PANAMA GOLD: The search for El Dorado has seized Toronto-based

When Freeport-McMoRan Inc. reorganized in 1989 and started selling off $2.15 billion in non-core assets, Greenstone Resources recognized an opportunity. Already familiar with Latin America through its Oronorte mine in Colombia, Greenstone joined forces with Boliden Int. Mining AB. and purchased Freeport’s mineral properties in Panama for US$6 million.

The most significant of the eight concessions acquired by the joint venture hosts the Santa Rosa and Alto de la Mina gold deposits, which The Northern Miner Magazine visited in May. Explored and drilled by Freeport, and more recently by Greenstone-Boliden, these two deposits are soon expected to be producing under the jointly owned Minas Santa Rosa S.A., a Panamanian corporation.

Greenstone has a 49% interest and will manage the project until a production decision is made. That decision will follow the full-scale feasibility study, to be completed this August.

Boliden holds a 51% interest in Minas Santa Rosa and, with its extensive operating experience in both metallurgical and mining fields has the right to manage the producing operation. Exploration of all Panamanian properties purchased from Freeport will continue under Greenstone direction as well as the property on which the two gold orebodies are now in the last stages of drilling. Only a fraction of the mining and exploration concessions have been explored to date.

These deposits lie in elephant country. Cerro Colorado, 76 km to the west, gives some idea of the potential of the Panamanian Cordillera as it may well generate between one and two billion tons of copper-molybdenum ore, all amenable to open pit extraction.

Cerro Colorado was explored extensively in the mid-1970s but came to grief over the Panamanian Mining Code (1963), which was rather arbitrarily applied. The deteriorating state of the western economy was another factor. Since then, corporate mining law in Panama has been transformed, making Latin America an attractive domain for off-shore investment.

Since the properties were acquired by the joint venture in August, 1990, the two gold orebodies have been systematically check-drilled and the extent of ore grade mineralization expanded. Proven and probable reserves stand at 12.4 million tons grading 0.061 oz. gold per ton with a cutoff grade of 0.025 oz. per ton (11.3 million tonnes grading 2.1 grams per tonne with a cutoff of 0.857 grams per tonne). The Santa Rosa deposit is the larger of the two, carrying 9.8 million tons at 0.060 oz. per ton (8.9 million tonnes at 2.06 grams per tonne). The Alto de la Mina holds the balance of 2.6 million tons at 0.065 oz. (2.4 million tonnes at 2.2 grams). The two deposits are close to each other and only a quarter of a mile will separate the two pits. New ore reserve models are being developed as a part of the feasibility study.

The orebodies represent only the earliest discoveries on a ring structure 15 km in circumference. The ring faults have been the conduits for late-stage volcanic waters and, in several cases, the resulting hot springs have deposited epithermal gold mineralization.

Thus, fault-controlled plumbing is essential in forming this type of deposit. The other requirements are a permeable rock unit to transmit the fluids and an impermeable cap rock to collect and trap the same fluids until stagnation followed by chemical reaction precipitates the solutions’ gold and silver content.

The geology is similar to that of other large gold deposits assigned to the maar volcanic classification and this includes the Pueblo Viejo in the Dominican Republic and Round Mountain in Nevada. These two deposits have reserves of 163 million tons at 0.11 oz. per ton and 208 million tons at 0.035 oz. per ton, respectively (148 million tonnnes at 3.8 grams per tonne and 189 million tonnes at 1.2 grams per tonne, respectively).

But at Santa Rosa, if the central part of the ring structure is filled with a permeable rock type that has been metallized by volcanic hot springs, this would then be a cousin to the Pueblo Viejo with the potential for an order-of-magnitude increase in ore reserves.

The Santa Rosa and its neighbors are not new discoveries. Gold has been known in Panama since the earliest of colonial times. But technological change over the past 15 years has prompted a fresh examination of the scattered gold showings throughout the country. The technology is, of course, heap leaching, which brings into range low-value deposits given little more than a cursory glance a few years ago.

In the 1930s, a British company drove numerous shallow adits into the higher-grade sections of a number of the Santa Rosa deposits. This early work is valuable because it directs attention to those deposits carrying significant gold values and provides ready-made access for geological mapping and sampling.

Las Huacas is one mineralized zone identified as a prime target by virtue of previous workings. It lies about three kilometres south of Santa Rosa and has large-tonnage potential. A number of assays ranging up to 0.6 oz. per ton (20.6 grams per tonne) have been returned from an area of 5,000 by 3,300 ft. (1,500 by 990 metres) and diamond drilling has recently begun. The targets are again low-grade bulk gold deposits suitable for heap leaching. A similar deposit, Los Sanchez, has been identified 3.2 km farther south from Las Huacas.

These two mineralized zones far from circumsribe the exploration possibilities. A more realistic indication can be drawn from the accompanying drawing of the Santa Rosa and Alto de la Mina Concession. And this concession is only part of the adjoining Veraguas Concession of 35,325 ha (87,253 acres). This also is under Greenstone-Boliden control.

The Santa Rosa project lies 125 miles (200 km) in a direct line south-west of Panama city and 10 miles (16.1 km) north of the Pan-American Highway. It is about four and a half hours drive from Panama City, or 45 minutes from Santiago, the capital of Veraguas Province. All driving is by paved road. The road to the mine ends at the small agricultural town of Canazas (pop. 3,000), about 1.6 km north of the proposed pits.

SANTA ROSA WILL BE THE FIRST LARGE HEAP LEACH PROJECT IN CENTRAL AMERICA AND THE LARGEST MINING PROJECT IN THE REGION FOR MANY YEARS.

The road passes through the gap between the Santa Rosa and the Alto de la Minas orebodies. The concession lies within the rolling foothills belt of the Cordillera with an elevation that varies between 500 ft. and 1,500 ft. (150 and 450 metres) above sea level. Potable well water is in reliable supply and the principal line of the Panamanian Power Corporation passes within 15 km of the orebodies. Freeport completed 99,000 ft. (29,700 metres or about 30 km) of drilling. Thirty per cent of the holes were diamond drilled; the remainder were percussion drilled using reverse circulation for cuttings recovery. Several holes were twinned to validate the two drilling methods, but no statistically significant differences in gold values were detected.

Random twinning continues and the two types of drill data are viewed with equal confidence.

By the end of July, 1991, the joint venture will have chalked up an additional 40,000 ft. (12,200 metres) of drilling split 30/70 between core and reverse circulation drilling. Most of the work is directed toward confirming proven and probable reserves. Exploration has also indicated a possible reserve of about 12.5 million tons (11.4 million tonnes) of near mine grade adjacent to the established reserves and additional drilling should upgrade a quantity of this to the proven and probable categories.

Once a profitable operation has been established, the objectives of exploratory drilling will be twofold: first, to replace depleted reserves from sources close to current operations; second, to locate major sources of ore at points already identified on or near the favorable ring structure, all of which augurs well for the long term.

If the feasibility gives the project a green light, mine construction will start in the fourth quarter of 1991. The first bullion would be poured
in early 1992. The source of the early production will be the test leach pad. The relatively small test pad measures 280,000 sq ft., or 25,200 sq. metres. The test pad (the first in Panama, where conditions are dramatically different from those in the bone-dry southwestern states) will determine how well and at what cost such a unit can be constructed in the Panamanian environment.

Extensive column leach tests (the closest laboratory procedure to simulate heap leaching conditions) demonstrated gold recoveries averaging 76%, with 63% for silver. Recoveries are expected to be 3% less and the figures used in financial analyses have pegged them at 73% and 60% respectively. The processing included crushing to one quarter of an inch, agglomeration and a 120-day leach.

Grinding to 100% minus 100 mesh followed by carbon-in-leach returned average recoveries of 83%, but the capital cost of grinding, classification and carbon-in-leach or carbon-in-pulp recovery would obviously be of another order.

Intensive metallurgical work is emphasizing agglomeration procedures, should these be required, and optimization of crusher sizes for heap leaching material.

Using the test pad for early production and start-up will generate rapid cash flow. An initial production rate of 1.5 million tons (1.4 million tonnes) per year is expected to be expanded later to produce 100,000 oz. (3,100 kg) gold per year.

The foothills receive about 280 cm of rain per year, the bulk falling during October, November and December. Mining, crushing and loading of ore will cease during these three months but stripping should be unaffected. Stripping will be taking place in waste and this material is expected to form hard, compacted roadbeds. The leach heaps will be under close observation at this time too, particularly during the first year of operation. They will be designed with lower overall slopes and there will be oversize drainage facilities and pondage volume to handle the surge of rainwater during the wet season, at which time a steady flow of rainwater-diluted leachate will be passed to precipitation and then to discharge to maintain a proper fluid balance in the system.

SANTA ROSA IS THE LARGER OF THE TWO DEPOSITS, CARRYING 9.8 MILLION TONS AT 0.060 OZ. PER TON.

Santa Rosa will be the first large heap leach project in Central America and the largest mining project in the region for many years — certainly the largest in Panama. Initial startup costs are estimated at US$15 million.

The business climate is excellent with a corporate tax rate of 35% and generous allowances for depreciation and depletion. All transactions are in U.S. dollars (unique to Latin America) and there are few restrictions on imports, exports or the transfer of funds. All in all, for $6 million, Boliden and Greenstone may have secured for themselves a golden future.