EXPLORATION ’92 — Summer production planned for La Colorada

Full-scale gold production is being planned for next summer at the La Colorada project near Hermosillo, Mexico, held by private company Eldorado and a unit of Campbell Resources (TSE).

Eldorado, which plans a public offering this fall on the Vancouver Stock Exchange, can earn a 70% interest by placing the heap-leach project into commercial production. Since signing the option agreement last December, more than US$1.5 million has been spent on acquisition, exploration and the development of test production facilities.

The La Colorada district in Sonora has a colorful mining history going back 250 years when the first discovery was recorded by Jesuit missionaries. Since then, over one million ounces gold have been produced from underground high-grade quartz vein systems, with the bulk of production from 1860 to 1916 by British and American companies.

The district, and its potential for bulk-tonnage gold deposits, came to the attention of a group of mining professionals in early 1991. The Eldorado team now includes mine financier Chester Millar, exploration professionals Richard Barclay, Michael Beley and Gary Nordin, and international businessman Marco Romero.

“Some juniors coming to Mexico are looking for projects to flip or promote,” Millar said. “But we have a strong operational background, and look for properties that do not require a lot of capital to get going. Heap-leaching epitomizes that, and once we saw La Colorada, we knew we had an instant candidate.”

Millar said Mexico’s potential for bulk-tonnage deposits amenable to heap-leach processing is largely untapped. But that was the clear focus for Eldorado, which outlined several open-pit heap-leach gold deposits during a 75-hole drill program earlier this year. Three of these deposits (near one another) contained near-surface preliminary reserves totalling 4.9 million tons grading 0.037 oz. gold per ton.

A pilot heap-leach test began this past August aimed at recovering 1,500-1,700 oz. gold. The test was based on 33,000 tons grading 0.077 oz. gold. The reserve was found to be well-suited to open-pit heap-leach mining, with good recoveries, a low work index, and run-of-mine ore requiring no blasting or crushing.

The test is also providing both revenue and information necessary to complete a feasibility study. Although a few details remain to be finalized, Eldorado is looking to start full-scale production next summer and work toward increasing gold production in stages to about 20,000 oz. annually. A 4,000-ton-per-day operation is envisioned, which provides for a 7-year mine life. Exploration will continue on the property, and once the public offering is completed, the company intends to grow by taking on other mineral projects in Mexico.

“La Colorada is our opening shot and just a beginning in our long-range foray into Mexico,” Millar said. “We will be aggressively looking for new projects.”