EXPLORATION ROUNDUP — Sulphide discovery changes picture at Cerro Casale

It would seem there is more to Chile’s Aldebaran project than meets the eye.

The discovery of deep-seated sulphide gold-copper mineralization extending beneath the Cerro Casale oxidized gold deposit has forced joint-venture partners Arizona Star Resource (AZS-V) and Bema Gold (BGO-T) to delay development of the oxides until they can determine just how big the overall sulphide deposit is.

“We need to know more about the sulphides before we proceed with the oxides,” explained Dennis Stansbury, Bema’s vice-president, South American projects, during a site visit by The Northern Miner and various mining analysts.

Though drilling is still at an early stage, 14 of 19 holes have intersected the main porphyry body at depth. Results indicate that grades are exceptionally consistent, with 12 holes averaging 0.92 gram gold per tonne and 0.35% copper. Two additional holes intersected a higher-grade breccia zone, which will be evaluated with additional drilling.

Preliminary estimates suggest the tabular-shaped body is 850 metres long, 300 metres wide and at least 750 metres deep. It remains open to the south, southwest, north, northwest and at depth.

The diorite porphyry body outcrops as an oxidized gold deposit on the northeastern face of a talus-covered hillside. The oxide portion is estimated to contain a reserve, minable by open-pit methods, of 93.8 million tonnes grading 0.65 gram gold. The transition of oxide to sulphide mineralization occurs at a depth of around 300 metres.

Several holes have also encountered a pocket of higher-grade breccia mineralization, with an overlying supergene-enriched zone. The higher-grade mineralization was first revealed by reverse-circulation (RC) drill hole 176, which intersected a 42-metre interval grading 17.8 grams gold and 1.5% copper.

Follow-up diamond drill hole 19 returned 242.2 metres of breccia grading 4.22 grams gold and 1.14% copper. In the recent deep drilling, two holes intersected lower grades in the breccia zone: Hole 23 intersected 174 metres grading 1.7 grams gold and 0.23% copper, whereas hole 25 cut 176 metres grading 2.11 grams gold and 0.5% copper.

The extent of the breccia zone is not yet defined, but it could serve as a sweetener for the main porphyry zone. At least three other breccia zones are identified in the oxide portion of the deposit.

Thomas Garagan, Bema’s vice-president of exploration, believes the potential size of the porphyry body, including the oxide portion, could exceed 500 million tonnes. And in a recent report, James Taylor, a mining analyst with Yorkton Securities, estimated the deposit could contain 14.5 million oz. gold and 2.6 billion lb. copper (assuming a tonnage of 500 million and an average grade of 0.9 gram gold and 0.35% copper).

The Aldebaran property is held 51% by Arizona Star and 49% by Bema, both of which are based in Vancouver, B.C. Bema also owns a 31.5% interest in Arizona Star, which translates into a 64% direct and indirect interest in the project.

Aldebaran lies in the southern end of the Maricunga mining district in north-central Chile, about 150 km inland from the Pacific coast and 100 km southeast of the city of Copiapo.

Maricunga is a 120-km-long belt of Eocene-to-Miocene-age volcanic rocks trending north-south along the Chilean-Argentine border. It encompasses a series of gold deposits, including La Coipa, Marte, Lobo and Refugio: n La Coipa deposit — La Coipa, which lies 90 km north of Aldebaran, is an open-pit, gold-silver mine, ownership of which is split equally between Placer Dome (PDG-T) and TVX Gold (TVX-T). Proven and probable reserves stand at 44.2 million tonnes grading 0.8 gram gold and 83.8 grams silver.

Since startup in 1989, La Coipa has cranked out 141,000 oz. gold and 4.7 million oz. silver at a cash cost of US$162 per oz. gold-equivalent. For the first nine months of 1996, the mine yielded 95,000 oz. gold and 4.8 million oz. silver at a cash cost of US$180 per oz. gold-equivalent.

n Marte and Lobo deposits — Under an agreement-in-principle with companies in the Anglo American group, and in conjunction with a separate agreement with Cominco (CLT-T), Teck (TEK-T) can acquire a 60% interest in the Lobo and Marte gold properties by paying US$51 million and carrying out a feasibility study. The properties are 60 km northwest of Aldebaran.

Marte operated in the early 1990s as an open-pit, heap-leach mine but was plagued by design and operating problems, resulting in a production shortfall. Reserves are now estimated at 26 million tonnes grading 1.63 grams gold.

The Lobo property hosts a reserve, minable by open-pit methods, of 53 million tonnes grading 1.73 grams gold.

Subject to due diligence and a definitive agreement, Teck intends to develop the properties jointly, in which case a carbon-in-pulp mill, capable of producing 300,000 oz. per year, would likely be constructed.

n Refugio mine — The newly constructed Refugio gold mine, 30 km to the north of Aldebaran, is an open-pit, heap-leach operation jointly owned by Bema and Amax Gold (AU-N) (see separate feature, page B1). The mine recently reached commercial production after a delay of several months, caused by mechanical and structural problems related to the fine crushing plant.

Based on the current mine plan, Refugio is expected to produce 233,000 oz.

gold over an initial 9.4-year mine life, with cash operating costs averaging US$237 per oz.

The minable reserve stands at 101.6 million tonnes grading 1.03 grams gold, with a stripping ratio of 1-to-1. According to an extended base-case mine model, minable reserves will be increased to 185 million tonnes grading 0.89 gram at a stripping ration of 0.9-to-1.

High-altitude project

Like Bema’s 50%-owned Refugio gold mine, Aldebaran is a high-altitude project. The Cerro Casale oxide deposit outcrops at an elevation of 4,460 metres.

Arizona Star acquired an option to a 51% interest in the Aldebaran from Minera Anglo American Chile in 1991. Terms of the agreement called for property expenditures of US$4 million and a payment of US$2 million. Arizona Star exercised that option in September 1994.

The 103-sq-km property features a 14.5-km-long trend of highly altered volcanic and intrusive rocks containing prospective, bulk-tonnage, gold porphyry targets. The principal target is Cerro Casale, an oxidized, east-west-trending, gold-bearing, stockwork zone where previous trenching returned values of 2.4 grams over 85 metres and 2.06 grams over 42 metres.

Anglo American has tested Cerro Casale with 14 RC holes, the best of which returned 1.68 grams from surface to a depth of 100 metres. Arizona Star has since drilled off the oxide portion of Cerro Casale with more than 200 RC holes and 10 geotechnical core holes.

Heap-leach potential

A prefeasibility study indicates potential for an open-pit, heap-leach mine.

The study concludes that a 15,000-tonne-per-day operation, utilizing a tertiary crushed size of minus a quarter of an inch, could produce 103,500 oz. per year over a 13.8-year mine life at a projected cash cost of US$273 per oz. The capital cost is pegged at US$64.5 million.

Believing costs can be further reduced by means of a modified crushing system, Arizona Star has continued to evaluate Cerro Casale with additional drilling and metallurgical testing. The data will be incorporated into a feasibility study.

In early 1995, Bema teamed up with Arizona Star by acquiring Anglo American’s 49% interest in exchange for US$4 million.

In April 1995, the project economics were updated, based on the latest metallurgical test results, which indicated gold recoveries averaging 83% and a primary crushed size of minus 6 inches. The elimination of fine crushing lowered projected cash costs to US$245 per oz. and reduced estimated capital costs to US$48 million.

Although a feasibility study on the oxide portion as a stand-alone, 30,000-tonne-per-day heap-leach operation is expected shortly, the extent of the sulphide mineralization discovered during this year’s deep drilling program will ultimately determine the type and size of operation proposed.

Management envisions open-pit production of more than 100,000 tonnes per day, with the sulphides subjected to standard flotation techniques.

Low stripping ratios

The stripping ratio is said to be enhanced by the topography: Cerro Casale outcrops in a hill, which rises close to 300 metres above the surrounding area. The oxide portion would require no pre-stripping, and the geometry of the deposit is such that the stripping ratio will be kept low. Geologist Peter Boise projects stripping ratios of between 2.1-to-1 and 3-to-1.

Management believes the deposit can be mined by open-pit methods to depths beyond 1 km below surface.

Metallurgical tests performed on partially oxidized material indicates favorable gold and copper recoveries, and more extensive studies on the sulphides are under way.

Over the next seven months, Bema and Arizona Star intend to drill off the main sulphide body. Four diamond drill rigs are currently on site, two of which are directed at firming up the grade in the main porphyry zone and stepping out to the south; the third rig is concentrating on delineating the breccia zone, while the fourth is being used as a wildcat drill for stepout holes. An additional, RC rig is being used to test other porphyry targets. In total, between eight and 10 deep drill holes are expected to be completed each month.

Bema’s Stansbury is confident the company will be able to calculate a preliminary resource for Cerro Casale by March 1997.

Additional potential at the Aldebaran property lies in satellite deposits. A 25-hole, 5,000-metre RC drill program is under way on the Cerro Roman and Romancito targets, 7 km northeast of Cerro Casale. The targets are diorite porphyries about 1 km apart from each other, and Bema’s geologists believe they could represent one mineralized system.

During exploration drilling in 1995, five of seven widely spaced RC drill holes on the Cerro Roman zone returned significant intersections, including 100 metres grading 1.13 grams gold, 41.2 metres grading 1.34 grams, and 41.2 metres grading 0.86 gram.

Drilling is also scheduled for the Vetas zone, a quartz vein just west of Cerro Casale where, in the 1980s, Anglo American drove several exploration adits and carried out shallow underground drilling investigating lead, zinc and high-grade silver mineralization. Geologist Kevin Crawford believes the work was carried out too high in the system for gold to be present. Deep drilling will test for gold mineralization at depth, and for the presence of a porphyry.

Other targets

Other porphyry targets at Aldebaran include Eva, Estrella, Enfeatro and Catedral, all of which are in various stages of exploration.

The Eva, 4 km northwest of Cerro Casale, covers an area of strong stockwork mineralization measuring 1 km long by 0.5 km wide. In late 1993, 20 holes totalling 2,200 metres were drilled, returning selected intervals of 68 metres grading 0.95 gram from surface, 28 metres grading 1.03 grams, and 70 metres grading 0.82 gram. An additional 17 holes totalling 2,400 metres were drilled in early 1995.

On the Estrella porphyry zone, preliminary sampling has yielded values of up to 2.64 grams gold.

Bema also holds a 100% interest in the nearby Quebrada property, where work has identified the Marisella and Q Seca diorite porphyries, as well as three other mineralized systems.

The Marisella porphyry, 17 km east of Cerro Casale, extends over a 1-sq.-km area. Trenching has returned selected values of 0.71 gram gold over 63 metres, 0.65 gram over 295 metres, and 0.72 gram over 96 metres.

The Q Seca porphyry, 14 km east of Cerro Casale, is exposed over an area measuring 300 by 200 metres. Trench results include 93 metres averaging 1.7 grams gold, 78 metres of 1.33 grams, and 105 metres of 1.07 grams.

Further exploration at Quebrada will include drilling on both Marisella and Q Seca.

Bema has 91.1 million shares outstanding (or 106.5 million fully diluted), while Arizona Star has 37.4 million shares outstanding (38.9 million fully diluted).