Western Goldfields to reprocess leach pads, expand pits
Mention California to gold-mining types and they’ll invariably wind up talking about how its politicians have turned their backs on their “Golden State” heritage and chased out miners by enacting legislation that’s hostile to the industry, such as forcing anyone opening a new open-pit mine to refill the pit with waste-rock as part of the reclamation process.
This attitude — that gold mining has no place in today’s California — is one that Thomas (Toby) Mancuso, president of Reno-based junior
Mesquite is at a moderate elevation in the Mojave desert, immediately south of the Chocolate Mountains Gunnery Range, some 56 km east of Brawley (pop. 22,000) and 72 km northwest of Yuma, Ariz. (pop. 85,000).
State Highway 78 passes just south of Mesquite, and the mine is well-supported by existing infrastructure, including the Southern Pacific Railroad (it were the crews building the railroad in 1876 who first discovered Mesquite’s gold).
While there has been intermittent placer and hard-rock mining in the Mesquite area since the late 1800s, the modern-day Mesquite mine opened in 1986, and has since produced 3 million oz. gold, or about 200,000 oz. annually in its heyday in the early 1990s.
What’s left behind at the Mesquite property today is a global resource of 110 million tonnes grading 0.62 gram gold per tonne (121 million tons at 0.018 oz. gold per ton), or 2.2 million oz. gold contained in both leach pads and fresh rock. Reno-based Mine Development Associates has confirmed this resource for Western Goldfields (WG).
Gold mineralization at Mesquite is both coarse- and fine-grained and hosted in two sub-parallel, Oligocene-aged epithermal deposits consisting of Jurassic-aged gneisses intruded by biotite- and muscovite-rich granites.
Ownership of the Mesquite mine has changed hands four times since it opened.
Gold Fields Mining Corp., a unit of U.K.-based Consolidated Goldfields, built Mesquite in the mid-1980s, but the parent was taken over by Hanson Natural Resources in 1989.
Hanson was never enamoured of the yellow metal and, in 1993, dealt its wholly owned gold assets, including Mesquite, to Santa Fe Gold.
Newmont halted mining at Mesquite in May 2001, and the last ore was stacked on the leach pads in August of that year.
Newmont’s mining permits ran out in 2001 and, because the major was a little slow in applying for its pit-expansion permits, it only received complete permits for expanding Mesquite in 2002 — well after mining had ceased and equipment was moved off-site.
In November 2003, WG acquired its 100% interest in Mesquite from Newmont in a cashless transaction. WG issued to Newmont 3.4 million shares and 8 million warrants exercisable at US$1, and assumed reclamation and closure responsibilities of US$8 million, which have since been covered by an environmental-insurance policy with
WG must also pay Newmont half of net profits from gold recovered from existing leach pads and royalties of 0.5-2% on newly mined ore.
WG paid for the insurance policy and subsequent work at the property with a US$6-million loan from South Africa’s First Rand Group (now mostly repaid), and a net US$9-million private placement of 25 million shares, plus half as many warrants, completed in December 2003 and arranged by Toronto-based IBK Capital.
“This deposit’s been banged around,” says Mancuso. “Newmont didn’t really care about Mesquite because it wasn’t big enough and not in Nevada, and the project was neglected for about twelve years. Santa Fe and Newmont never put any money into it and it just chugged along.”
Residual gold production has continued since mining was halted, with 22,575 oz. gold coming off the pads between WG’s purchase date on Nov. 7, 2003, and Sept. 30, 2004.
In WG’s first year of ownership of Mesquite, the company achieved several milestones:
– it took over operatorship from contractor Harrison Western Construction;
– it spent US$1.5 million recommissioning a gold refinery and related facilities in order to produce dor on-site (consisting of 80% gold and 11% silver), which is then shipped to Johnson Matthey’s refinery in Salt Lake City, Utah; and
– it completed a favourable prefeasibility study of the potential for reprocessing the leach-pad material and restarting hard-rock mining.
1 million oz.
Central to the Mesquite story is that, though 3 million oz. gold have come off the pads so far, WG reckons that at least 4 million oz. were laid on them, leaving behind some 1 million oz. gold in about 142 million tonnes of leach-pad material.
The reason so much gold was left on the pads can be traced to Mesquite’s status as one of the first large heap-leach operations ever developed in the southwestern U.S.: the technique was new, and mistakes were made.
Chief among these was the loading of ore on to the pads using dump trucks rather than today’s gentler conveyors and stackers.
“They’d drive and dump, drive and dump, thereby creating an impermeable layer by packing the pads every twenty feet,” says Mancuso. “We drilled into the heaps and found, every twenty feet, a nice, dry, packed solid.”
These impermeable layers prevented proper percolation of cyanide solutions through the heaps and therefore lowered recovery rates.
Previous operators also put high-grade gold ore on to the heaps — a particularly wasteful method of gold recovery for high-grade. Mancuso says past operators did this because they “were just looking for tonnes.
“Drill tonnes up there, do it as quickly as possible and get out, because it isn’t a core asset,” he says, describing the operators’ attitude.
Another no-no by Newmont was to place run-of-mine sulphide ore on top of the pads. As this sulphidic material was leached, it created acidic conditions in the pad material, dropping the pH from optimal levels of 10 or higher, down to the upper 8s or low 9s.
This excess acidity in the leach pads attacked the cyanide being introduced and prevented it from dissolving the gold. The end result was that unnecessarily high cyanide consumption (and costs) were needed to offset the acidity, and this continues to be the case.
So, going forward, WG is looking at blasting, moving and completely reprocessing the pad material, into which lime would be added in order to raise the pH levels back to optimal levels.
“The economics are looking good in our scoping study,” says Mancuso. “We’ve gone into Mesquite with a totally different view and attitude, really looking at improving the efficiency and recovery off the leach pads.”
Newmont, which still retains its 3.4 million WG shares (a 9% interest), is co-operating with WG on some joint metallurgical work on the heap-leach pads. Comments Mancuso: “We’ve had a good relationship, and it’s a good group to have on your side.”
Pit expansion
Beyond the gold left in the pads, Newmont left behind about 890,000 oz. of gold resources in nine pit-expansion areas. The resources are contained in 38.9 million tonnes grading 0.72 gram gold per tonne (42.9 million tons at 0.021 oz. gold per ton).
“That’s too small for them, but just fine for us,” says Mancuso. “We’re looking at each of the nine and completely redoing the geological model, trying to tear it apart and see what we can do with it. I think we’re going to be able to do much better than that [890,000-oz. resource] when we’re done.”
The best-developed of the nine pit-expansion areas is Big Chief North, where there are we
ll-defined, easily accessible, fully oxidized resources of 17.9 million tonnes grading 0.75 gram gold.
“We want to get in there and initiate mining at Big Chief North on a 50,000-oz.-per-year basis,” says Mancuso. “Just to get things rolling.”
WG won’t repeat the mistakes of Mesquite’s past operators and plans to load the pads using cheaper, more efficient and less compacting conveyors instead of trucks.
WG will also pay far more attention to the selective mining and alternative processing of any high-grade ore.
Newmont turned over to WG a vast database for Mesquite, comprising 6,221 exploration holes (823,500 metres) and 650,000 blast holes. As WG geologists pore over the data, Mancuso says they are able to see, for the first time, significant continuity of high-grade mineralization in the nine expansion areas and two smaller areas WG has found.
“We’re amazed at the grades we’re finding within structures, shear zones and faults throughout the Mesquite system,” says Mancuso. “Some of this high-grade starts thirty metres from surface, and it’s never been focused on. With the big trucks and big equipment, it was just mined and thrown on the leach pads. We think it has tremendous potential — and we’re looking closely at just one area right now — because there’s high-grade throughout the project site.”
Whether future mining is achieved by open-pit or underground methods, says Mancuso, “we’ll get a grade-control geologist down there watching twenty-four hours a day so that we can pick out the high-grade stuff.”
More broadly, WG is carrying out a thorough review of the hard-rock potential in the entire Mesquite permit area, and is completely remodelling the whole system’s geology and epithermal mineralization.
“Because Santa Fe and Newmont essentially put together a bulk-minable, huge-tonnage-type operation, they never really focused on geology and grade control or anything like that, to our knowledge,” says Mancuso.
He believes Mesquite has plenty of depth potential, too, since only four of the 6,200 holes drilled at the property have exceeded 600 metres, and only a few more exceeded 400 metres depth.
He says a couple of the holes “did intersect substantially high-grade mineralization down deep, and some of it was sulphide, but that’s okay, especially with the grades we’ve seen.”
In the near-term at Mesquite, WG hopes it can begin ramping up Big Chief North in the fourth quarter of 2005, producing about 25,000 oz. gold in 2005 and 80,000-100,000 oz. gold in 2006. During that time, WG would also be developing other expansion zones so that, by 2007, Mesquite could conceivably be producing well above 100,000 oz. gold annually at a cash cost below US$250 per oz.
Within five years, WG hopes to be producing a quarter of a million ounces annually.
Within the realm of junior gold producers, WG wants to position itself as an unhedged gold producer, though it did have to hedge 26,400 oz. gold at US$383 per oz. to obtain its US$6-million First Rand loan.
The existing pits, expansion areas, heap-leach pads, and dumps are all in a fully permitted area that comprises 2.1 sq. km (5,200 acres). Mancuso says there is mineralization outside the permitted area but that at this time, “California is not an easy place [to obtain new permits], and we’ve got enough work to keep us busy for ten years just in the immediate Mesquite area.”
L.A. garbage
A unique twist to Mesquite’s rebirth is an alliance WG has made with the County Sanitation District of Los Angeles in relation to city’s plan to build North America’s largest-ever landfill immediately west of the Mesquite mine, beginning toward the end of this decade.
The landfill’s scale will be enormous: Starting 270 km away at a loading terminal to be built at the soon-to-be-closed Puente Hills landfill in Los Angeles, trains will haul some 20,000 tonnes of garbage per day to the Mesquite area. There, workers will unload it on to enormous pads that will be 4-6 km long and up to 125 metres deep — or as high as a 30-story building stretching from Toronto’s Front Street up to the city’s Yonge-and-Eglinton neighbourhood.
The landfill operators will use Mesquite’s spent leach material (with the cyanide cleaned out of it) and dump material (currently amounting to 265 million tonnes) to cover the garbage on a daily basis. They will also line their landfill pads with clay mined from WG’s Mesquite property.
“The L.A. Sanitation department has the rights to this material, and we’re working with these folks to see if we can assist them in transporting it,” says Mancuso, adding that he does not yet know the arrangement’s dollar value.
“We’re earth-movers and they’re landfill guys, so there’s got to be some kind of a beneficial relationship there,” he says. “This landfill is a huge, huge project relative even to a gold mine, and for Imperial County it’ll generate tremendous revenues. They’re going to be out there a long time — they have a hundred-year lease that can be extended, and we’re going to be there ten to twenty years mining gold — so it’s an opportunity for us to be involved in something long-term.”
Adds Mancuso: “Essentially, in California, miners have been afraid of the open pit and back-filling. But at Mesquite we cannot backfill, because L.A. has rights to use all our material to cover its new landfill. It provides a big benefit to us in our reclamation, closure and bonding obligations.”
Mancuso says that “in the California situation, Mesquite is an exception; it’s fully permitted and it’s been there for years and years. People say, ‘California?!’ but it’s okay, because we’re not fighting the same battles other people out there are fighting, like Canyon Resources with Briggs.”
While WG’s sole producing asset is the Mesquite mine, the company has three more advanced gold projects: Cahuilla, west of Mesquite in Imperial Cty., and two mothballed mines in Nevada — Lincoln Hill in Pershing Cty. and Sunny Slope in Mineral Cty. (see map, below).
Cahuilla is near the town of Indio, on the Torres Martinez Indian reservation. Drilled in past decades by Homestake Mining, Newmont and Kennecottt, Cahuilla hosts an 856,000-oz. gold resource in 38.9 million tonnes grading 0.69 gram gold per tonne (42.9 million tons at 0.02 oz. gold per ton). Gold occurs in both high-grade and bulk-disseminated mineralization that WG describes as being similar to Mesquite’s.
Mancuso is familiar with Cahuilla, having developed it as a geologist for Kennecott from 1993 until 1997, when Rio Tinto bought Kennecott and then divested or dropped all of its target’s gold projects.
“With Cahuilla being on an Indian reservation, we have significant permitting benefits, because the tribe is pro-mining and pro-active, and they really want to see this thing get rolling,” says Mancuso.
He adds that WG has formed a good relationship with the tribe, and together they are forging a formal exploration and mining agreement. WG hopes to restart drilling at Cahuilla in the near-term.
WG is also evaluating mineral opportunities in Mexico.
At the corporate level, and with the help of Toronto-based brokers Research Capital, WG is laying the groundwork for a Toronto Stock Exchange listing in the coming months and afterwards plans to upgrade its OTC listing (active since September 2004) to a senior U.S. exchange.
“We want to get on a real exchange, and Toronto understands precious metals, so it’s the next logical step,” says Mancuso.
As part of its TSX listing requirements, WG hired Mine Development Associates to complete a technical report on Mesquite that is compliant with National Instrument 43-101. In that report, MDA’s updated reserve and resource estimates confirm Newmont’s original, in-house assessments.
WG has 38.7 million shares outstanding (60.1 million fully diluted), and shares were traded at about US40 at presstime. The company has US$1.5 million in cash, and is seeking to raise a couple of million dollars to help fund a feasibility study.
Mancuso expects WG wi
ll need to spend US$36 million to get the Mesquite mine back up and running at significant levels, including US$19 million for a mining fleet, US$5 million for a crushing and processing plant, US$4 million for a conveyor and stacking system, and US$5 million for new leach pads.
In addition to Mancuso, WG’s management team is rounded out by: Larry O’Connor, vice-president of operations; Mark Shonnard, chief financial officer; and Thomas Callicrate, vice-president of exploration. In all, WG has more than two-dozen full-time employees.
At the board level, the directors are Mancuso, Callicrate, Chairman James Mancuso (Toby’s father), Douglas Newby and Gerald Ruth. As independent directors, James Mancuso is paid US$7,500 per quarter while Newby and Ruth receive US$5,000 quarterly.
In mid-2004, these officers and directors owned about 10% of WG’s outstanding shares. On an individual basis, Toby Mancuso owned 1.1 million shares; Callicrate, 1.1 million; Newby, 554,000; Ruth, 450,000; James Mancuso, 400,000; Shonnard, 300,000; and O’Connor, 225,000.
“We put this team together because we want to make gold,” says Mancuso. “That’s it. That’s our objective.”
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