Last year’s merger with Francisco Gold delivered two major gold projects that will play a key role in the future of
The first property expected to reach production is El Sauzal, in the southwestern corner of Mexico’s Chihuahua state, some 15 km east of the Sinaloa state line. The wholly owned project is being developed as an open-pit, conventional oxide milling operation. It lies in a remote, undeveloped and sparsely populated setting 250 km southwest of Chihuahua City and 65 km northeast of Choix, the nearest centre.
Production from El Sauzal is expected to average 190,000 oz. annually for 10 years at a cash cost of US$110 per oz., based on a mill capacity of 5,500 tonnes per day. With an estimated capital cost of US$101 million, including a contingency of US$10 million, the project provides an internal rate of return of 25%, based on a gold price of US$300 per oz.
Proven and probable reserves contain 2 million oz. gold in 18.5 million tonnes grading 3.37 grams per tonne, based on a gold price of US$300 per oz. and a cutoff grade of 0.8 gram per tonne.
James Voorhees, Glamis’s chief operating officer, expects to have all major permits in hand to begin plant and mine construction by the second half of 2003, with commercial production slated to begin in the first quarter of 2005.
“We continue to have positive relationships with the communities in the region, as well as with all levels of government,” Voorhees told analysts and investors during a recent presentation of the company’s first-quarter results. “The people and leaders in Mexico want this project completed not just for the jobs but for the infrastructure it will bring to the region.”
The mine is expected to employ a workforce of around 209 people. An operations team is already in place, including two senior high-level managers to lead the technical and administrative divisions.
Construction and upgrading of a 92-km-long main access road from the mine site to Choix is under way, and a power line will follow the same route. Once the new southern access road is completed, Los Lochis, a port city on the west coast in Sinaloa state, will be only a 5-hour drive away. A recently built airstrip at the project site is now fully functional. In the long term, the airstrip will contribute to both the security and safety needs of the mine.
Infrastructure is key for moving this project forward, said Voorhees. “We have got a good head start on many of the areas, and long-lead-time items, such as the grinding mill, have been ordered.”
Topographic relief in the project area is severe, with elevations ranging from 325 metres above sea level at the Urique River, just below the deposit, to more than 900 metres above the crest of the proposed open pit. Water will be sourced from two pump wells built 2 km away on the northern bank of the nearby Rio Urique. The main pipeline is under construction.
Through the Francisco merger, Glamis also acquired the Marlin project, in the western highlands of Guatemala. The company has expanded the mineral resource to more than 5.6 million oz. gold-equivalent, adding 4.2 million oz. in just 10 months, at a low cost of US$1-2 per oz.
“We have been successful with our exploration at Marlin,” said Charlie Ronkos, the company’s exploration manager, adding: “There is still more to come.”
The mineralization remains open on the west end and down-dip to the south. In recent drilling, Glamis identified, for the first time, visible gold in several of the deeper holes drilled along a fence on the western extension. It has taken more than 250 holes to spot the first visible gold. Results from this fence of holes include 14.9 grams across 21 metres, 14.7 grams over 15 metres, and 12.9 grams across 8.8 metres. The company has stepped out a further 250 metres and, though assays are pending, Ronkos said gold is also visible in the new holes. Rock geochemistry extends the zone another half a kilometre.
“Marlin is quickly becoming our most important asset, justifying the accelerated exploration effort in the first quarter,” said President Kevin McArthur.
A recently completed interim feasibility study of a proposed open-pit/underground mining and conventional milling operation has Glamis considering startup in the fourth quarter of 2005.
The Marlin project comprises 100 sq. km and is 50 km, by road, southwest of the town of Huehuetenango. The country’s capital, Guatemala City, is 120 km southeast of Huehuetenango, but 300 km by road. Marlin falls within the municipality of San Miguel Ixthuacan, a village of 8,000. San Miguel has power and water service, in addition to several stores and small restaurants.
The Marlin deposit was discovered in 1998 through regional grassroots exploration by local geologists working for a private, Vancouver-based exploration company with which Francisco’s then-president, Randy Reifel, was affiliated. The field crew uncovered precious metal mineralization in a roadcut along the crest of a 1.5-km-long ridge. The Marlin project covers elevations ranging from 1,800 to 2,300 metres.
Francisco acquired the privately held company in 2000 and had delineated a resource of 1.4 million oz. gold-equivalent by the time Glamis took over in July 2002. The measured and indicated resource stands at 53.9 million tonnes grading 1.7 grams gold and 24.4 grams silver, equal to almost 3 million oz. gold and 42.1 million oz. silver, or 3.6 million oz. gold-equivalent. An additional 1.7 million oz. gold and 27.4 million oz. silver, for more than 2 million oz. gold-equivalent, are contained in an inferred 37.9 million tonnes grading 1.4 grams gold and 22.5 grams silver.
“We are pretty excited about the drill results at Marlin to date and about the upside the project continues to exhibit,” said Steven Baumann, Glamis’s vice-president for Central America.
The deposit is hosted in a quartz-adularia epithermal vein system within a Tertiary-age, bimodal, mafic volcanic unit. Most of the mineralization is contained in quartz veins and stockwork in a dacitic, lithic tuff of the Marlin formation. The mineralized system dips gently to the south near the surface and steeply at depth. Many of the higher-grade intersections occur in south-dipping, tectonic breccia zones in an underlying volcaniclastic sequence. A small part of the mineralization is in calcite veins.
The bimodal volcanics are intruded by andesitic dykes, in a fault controlled basin. The alteration seems to follow the andesitic dykes. Said Ronkos: “We have high-temperature alteration at the south end, and it gradually goes into lower-temperature alteration at the north end, and the alteration seems to widen where faults cross the major trend of alteration.”
Drilling to date has confirmed continuity of the mineralization along strike, and includes the Los Cochis, Main and Southeast Extension zones. The mineralization extends in a northwest-southeast fashion over a distance of 1,400 metres and a width of up to 300 metres. A 150-by-75-metre layer of weathered vein rubble material overlies a portion of the Main zone. This Rubble zone is relatively higher-grade and has metallurgical and physical characteristics that distinguish it slightly from the rest of the deposit.
Post-mineralization faults have produced shear zones along the mineralization. Clay alteration, consisting of illite and kaolinite, forms adjacent to the veins.
Drilling has tested the Marlin deposit for more than 1,000 metres downdip, representing a vertical range of little more than 500 metres. About one-fifth of the mineralization found to date is oxide. The remaining is transition and sulphide. The sulphide mineralization contains pyrite at concentrations of 1-3%.
There are still a lot of open areas to test, said Ronkos. Glamis has just started putting holes into the Condemnation zone, a 700-metre-long soil anomaly to the east. The Southeast Extension zone had appeared to be closing off, but the last line of holes included one intercept that ran 41 grams gold across 1.5
metres, with assays pending on adjacent holes. “We think that [intercept] may be the start of the Vero zone,” said Ronkos. Vero is a continuation of what was originally called the Cancil target, and it apparently strikes and dips parallel to the Main Marlin zone. Quartz vein alteration at Vero is closely associated with mafic dykes. Surface sampling has returned several multi-gram hits of up to 13 grams.
At the Los Cochis zone, Glamis has yet to drill beneath two holes that encountered high-grade intercepts of 94 grams over 1.5 metres and 52 grams across 1.5 metres. “There is a chance the Los Cochis zone may connect to the Don Tello,” said Ronkos. Don Tello is a second vein zone that strikes northeast and dips steeply to the north.
Glamis recently completed an interim feasibility study of both an open-pit operation and a combined open-pit/underground mine, based on conventional milling at the daily rate of 4,000 tonnes. The open-pit/underground option is considered economically preferable; it would generate 190,000 oz. gold (225,000 oz. gold-equivalent) annually over a 10-year mine life at a cash cost of US$101 per oz. and a total cost of US$208 per oz. (including acquisition). With a capital investment of US$100 million, the optimized version provides an estimated internal rate of return of 25% based on a gold price of US$300 per oz. and a silver price of US$4.50 per oz. “Economically, this project is a real winner,” said Baumann.
The open-pit is modelled to contain proven and probable reserves of 10.9 million tonnes grading 3.5 grams gold and 45.9 grams silver, equivalent to 1.2 million oz. gold and 16 million oz. silver, at a stripping ratio of 3.5-to-1. The much higher-grade underground component is based on a measured and indicated resource of 1.1 million tonnes grading 15.6 grams gold and 246 grams silver, equivalent to 553,000 oz. gold and 8.7 million oz. silver, as well as an inferred 620,000 tonnes grading 14.3 grams gold and 225 grams silver, or 285,000 oz. gold and 4.5 million oz. silver.
Underground mining (with ramp access) would begin about a year after the open pit starts up. The pit is modeled to a depth of 200 metres, followed by a 300-metre-deep underground mine. Underground design work is being conducted by AMEC E&C Services. The current design, based on rock-mechanics studies, calls for a spiral ramp access in the footwall of the deposit, with intersecting crosscuts providing access to the stopes. A conservative stoping method of underhand drift-and-fill, with cemented rock-fill, has been chosen. The proposed underground mining rate is 750 tonnes per day.
Plans call for Marlin ore to be processed with a semi-autogenous grinding and ball mill, followed by an agitated cyanidation leach circuit and Merrill-Crowe plant.
Average overall recoveries for the four ore types (oxide, mixed, sulphide and rubble) are 91% for gold and 83% for silver. Optimum results were obtained on a 200-mesh-grind over a leach time of 72 hours. Early flotation results are said to be promising, and additional testing is under review.
Tests were also carried out on lower-grade oxide resources to determine their leachability. “There is a sizable amount of lower-grade oxide ore in and around the area that’s not currently envisioned in this project, because it doesn’t meet the grade of the mill,” said Baumann. Results show that the oxides are quite amenable to heap leaching, with a simple crush. Recoveries are in the neighbourhood of 70-80% for gold and 35% for silver. Baumann is certain there will be a component of heap-leaching in the final mine plan.
Power is available from two different directions, both about 25 km away. Studies are under way to determine which of those two represents the best path. The project will need a maximum of 600 gallons per minute (gpm) of water, which is available locally from streams and from underground in the project area. The company is preparing to submit an environmental impact statement to government authorities and expects permits to be in hand by April 2004. Construction will not begin until the receipt of an exploitation permit, which is expected by June 2004.
“While the ultimate size and details of the Marlin mine are expected to change as drilling continues, we are pleased to have completed this feasibility study, which establishes basic operating parameters and capital and operating costs,” stated McArthur. “As optimization studies and drilling programs continue, we are confident in our team’s ability to convert more of the large mineral resource to reserves and to discover additional mineralization.”
Final design plans for the project should be completed by November.
Aside from expanding the resource at Marlin, Glamis has identified several regional drill targets. Ongoing exploration has identified an extensive network of parallel and crosscutting faults and fractures, which are traced for over 10 km along strike from the main deposit area.
Fields crews have uncovered narrow zones of iron oxide and silicification at the Coral target, directly north of the deposit area. Surface chip sampling of these silica zones has yielded gold values of up to 10 grams in several spots. Alteration has been traced over a distance of 1 km in a northwest-southeast direction.
La Hamaca is a prospect 3 km northeast of the Main zone and, according to Ronkos “has all the ingredients of a good target — it’s a big soil anomaly; it has the andesite intrusives; it has a large regional fault; and it has many silica ribs.”
Soil sampling has outlined an 800-by-200-metre area anomalous in gold, with some quartz veining and quartz stockwork. Surface chip samples returned values of up to 2.5 grams.
While the company so far has focused on the northern half of the property, Ronkos believes the southern portion holds a lot of potential. Visible alteration there has yet to be mapped it in detail. “We are going to identify more targets to the south and test these targets.”
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