Vancouver — The low price of gold has prompted many major producers to shed sub-economic assets, and partners
Placer and Kennecott, a subsidiary of
The majors subseqently sold the project to National Gold in March 2001 for $10.5 million, due over four years. In August of that year, the terms of the purchase agreement were revised; as a result, all but the $250,000 already paid is deferred until 2008 and 2010 unless the gold price rises above US$300 and US$325 per oz., respectively.
“The divided ownership of the property and the changing priorities of the partners . . . during this period of devastated gold prices have combined to present National Gold with this extraordinary opportunity to purchase the Salamandra gold deposits,” says Albert Matter, the company’s chief executive officer.
Finding it difficult to raise the necessary financing to advance the project, National Gold inked a deal with Alamos in October 2001. Alamos can earn a half-interest interest in Salamandra by spending $2.4 million on exploration and development costs, metallurgical test leaching and any underlying property payments that come due over the next 12 months. Alamos and National Gold would then share equally in future development costs and any additional outstanding payments to Placer and Kennecott. Once the property is placed into profitable production, Alamos would pay a further $2 million to National Gold over the following four years.
The property is in the Sierra Madre gold belt in Sonora state, 400 km south of Tucson, Ariz., and 220 km east of Hermosillo. A 1999 feasibility study envisioned a 17,500-tonne-per-day open-pit operation. Capital costs are pegged at US$120 million, whereas operating costs for the heap-leach operation are estimated to be $5 per processed tonne at a gold recovery rate of 66%.
Despite the low recovery rate of the sulphide component of the ore, Alamos, led by well-known mine operator Chester Millar, is attempting to advance the high-grade Estrella zone, within the Mulatos deposit. Millar is a pioneer of low-cost heap-leach mining in the western U.S.
“By commencing production from the higher-grade oxide component of the Estrella mineralization, the cash flow should be sufficient to meet the subsequent property payments and allow a scale-up to full production of the eleven million tonnes of high-grade ore,” says Millar.
The Mulatos deposit contains an estimated resource of 68.8 million tonnes grading 1.6 grams gold per tonne. The resource was defined using 551 drill holes for a total of 96,124 metres, combined with 994 samples from underground workings, at a 0.8-gram gold cutoff. The Estrella zone represents the higher-grade core of the deposit and hosts 11.5 million tonnes grading 3.16 grams gold, or 1.2 million ounces contained gold, based on a cutoff grade of 2 grams gold per tonne.
Alamos began delineation drilling in December 2001 in an attempt to boost the grade of the known resource in the Estrella zone. Toward this end, the current drilling campaign is slated to comprise 126 vertical holes varying from 18 to 40 metres in depth, which will be drilled on a 12-metre grid spacing. This subsequently will be increased to a 6-metre spacing if results warrant.
The closely spaced drilling is required to estimate the amount of contained gold that will be mined and stacked on a test leach pad. A bulk heap-leach test will follow the drill program as part of a new feasibility study. The junior is acquiring permits to mine, crush and heap-leach 50,000 tonnes of material.
Millar believes gold recoveries may improve as a result of using a crush size smaller than the three quarters of an inch Placer used in its heap-leach tests. Alamos’s heap-leach test is to slated for the third quarter.
Mineralization is hosted in a large, high-sulphidation gold system, which is found preferentially stratabound in felsic volcaniclastics and porphyritic flows. Alteration is well-zoned, extending from a gold-bearing core of silicic and pyrophyillite clays to kaolinite-illite-dickite clays and finally to a propylitic zone.
“The Mulatos and its associated epithermal system occupy only 15% of the area covered by the seven auriferous epithermal systems identified on the Salamandra property,” says Matter. “As such, the remaining 85% represents an exciting opportunity to develop additional resources of gold.”
Alamos has 14.9 million outstanding shares, or 15.6 million fully diluted, whereas National Gold has 16.8 million outstanding shares, or 22.4 million fully diluted.
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