Orvana begins Don Mario development

It may have taken longer than expected, but Orvana Minerals (ORV-T) has entered the final stretch at the advanced Don Mario gold project in eastern Bolivia.

Orvana bought the deposit in 1996 for $43 million in cash and shares and then spent $21 million developing it over the next three years. However, by then the gold market had soured, the company had run out of cash, and the project’s worth had been reduced to $12 million.

Nevertheless, Orvana’s hopes were rekindled in 2001 when private Bolivian miner Compania Minera del Sur (Comsur) offered to finish the job in return for a majority interest in the company. The deal has since been sealed, allowing development to renew.

Situated in the Brazilian Shield, Don Mario represents the first discovery of its kind in this part of the country. A private company is responsible for the find; it was then acquired by Billiton, now BHP Billiton (bhp-n), which eventually sold it to Orvana.

The deposit comprises two mineralized horizons enclosed by crystal schists that are intruded by a granitic pluton. The targeted Lower unit is a 1.5-to-1.8-metre-thick shoot that extends from surface to 700 metres down plunge and varies from 100 to 150 metres downdip.

Except for mild oxidation near the surface, the Lower unit represents a low-sulphide system characterized by fine free gold, rendering it amenable to conventional milling and carbon-in-leach processing. Chalcopyrite and bismuthinite are the main sulphide minerals.

Recovery rates are expected to exceed 90%.

Under terms of the deal, Comsur was issued 53 million Orvana shares in return for US$4 million in cash and US$14 million in financing. A large chunk has already been spent on a 600-tonne-capacity mill and other equipment formerly owned by Comsur.

Shaft-sinking has begun and will eventually bottom at 225 metres below surface. Underground and surface development is expected to take a total of 15 months to complete.

Miners will rely on sub-level stoping to extract the ore, which should keep operating costs between US$25 and US$30 per tonne.

Comsur expects to recover 346,000 oz. over five years from an estimated reserve of 1.17 million tonnes grading 10.24 grams gold per tonne. This is significantly less than was estimated by independent engineering consultants, which partly reflects the choice of mining methods and cutoff grades.