sulphides occur within, or adjacent to, the felsic volcanic tuffs of the VS complex. Generally, the mineralized bodies are localized within sub-vertical limbs of folds.

The sedimentary rocks of the VS complex consist of shale, tuffaceous sediments and chemical sediments, including chert, jasper, barite and limestone. Jasper, commonly found near the top of the volcanic pile, represents an important marker horizon because it commonly overlays, or is distal to, massive-sulphide horizons.

Above the VS group rests the Flysch group, a monotonous sequence of greywackes, slates and rare quartzites and conglomerates.

Massive sulphides at Aljustrel occur in several stacked horizons near the top of the VS complex. The main mineralized horizon is up to 75 metres thick and is comprised primarily of pyrite, while sphalerite, galena and chalcopyrite are the main economic sulphides. It is commonly zoned with a copper-rich base and a zinc-rich top that is separated by barren pyrite; locally the horizon is underlain by intense chlorite-pyrite-chalcopyrite stockwork alteration.

The Aljustrel mining complex, which is currently on care and maintenance, consists of the Feitais and Moinho/Sao Joao underground mines and a 1.2-million-tonne-per-year mill. Infrastructure includes extensive underground development, a tailings facility, a rail line and a port facility dedicated to concentrate handling situated in Setubal, just south of Lisbon.

Local geology at Aljustrel is expressed as a series of tightly folded strata which outcrop as an elongated dome-shaped structure that strikes in a northwesterly direction.

The Aljustrel property encompasses five mineralized bodies: Moinho/Sao Joao, Feitais, Algares and the undeveloped Gaviao and Estacao deposits.

The Moinho and Sao Joao deposits have proven to be two parts of a single mineralized body. Sao Joao, which outcrops in the west, was exploited until poor ground conditions were encountered in the vicinity of the Messejana fault. Moinho was discovered in 1954, during the exploration of the southeastern continuation of Sao Joao deposit.

Reserves at Moinho weigh in at about 44 million tonnes grading 2.98% zinc, 0.85% copper and 1.1% lead, however, Auspex intends to carve out small blocks of higher-grade material totalling 4.6 million tonnes averaging 5.44% zinc, 2.18% lead and 0.48% copper. These values include 5% dilution.

“Additional drilling will occur on both deposits,” said Ray Hughes, Auspex’s manager of investor relations. “The grades used [in the current reserve calculations] understate what probably can be mined for zinc grades during the first two or three years.”

Earlier drill results from Moinho illustrate the potential for isolating high-grade blocks of ore. Hole 127 intersected 31 metres (true width) grading 7.07% zinc, 3.05% lead and 0.38% copper. Hole 49, drilled into the copper-enriched footwall zone, returned 15 metres (true width) grading 1.91% zinc, 0.67% lead and 2.56% copper

The Estacao and Feitais deposits lie about 2 km east of Moinho, and are offset by a strike-slip fault roughly 1 km in length. Feitais was discovered in 1964 by drilling a large gravity anomaly; Estacao was found in the same manner 5 years later.

The total resource at Feitais has been estimated at 54 million tonnes grading 3.43% zinc, 0.43% copper and 1.12% lead. Auspex, however, is focusing on a higher-grade block of ore weighing in at 13 million tonnes grading 5.94% zinc, 2.02% lead and 0.24% copper.

Drilling highlights from Feitais include hole 40, which intersected 27 metres (true width) grading 11.16% zinc, 3.04% lead and 0.27% copper; and hole 54, drilled into the footwall zone, which hit 19 metres grading 3.97% copper, 0.22% lead, and 0.79% zinc.

Initial reserves at Estacao were approximated at 20 million tonnes grading 4.84% zinc, 0.38% copper and 3.05% lead. Auspex recently finished a first-phase drilling program on the deposit. Highlights of the last three holes include 29 metres grading 4.82% zinc, 1.68% lead and 59.9 grams silver per tonne in hole 8, including a 14-metre intercept running 5.21% zinc, 1.76% lead and 63.41 grams silver; 3.7 metres grading 5.99% zinc, 1.8% lead and 60.03 grams silver in hole 9; and 10 metres grading 6.66% zinc, 1.67% lead and 93.05 grams silver in hole 10.

The Estacao sulphide body extends 350 metres along strike and 300 metres downdip. It has an average true thickness of about 40 metres, and currently remains open both up and down plunge, as well as downdip.

South of Estacao and Feitais lie the Gaviao and Algares deposits. Algares was exhausted during a production boom following the Second World War.

Gaviao, which is considered to be a northwestern continuation of the Sao Joao/Moinho deposit, was discovered in 1970. The Messejana wrench fault displaced the deposits by a left-lateral slip of about 2.5 km. Portuguese operators pegged total reserves at Gaviao at 25.7 million tonnes grading 2.98% zinc, 1.51% copper and 1.01% lead. Auspex has not yet done any follow-up work on the Gaviao deposit.

The Aljustrel mining complex was operated from early 1991 until March 1992 by a private company, Pirites Alentejanas (PA), whose major shareholder is the Portuguese state mining corporation, Empressa de Desenvolvimento (EDM).

The joint-venture group, in which Auspex holds 30% and the others hold 10% each, signed a heads of agreement document with PA and EDM that gives it the right to acquire a 75% interest in the Aljustrel mining complex, currently 100% owned by PA.

The Canadian juniors also acquired a 60% interest in Estacao (which is legally distinct from the other deposits) from EDM in April 1997. Auspex’s wholly owned Portuguese subsidiary, Portuglobal, is operator of the project.

International Vestor has been working on acquiring the interests of both Redfern and Cumberland, which would give it a 30% interest in Estacao and a 37.5% interest in the Aljustrel mining complex. Auspex’s share is 37.5%, while EDM, through its holding in PA, will hold the remaining 25%.

A preliminary evaluation performed by Rescan Engineering suggested that Aljustrel can be operated profitably by exploiting higher-grade zones within the existing deposits. The study also suggests that metal recoveries could be improved
by modifying the mill.

When the project was put into production in 1991, it was decided that the entire deposit would be mined indiscriminately. Because the dominant sulphide is pyrite, this approach diluted the zinc and copper ore, making the operation unprofitable.

In addition, variable hardness of mill feed resulted in either over-grinding or reduced throughput. Over-grinding produces slimes which cannot be separated efficiently in the floatation process. Furthermore, the mills were not rotating rapidly enough to grind the ore efficiently.

Auspex believes these problems can be corrected by converting the mills to semi-autogenous grinding and modifying flotation capacity, filtration and cleaning units.

The result should be an increased consistency of ore throughput and higher metal recoveries.

Rescan Engineering estimated mining costs at around US$6 per tonne if bulk-mining techniques are implemented. Total operating costs are expected to slide in at just under US$20 per tonne; that figure includes mining, processing, transport of concentrate to the port at Setubal and ocean freight charges.

Under the terms of the agreement with EDM and PA, Auspex and its partners are required to complete a feasibility study on the Aljustrel mining complex within

40 months, at an estimated cost of up to US$15 million. Auspex predicts, however, that the actual price tag will be in the US$11-to-12-million range.

Total projected capital costs to reactivate the site are expected to reach about US$55 million, including the retirement of an existing US$8-million debt.

Auspex stated that its preliminary discussions with European banking interests suggests a strong possibility of some project financing. Canadian brokerage firms are also currently showing an interest in the project.

Between the Canadian juniors and EDM, about $1.2 million has been spent on Estacao to date, and another $330,000 has been spent on Aljustrel.

The companies have budgeted US$10 million for exploration drilling and the feasibility study during 1998.

Portugal is eager to promote mine development as a means of narrowing the economic gap between itself and its wealthier European Union counterparts.

Income tax on mines is currently at 39.6%, and capital expenditures are fully deductible over the life of a mine. Numerous incentives have been arranged to stimulate foreign investment and make the country attractive to mining and exploration companies.

Auspex currently has a working capital of $2.4 million and 31 million shares fully diluted.