Containing a resource of more than 9.5 million ounces, Alto Chicama is the industry’s largest grassroots discovery in the past several years.
With a portfolio of 12 operating mines in seven countries on four continents, Barrick is on track to produce somewhere between 5.4 and 5.5 million oz. for 2003 at an average cash cost of US$190-195 per oz. Speaking at a recent Merrill Lynch investment conference, Barrick President Greg Wilkins told investors that production will likely be 10% lower in 2004, with costs running about 10% higher, as several of the company’s key operations, primarily Pierina and Goldstrike, will be impacted by lower mine grades. Looking beyond 2004, Wilkins noted that Barrick should begin to see benefits as the first of the new mines in its development pipeline come into production in 2005.
The Alto Chicama project occurs on the western flank of the Peruvian Andes, at an elevation of 4,000-4,260 metres, in the La Libertad region of the provinces of Otuzco and Santaigo de Chuco. It is 140 km by road east of the coastal city of Trujillo and 42 km west of Huamachuco. The struggling Quiruvilca zinc-silver underground operation of
A feasibility study has now been completed for Alto Chicama, and Barrick’s board recently approved the project. The engineering studies have demonstrated the technical feasibility and economic viability of recovering gold from the Alto Chicama property by conventional open-pit mining, crushing and heap-leaching methods, similar to those used at Barrick’s Pierina mine, 175 km to the south. “We are moving forward with another Pierina look alike,” says Wilkins.
Barrick estimates Alto Chicama will produce 540,000 oz. per year at an average cash cost of US$135 per oz., or a total production cost of US$210 per oz., over the first decade. Initial capital costs are in the order of US$340 million. The project yields an internal rate of return of 39% using a US$350 per oz. gold price. The company expected to file an environmental impact statement in early October, which would put the project on track to begin construction in the first half of 2004, with the first gold pour scheduled in the third quarter of 2005.
Barrick is spending US$13 million to upgrade some 70 km of access road from the town of Otuzco to the west. This should be finished by April 2004.
Since the discovery, Barrick has completed 130,000 metres of drilling concentrated principally on the Las Lagunas Norte area, in the southwestern portion of the 185-sq.-km Alto Chicama property. Gold mineralization at Las Lagunas Norte is high-sulphidation, with disseminated mineralization hosted in volcanics, sedimentary breccias and tuffs.
The flat-lying mineralization outcrops and extends over an area of 1,600 by 750 metres and to depths of up to 300 metres.
Drilled at a 50-by-50-metre spacing, the geological database includes 830 core holes and 138 reverse circulation holes, along with 2,581 metres of surface channel cuts, for a total of 222,299 samples. The feasibility study is based on a mine plan containing an open-pittable oxide reserve of 144 million tonnes grading 1.54 grams gold and 3.71 grams silver, equal to almost 7.2 million oz. gold. A further 1.1-million oz. resource is contained in the pit shell, including 506,000 oz. of inferred and 654,000 oz. of carbonaceous buffer zone material. The stripping ratio over the life of mine is 1-to-1.
Barrick started grassroots exploration in the district of La Libertad in 1998 and identified Alto Chicama as a target area based on the results of a regional BLEG geochemical sampling program, which was done in conjunction with stream-sediment sampling. The regional geology of the Alto Chicama area is dominated by a thick sequence of Mesozoic marine clastic and carbonate sedimentary rocks unconformably overlain by andesitic and dacitic volcanic rocks of the Tertiary Calipuy group. This sequence is cut by numerous small intrusive bodies.
Barrick acquired the mining rights to the Alto Chicama property in January 2001, following a privatization auction held by state-owned Centromin. “When the Peruvian government put Alto up for bid, 15 other gold companies looked at it and took a pass,” Barrick’s Alex Davidson, vice-president of exploration, told shareholders at the company’s annual meeting. “Our team saw what the others didn’t.” Davidson singled out Ramon Araneda, who leads the company’s exploration efforts in Peru, was singled out for credit.
“Technology only takes you so far,” said Davidson. “Our guys in the field still have to walk the ground, break the rocks and recognize what is important and what is not, and our guys in the field still have to make the decisions that lead to discoveries. All companies have access to the same technology, it’s the people that make the difference.”
Barrick has earned a 100% interest in the property and made an advance royalty payment of US$2 million, which will be credited against Centromin’s retained 2.51% NSR.
Barrick began field work at Alto Chicama in March 2001, identifying three drill target areas during a program of geological mapping, channel sampling and ground geophysics. Field crews uncovered altered tuff and anomalous gold-bearing breccias containing quartzites and vuggy silica clasts. Drilling began in June 2001 and consisted of an initial 4,700 metres in 27 holes. The first 15 holes tested an area 3-3.5 km south of Lagunas Norte, before drilling shifted to the discovery area.
By the time Barrick announced the discovery of Lagunas Norte in April 2002, 45 holes totalling 14,500 metres had defined a 3.5-million oz. inferred resource of 55 million tonnes grading 1.95 grams. The initial drilling was widely spaced on 200-metre centres.
Barrick proposes to crush and heap-leach the open-pit ore at a rate of 42,000 tonnes per day or 15.3 million tonnes per year. The leach pad will be constructed with an initial capacity of 20 million tonnes. Three of four expansions will follow every two years at a total cost of US$40 million. Based on extensive metallurgical testwork, the oxide ore is expected to yield an average gold recovery of 86% after a 45-day leach time. The Buffer zone material, which holds an additional 654,000 oz., will be stockpiled as it is mined with the potential of being placed on top of the heap leach pad and processed at a reduced recovery. The Buffer zone has no value currently assigned in project economics.
Barrick is spending US$7.3 million exploring targets on the Alto Chicama property and in the immediate area, where it has assembled a land package of about 1,200 sq. km. “What’s got me even more exited is what Alto shows me in terms of the number of surface showings spread over so many square kilometres,” says Davidson. “This suggests the potential for more than one deposit. In fact, given the anomalies we’ve turned up in our fieldwork so far, I expect we will be exploring our Alto Chicama land package for the next ten years at least.”
Since 1996, several significant epithermal gold deposits have been discovered in the La Libertad region.
In late 1997, Cambior announced a new discovery called La Arena, near the town of Huamachoco. Indicated resources stand at 13.4 million tonnes grading 1 gram gold, representing 414,000 oz., based on a gold price of US$325 per oz.
New Oroperu owns 50% of Tres Cruces, with an option to acquire the remaining 50% from Pan American Silver, subject to a 2% NSR on all future production. Barrick can earn a 69% interest in the Tres Cruces project by spending US$1.7 million and carrying New Oroperu through to production. In addition, New Oroperu will receive cash payments of US$800,000 spread over two years and US$250,000 per year thereafter.
Barrick’s exploration program to date at Tres Cruces, includes geological mapping, re-logging of existing drill core, induced polarization and gravity geophysical studies and the drilling of 14 core holes totalling 4,029 metres. Barrick intersected 186 metres of 1.2 grams on the east margin of the South zone.
“Alto Chicama is going to be a very important district for Barrick,” says Wilkins. “We are very optimistic that the potential for future gold production is really quite high.”
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