Buenaventura, Gold Fields make major gold discovery in Peru (May 12, 2010)

Just eighteen months after drilling their first hole, joint-venture partners Compania de Minas Buenaventura (BVN-N) and Gold Fields (GFI-Q, GFI-J, GFI-D) have discovered a major gold-copper-silver deposit of 5.6 million eq. gold oz. at their Chucapaca project in southern Peru.

News of the discovery – called Canahuire — coincided with spot gold prices in New York closing at US$1,231.40 per oz. on May 11.

The inferred resource for Canahuire is roughly 83.7 million tonnes grading 1.9 grams gold per tonne, 0.09% copper and 8.2 grams silver per tonne for a total of 5.6 million gold equivalent ounces.

The resource was based on a cut-off grade of 0.67 gram gold equivalent constrained within an optimized pit shell. The pit shell was based on a price assumption of US$1,150 per oz. gold, US$3 per lb. copper and US$17 per oz. silver. The resource is compliant with the South African Code for the Reporting of Exploration Results.

Peru’s Buenaventura holds 49% of the project and South Africa’s Gold Fields 51%, so the amount of precious metal attributable to Buenaventura would be 2.8 million oz. gold equivalent and for Gold Fields 2.9 million oz. gold equivalent.

An interim scoping study is to be completed by June and if the results are positive Gold Fields says it will start a pre-feasibility study in July.

The discovery sent Buenaventura’s shares up US$2.20 apiece or 6.4% to close at US$36.43 per share. Gold Fields advanced 79¢ apiece or 6.1% to close at US$13.75 per share.

The joint-venture partners believe that Canahuire is amenable to open-pit mining. At this stage, the proposed mining process would be to crush and grind with flotation to produce a smelter-grade copper-gold concentrate followed by carbon in leach (CIL) extraction from flotation tails. Recovery assumptions are 77% for gold, 82% for copper and 44% for silver.

The companies stated in a press release that the resource estimate is “relatively insensitive to variations in metal prices and operating costs.” A 25% decrease in metal prices, for instance, would result in a 13% decrease in resource tonnes, a 9.3% improvement in average gold-equivalent grade and a 4.9% decline in gold-equivalent ounces above the cut-off grade.

The Canahuire deposit is one of several targets in the 12,700 hectare Chucapaca area, which is about 4,800 metres high in the Altiplano region, 120 km northeast of the city of Moquegua.

Both joint venture partners have independently consolidated concessions next to the CPA and are actively exploring the areas.