Campbell builds up reserves at Santa Gertrudis project

This area of Sonora state is proving to be a smaller version of Nevada’s Carlin Trend. The San Francisco mine of Geomaque Explorations (TSE), the Lluvia de Oro deposit of Great Lakes Minerals (TSE) and Walhalla Mining’s Amelia mine are all at or near production. And the efforts of Campbell Resources (TSE) at the Santa Gertrudis mine, the area’s largest producer, offer hope that small things could get bigger.

Phelps Dodge (NYSE) came to Santa Gertrudis in 1988 after taking a look at the Amelia deposit, immediately to the northwest. PD recognized the Carlin-like characteristics of the mineralization at Santa Gertrudis and, by the middle of 1991, had put the property into production. Annual production, which initially ran just over 50,000 oz., fell to 38,000 oz. after heavy rains created production problems in 1993. Costs, which started at US$205 per oz., rose to US$394.

Phelps Dodge’s decision to concentrate on its established copper business meant that Santa Gertrudis was put on the auction block. It was acquired by Campbell’s Mexican operating unit, Oro de Sotula, in July 1994. Campbell’s US$9.8 million bought a large facility, on which Phelps Dodge had spent about US$28 million, and a property about 125 sq. km in area with plenty of prospects. But it had proven gold reserves containing 100,000 oz., enough for only two years of production.

At the same time, the National Union of Miners had just entered negotiations for the first collective agreement at the mine. Two weeks after Campbell acquired the mine, there was a brief work stoppage; the dispute was settled in short order, and relations between the company and union are now good.

Once that fire was out, Campbell’s first task was to reduce costs. Small things made a difference: sometimes a line of three trucks would be waiting at one shovel, while a loader sat idle on the other side of the pit. Ironing out these and other minor wrinkles enabled the company to trim costs to US$287 per oz. over the remainder of 1994, and to US$232 in the first half of 1995. A lower exchange rate for the Mexican peso has also helped reduce the U.S. dollar unit cost.

Another factor in cutting costs was efficiency in pit design, in particular the ability to keep the volume of waste rock to a minimum. The stripping (waste-to-ore) ratio was 10.7 during Campbell’s 5-month ownership period in 1994, and was reduced to 6.5 for the first six months of 1995. Even though a large amount of overburden is to be stripped for pit expansions and new pit development, the estimated stripping ratio for the whole year is still a healthy 7.5.

Cost-cutting

The labor force at Santa Gertrudis has been reduced to 224 from 254, while productivity has increased. As for cost-cutting, “I think we’ve done all the obvious things,” says Mine Manager Vernon Smith, noting that some fine-tuning can still be done. Estimated mining costs are around US75 cents per tonne, and processing costs are US$4.25 per tonne.

The other challenge at Santa Gertrudis was to turn mineralization into ore. The 100,000-oz. reserve represented two years of production; known showings on the property had about a 500,000-oz. potential. Campbell developed a short-term strategy of proving reserves in the northern part of the property, within about 3 km of the leach pads, and a long-term strategy of integrated exploration over the whole property.

To find minable reserves in the developed area of the property, Campbell leans on boot-and-pick prospecting. Exploration Manager Ayax Alba puts it plainly: “We need reserves, and the only way to get them is by walking, walking, walking. You have to break rocks and sample.”

Breaking rocks and sampling has turned up several good prospects, including the Allison showing southeast of the Corral pit and the Carolina showing northeast of the Hilario and Agua Blanca pits. In this effort, the company has benefited from one of Santa Gertrudis’ “hidden assets” — an exploration staff with long experience on the property (many of them worked here during the Phelps Dodge days). Campbell credits exploration geologist David Gomez Juarez with most of the discoveries.

Diamond drilling

To prove reserves, Campbell has found that reverse-circulation drill holes on 50-metre centres provide enough coverage for reliable reserve estimates. Diamond drilling is used more sparingly, for structural information and to provide material for metallurgical tests. Diamond drills can also be mobilized to prospects where access is too difficult for a truck or tractor-mounted reverse-circulation drill.

Average grades in the productive pits are from 1.7 to 2 grams gold per tonne, and recovery is about 70%. Campbell expects recovery will increase to about 75% in the long term.

Most of the pits are no more than 55 metres deep, and all have bottomed in the oxide zone. Oxidizing conditions persist to at least 150 metres at Santa Gertrudis, and deep drill holes at some other mines in the vicinity have had to go 700 metres down before intersecting sulphides. The company expects any near-term reserves to be heap-leachable oxide ores.

Exploration elsewhere on the property is at the grassroots level. While Santa Gertrudis fits a Carlin model in many important ways, previous exploration may have concentrated too heavily on limestone units that were known to be favorable, along a southeast-striking structural trend where the first discoveries were made. More showings have been found elsewhere on the property, and it has become apparent that other structural controls may be as important as the original trend.

Prime targets

The property features a southwest-facing sequence of sedimentary rocks, mainly carbonates, intruded by dioritic dykes or sills. Most of the mineralization is clustered along a zone of shearing roughly parallel to the stratigraphy; the intersections of this shear zone, with crosscutting faults that generally strike northeast, are prime structural targets. Away from the shear zone, showings are commonly on, or near, northeast-striking faults. The favorable host rocks are the limestones, particularly where they have been fractured or brecciated.

About a quarter of the property has been mapped at a 1:5,000 scale, and William Hamilton, project manager, says “there is no shortage of good targets you can find just by mapping.”

Airborne magnetics and air photography are becoming important tools in regional exploration at Santa Gertrudis. The property has been fully covered by aeromagnetics and aerial photography, and Campbell has one geologist working full-time on interpreting satellite imagery and aerial photography for structure.

A large, circular, magnetic anomaly has been correlated in the field with an area of contact-metamorphosed rock, suggesting that a large intrusive body may be underneath. Hamilton says there is a possibility that favorable structures exist around a buried intrusion. “If we are going to get any large breaks, that is where we will probably find them.”

Phelps Dodge had sampled soils on about 30% of the property. Campbell is expanding that coverage and has also been sampling bedrock for gold and for pathfinder elements that may serve as guides to mineralization. But there is still no substitute for subsurface information: Campbell has done about 10,000 metres of reverse-circulation drilling this year and expects to do another 6,000, plus 2,000 metres of diamond drilling.