Trevali pushes towards Peruvian production

Trevali Mining (TV-T) is getting ever closer to launching Peru’s next polymetallic mine with a little help from a well known player in the metal game: Glencore International (GLEN-L).

The two companies plan to have the Santander mine up and running by the third quarter of this year, which should put it in a good position to capture a forecasted supply shortage in the zinc market.

The 44 sq km project sits in the Central Peruvian Polymetallic belt and is accessible by road, roughly 215-km east from the capital of Lima. Such easy accessibility is in part attributable to the area’s rich mining history.

First explored in early 1900s, exploration activity carried on through the 1950s until finally in 1957 an open pit and underground operation was built to mine the Santander mineralized pipe. Once in operation the deposit kept giving all the way up until 1992 when at a depth of 480 metres the operation was halted due to low metal prices.

Trevali, believing that the old mine may still have more to give, arrived on the seen in 2007 and immediately began exploring for new mineralized bodies. Its faith in Santander was rewarded with the discovery of two distinct mineralized trends: the Magistral trend with strike length of 14 km and the Santander Puajanca trend, which is a splay off the Magistral trend and has a strike length of 3-km.

Following the two trends, Trevali drilled 171 drill holes for 33,000 metres and for its efforts came back with the discovery of four new mineralized bodies.

Three of the new deposits were found in the Magistral trend. The Magistral North deposit has indicated resources of 2.2 million tonnes grading 60 grams silver, 2.58% lead, 3.02% zinc and 0.08% copper. Magistral Central has 2.5 million tonnes of indicated grading 44 grams silver, 0.72% lead, 4.31% zinc and 0.09% copper and Magistral South has indicated resources of 1.1 million tonnes grading 11 grams silver, 0.17% lead, 4.84% zinc, and 0.05% copper.

In the Puajanca trend, which also contains the original Santandar mine, the company discovered the Puajanca South massive sulphide deposit which has indicated resources of 183,000 tonnes grading 36 grams silver, 1.96% lead, 2.14% zinc and 0.01% copper.

Mineralization is open at depth for all four deposits.

And then there is the remnants of the old Santander mine itself, which shows that the historical mine is still determined to give more. The tailings from the old mine have indicated resources of 100 million lbs of zinc at an average grade of 2.74% zinc.

When all those resources are put together, Trevali says it has enough ore to support 10 years of mine life.

The plan is to mine the three Magistral deposits as open pit mines for 18 to 24 months after which it will switch to underground stope mining.

After doing a solid job on the exploration front, Trevali handed the reins over to Glencore International for the design, construction and operation of a 2,000 tonne per day concentrate plant.

Glencore, which has many years of experience running base metal mines around the world, but has even deeper experience in South America, is taking on the workload in exchange for a life of mine concentrate offtake agreement on all of the mines production at international benchmark pricing.

The deal with Glencore leaves Trevali with full ownership of the mine and it will acquire the processing plant once completed.

When commissioned later this year the mill is expected to yield efficient results due to the coarse-grained mineralogy of the deposits. Trevali pegs recoveries at 90% lead at 40% concentrate; 80 to 85% zinc recovery at 52% concentrate grade and 70% silver recovery.

Trevali is confident that it will continue to expand resources which will mean an expansion for the mill in 2014 to 4,000 tonnes per day.

Trevali also enjoys advantages on the cost side due to its ownership of the Tingo hydroelectric plant which sits just 17 km down valley to the west of the mine. The plant is being upgraded to 10 MW.

The plant, which has been in operation since 1958, currently generates 1.6 MW of power and partly service the power needs at Santander. Once the expansion is completed in 2013, the company estimates that power costs will come in at roughly a penny per kilowatt hour, which compares favorably to the 8 to 12 ¢ per kilowatt hour charged when power is drawn from the national grid.