EXPLORATION 1999 — Full study recommended for Cerro Crucitas — Lyon Lake sees potential in Placer Dome hand-me-down

Having put US$2 million so far into acquiring the Cerro Crucitas gold project in northern Costa Rica, Lyon Lake Mines (LLL-M) is seeing signs that the money was well spent.

Lyon Lake hired the projects and construction division of Cambior (CBJ-T) to review the prefeasibility study performed by previous owner Placer Dome (PDG-T). That review concluded that the deposit was potentially economic and that a full feasibility study was justified. Cambior estimated that a full feasibility study would need a budget of US$1.05 million.

Cerro Crucitas is a large, low-grade deposit with a total resource of 49.6 million tonnes grading 1.8 grams gold and 3.7 grams silver, based on a 1-gram cutoff grade. At a lower cutoff of 0.6 gram, the resource rises to 73.4 million tonnes, with average grades of 1.2 grams gold and 3.5 grams silver per tonne.

The review examined the economics of an open-pit mine with a conventional mill, exploiting a resource of 27.9 million tonnes at average grades of 1.7 grams gold and 2.3 grams silver per tonne. Over an 8-year mine life producing an average of 175,000 oz. gold annually, Cerro Crucitas would be expected to have cash production costs of US$180 per oz. A higher production rate of 200,000 oz. in each of the first three years would bring early-stage costs down to US$158 per oz., and the capital would be paid back in 3.1 years.

The estimated capital cost to turn the project into a mine is US$135 million, which includes US$24 million for contingencies and capital expenditures during production. Cambior estimated an internal rate-of-return of 15%.

The feasibility figures are based on a gold price of US$350 per oz., though Cambior’s review indicated that the project had little sensitivity to the price of gold; only 7% of the tonnage was taken out of reserves at a gold price of US$325 per oz.

Lyon Lake expects that further exploration on the property will improve the feasibility picture. The neighbouring Conchudita concession also has a gold deposit, estimated at 3.2 million tonnes grading 4.6 grams gold per tonne, and Lyon Lake is planning a 4,000-metre drill campaign there. At another nearby concession, San Antonio, soil and rock geochemistry has shown high concentrations of gold, and Lyon Lake plans to carry out 2,000 metres of drilling to test the geochemical anomaly.