74 juniors, by latest tally, directing efforts to Mexico

As the bigger companies downsize their exploration efforts in North America, the emphasis on Mexico has mushroomed to the point where there are now at least 74 Canadian and a handful of U.S. firms conducting activity there.

That list does not include the majors that have recently opened exploration offices in response to new foreign investment rules that allow them to control local projects for up to 12 years from the date of initial production. When The Northern Miner toured Mexico recently, officials from Colorado gold mining giant Newmont Mining (NYSE) were preparing to join Amax (NYSE) and Noranda (TSE) by setting up base in Mexico.

“As North American governments raise taxes and introduce tougher regulations, what we are seeing is a natural migration to real good geology,” said Russ Babcock, chief geologist at Utah-based Kennecott

While most companies are still in the early stages of exploration, Kennecott is leading the way with a 1992 budget of several million U.S. dollars and a sizable landholding in the Mulatos district of eastern Sonora in northern Mexico.

Like Placer Dome (TSE), Kennecott believes there is a lot of potential for large bulk-tonnage gold deposits, and they are now looking for this type of target.

Optimism is based partly on the fact that when North American companies were combing Mexico for porphyry copper deposits in the late 1960s, they bypassed gold because the yellow metal was still trading at US$35 per oz. Indications that only 20% of the country’s potential mineral wealth has been properly surveyed are also giving rise to optimism in exploration circles. As well as being the world’s leading silver producer, Mexico also accounted for 5% of the lead and 6% of the zinc produced globally in 1991. Kennecott is drilling in the Mulatos area where Placer Dome’s (TSE) Real de Angeles bulk silver mine has established preliminary reserves of 20 million tonnes grading 1.85 grams gold (0.053 oz.) per tonne. But no results have yet been released.

Through Mexican affiliate Empresa Minera Canmex, Placer Dome is preparing to start drilling on a gold project in Sonora, but Carl Hering, Placer Dome’s regional geologist for Mexico and Latin America, says hot competition in that region prevents him from providing any details.

However, Phelps Dodge’s (NYSE) success in getting its Santa Gertrudis gold mine into production has raised hopes that others, like Red Rock Mining (VSE) and Hecla Mining (NYSE), will eventually get their own projects up and running.

Santa Gertrudis is attracting interest because it is the first project in Mexico to use heap leach mining methods for gold extraction. A zero discharge operation, it is predicated on a Carlin-type hydrothermal system hosting seven million tonnes of grade 2.6 grams (0.076 oz.) gold.

Mine manager Dave Collins declined to say what his production costs were when The Northern Miner paid a visit to the 3,000-tonne-per-day project. But Phelps Dodge is reporting a recovery rate of 80-85% from zinc precipitates and targeted production this year is 60,000 oz.

At the adjacent Amelia project where reserves stand at about one million tonnes grading 4.36 grams (0.126 oz.), Red Rock and affiliate Walhalla Mining are attempting to determine the feasibility of developing another heap leach mine. Since acquiring the property last year from Chutine Resources (VSE), the joint venture has also attempted to examine the potential at depth. But Collins believes the La Choya gold project, about 30 miles south of the U.S. border, will be Sonora’s next heap leach operation, even though Hecla hasn’t exercised an option to buy the project from Australia’s Aztec Mining. While Hecla refused to give reserve figures, Vancouver-based Silver Standard (VSE) outlined six million tonnes of 1.1 grams (0.03 oz.) at La Choya before dropping its option on the property.

Meanwhile, Cominco Resources International’s (TSE) Maria copper project in Sonora achieved an operating profit of $5.36 million last year after treating 35,000 tonnes of 13.8% copper during the fourth quarter. Having commissioned a new concentrator, Cominco and Mexican partner Empresas Frisco expect to begin treating 390,000 tonnes of lower-grade ore averaging 1.8% copper and 0.7% molybdenum in 1993.

Cominco is also examining various alternatives, including bringing in a partner to develop its Mariquita copper project, which according to a preliminary feasibility study could yield 22 million lb. of cathode copper annually.

Here is a brief update on what some of the other Canadian and North American companies are doing in Mexico:

The Noranda (TSE) group is expected to begin drilling for gold on the Viruela-La-Cruz property in Sonora’s highly prospective Mulatos district, after spending $1.5 million in Mexico last year. The Toronto company is also actively looking for copper deposits.

Gerle Gold (VSE) is seeking exploration opportunities through Rio Sonora Resources and its Mexican subsidiary Minera Rio Sonora S.A. de C.V. It is currently targeting a possible heap leach project in Sonora. Hughes Lang Group member Aurizon Mines (TSE) recently optioned its La Reyna copper-gold prospect at Sinaloa near the port of Mazatlan to Vancouver-based Western Desert Explorations. To earn a 60% project interest, Western Desert must complete a feasibility study on 12 million tonnes of oxide and sulphide reserves grading 0.71% copper and 1.1 gram gold while spending $250,000 on exploration within the first year. Western Desert is also paying Aurizon $25,000 in cash. According to Aurizon spokesman John Harvey, the extensive oxide cap may be amenable to open pit and heap leach extraction methods. Cream Silver Mines (VSE), another member of the Hughes Lang Group, has an option to earn 47% of a small high-grade silver-lead-zinc operation known as the Los Pinos mine. Penoles, a privately owned Mexican mining company, established 301,054 tonnes of grade 6 oz. (208 grams) silver and 11.2 9% zinc over average widths of five metres.

But as those reserves can support a 50-tonne-per-day operation, Cream Silver has the option to earn its interest by finding enough new ore to double mill throughput. However, work is now on hold pending higher metal prices. Silver Standard has a 17% interest in the Bienvenidos syndicate, a Vancouver outfit set up to acquire properties in Mexico. Assets include a large porphyry copper property in Navajo southeast of Hermosillo.

Avino Mines & Resources (VSE), a Vancouver junior, is struggling in the face of low silver prices to move from open pit to underground mining methods at its 49% owned silver operation in Durango. Avino and its Mexican partner, (the Ysita family), were hoping to produce one million ounces silver last year. But by November mine output had only reached 679,475 oz. and spokesman Jim Baylis says production should be below target for the year. By moving underground, Avino expects recoveries to increase to the 80-90% range from a current level of around 60%.