Francisco boosts Sauzal resource

Junior Francisco Gold (FGX-V) has increased the indicated resource estimate at its wholly owned El Sauzal project in northern Mexico. The gold resource has grown by 370,000 ounces, or 12.5%, and now stands at 3.6 million contained ounces.

The calculation, performed by Mine Reserve Associates of Colorado, was based on assay results from 124 diamond drill holes, totalling 20,300 metres. More than 1,650 surface chip samples were also included in the estimate, which weighed in at 50.6 million tonnes averaging 2.21 grams gold per tonne. The overall average grade was increased by about 3.7%. Gold recovery was estimated at 92%.

Francisco Gold also received an updated scoping study from Behre Dolbear. The study used a long-term gold price of US$325 per oz. and a cutoff grade of 0.72 gram gold. Calculations indicated that a minable oxide resource of 23.5 million tonnes could be milled at a grade of 2.98 grams gold (2.25 million contained ounces). The estimate takes into account mine extraction losses and dilution rates. An additional 4.1 million tonnes of heap-leach material grading 0.52 gram gold (68,000 contained ounces) was included in the proposed open-pit mine plan.

The measured and indicated categories have increased by about 24% over 1997 calculations. Francisco reports that the 1998 drill program increased by 105% the gold content classified in the measured category. The final review of the minable resource is scheduled to be completed following independent verification of the calculations during the prefeasibility stage.

Dolbear’s new base case operating plan envisages a processing rate of 10,000 tonnes-per-day over a 7-year mine life.

Owing to the increased depth and geometry of the pit design, operators have updated the stripping ratio to 1.58-to-1.

The total capital cost is pegged at US$206.9 million, including sustaining capital, inflation allowance, reclamation costs and a 20% contingency.

The average life-of-mine operating cost has been set at US$95.80 per ounce with total costs estimated at US$180.47 per oz. The estimated payback period, after taxes, was calculated to be 2.7 years.

The project is expected to produce gold at a cash cost of about US$75 per oz. during the first four years with an annual production target of 310,000 oz. The after-tax internal rate-of-return is projected at 22.1%.

Francisco recently completed an all-season 40 km access road from Cieneguita to El Sauzal and is currently constructing access roads to the West Lip and West zones for the next drill program, scheduled to begin later this month.

A 50-man camp is under construction.

Preliminary metallurgical bulk-sample testing is being carried out by Metcon Research of Tucson, Ariz. Bench-scale test work and heap-leach column studies will be performed on an 800-kg sample taken from the West and East zones of the deposit.

Several major mining companies are said to be conducting advanced due diligence on the project.

Francisco has $37.5 million in its treasury and 16.6 million shares fully diluted.