Miramar, Costa Rica — A strong sense of goodwill has gone a long way toward advancing the Bellavista gold project, about 3 km northeast of this small coastal community.
In early 2002,
“Bellavista is fully permitted and sufficiently engineered so that it could be developed into a producing gold mine in a short time,” President Kerry Knoll, himself a former Wheaton director, said at the time.
However, the company was forced to retreat a week later, after newly elected Costa Rican President Abel Pacheco signed a decree banning open-pit mining. A legal challenge ensued and, by October, the Constitutional Court had ruled in Glencairn’s favour.
“That’s when we bought it,” Knoll told The Northern Miner during a recent site visit.
To be sure, Glencairn has a signed letter from the minister of environment and energy, Carlos Manuel Rodriguez, confirming the validity of its permits. Rodriguez had rallied behind the president.
“The minister made it clear that the fight was not against us,” says Bellavista General Manager Franz Ulloa Chaverri. “In fact, they want to use us as an example of how mining could be done inside all the environmental regulations.”
Glencairn aims to build an open-pit, grind-agglomeration, heap-leach mine to exploit an epithermal reserve of 11.2 million tonnes grading 1.54 grams gold per tonne. The proposal is essentially the one tabled by Wheaton in 1999.
Among the environmental precautions are:
- he encapsulation of potential acid-generating waste rock;
- leach pads designed for zero discharge of process fluids; and
- a surge pond large enough to handle a 100-year storm event.
All conveyors will be covered.
“A lot of work has been done based on previous experience working in high rainfall countries,” said Gerald Gauthier, vice-president of operations.
Glencairn also has set aside ground for a forest reserve, arguably reducing the operation’s footprint to zero. The parcel of land will be sold to a non-profit organization, assuming a buyer comes forward.
Glencairn, and Wheaton before it, also has had to overcome strong local opposition, which came to a head in 1996 when former owner Minera Rayrock proposed a combined underground and open-pit operation that crushed ore on site but processed it southeast of the town. Moreover, Minera, which has since merged with
“The idea of having a slurry pipe crossing the river and mountains to another area caused the people to jump up,” says Chaverri. “When Wheaton River came, around 90% of the population were against mining; now, less than 5% are opposed.”
In Wheaton’s favour was its application of regular updates and site tours. Glencairn continues the program, and by the time of The Miner’s visit, more than half the town’s 5,000 inhabitants had toured the property.
Wheaton also won accolades for locating new water sources for the town. At first glance, such initiatives may seem trivial, but the troubles now facing
“People are just waiting for the mine,” says project geologist and community representative Arnoldo Rudin. “They really want the jobs.”
At full-scale production, scheduled to begin in 2004, Glencairn expects to employ 239 people, all of whom will hail from Miramar.
Miners will extract upwards up 1.62 million tonnes annually at an average stripping ratio of 1.32-to-1. An average of 60,000 oz. will be poured in each of the 7.3 years, though steady-state production is to be achieved in year 3, when output peaks at 65,772 oz.
“There is not a whole lot of optimizing that can be done on the pit, because it already has been done to the nth degree,” notes Gauthier.
Wheaton River had spent US$10 million, and all aspects of its feasibility study and environmental impact statement have been independently confirmed and updated.
Once mining is under way, Glencairn may redirect one of two streams that constrain the pit boundaries. The push-back requires minimal effort and has considerable benefits: steady-state production lasts two years longer and 70,000-75,000 more ounces are produced in all.
Wheaton’s feasibility study, which was based on a gold price of US$325 per oz., generated US$62 million in net cash flow, excluding preproduction and financing costs. The extra tonnage translates into roughly US$27 million at a gold price of US$375 per oz.
‘Strong upside’
“That’s a pretty strong upside for us on the gold price, because we are really not changing anything,” says Dunham Craig, vice-president of corporate development. “We are just processing more ore through the same process, so the difference in net cash flow goes straight to the bottom line.”
Adds Chaverri: “First we have to prove we are doing things right.”
There are no environmental restrictions regarding streams so long as the water continues to flow year-round. One of the streams flows intermittently.
Without the push-back, and assuming a gold price of US$350 per oz., Bellavista still generates a healthy 33.2% internal rate of return and has a payback period of 3.7 years. The net present value varies from US$41 million, using no discount rate, to US$11.3 million, using a 15% rate.
Cash operating costs are expected to average US$163 per oz., and total production costs, US$242 per oz., net of byproduct silver credits. Glencairn may employ contract miners, which would have the effect of increasing operating expenses but lowering preproduction costs.
Capital costs ring in at US$28 million; sustaining costs, at US$9 million. The plan is to cover US$19 million with debt, US$12 million with new equity and US$5 million with equipment leases.
Toward that end, Glencairn is seeking a limited recourse loan from Standard Bank of London and is expected to hedge 150,000 oz. of production as a result. Knoll says the bank will accept a minimum price of US$315 per oz., but the company has enough funds to carry itself for another year.
Ball mill
Meanwhile, Glencairn has purchased a 2,000-tonne-per-day ball mill and related equipment from the depleted Golden Bear heap-leach mine in northern British Columbia. The company paid an undisclosed sum of cash and issued 600,000 shares to Wheaton River.
“Under the eyes of the government, we have already begun construction,” says Chaverri.
While Glencairn is understandably focused on Bellavista, it has not forgotten exploration. Starting in the fall, drilling will test two large soil anomalies overlying the historic Trinidad and Montezuma mines.
Gold mineralization at Bellavista is hosted by the Tilaran Group, which is a local name for the more extensive Aguacate Group — a volcanic sequence of late Tertiary pyroclastic rocks with minor interbedded andesitic lava flows that hosts all the known deposits in Costa Rica’s central gold belt. About 80% of the property is covered by the favourable rocks, and tectonic faulting — the main control on mineralization — is widespread.
At Montezuma, which lies directly to the south, Minera Rayrock pulled up to 8 metres grading 12 grams per tonne. The values are reportedly twice as high as historic head grades, and extending eastwards from the workings is a geochemical anomaly some 800 metres long and 200 metres wide.
The Trinidad anomaly is as extensive as Bellavista but has never been drill-tested. The anomaly lies to the northwest of the deposit, on the western side of the Lucha fault.
Historic producer
The Trinidad mine operated during the late 1940s and 1950s, when the focus was on 1-to-2-metre-wide structures carrying 4-5 grams gold. Montezuma was a seasonal stamping mill that operated at the turn of the century and cont
ributed most of the 80,000-100,000 oz. produced prior to 1914. The ruins serve as a pointed reminder of the region’s mining heritage.
“We feel there is a good chance to double the mine life,” says Craig.
Knoll adds that the Trinidad area is relatively flat and thus a good prospect for heap leaching. At least three holes will be drilled in each once the rainy season ends.
Glencairn is attempting to simplify the complex ownership structure it adopted from Wheaton while retaining the economic benefits. Among other things, the company is exempt from taxation over 10 years and from paying duties on imports or exports.
Glencairn must pay a 1% royalty on mining revenue to each of the municipal county and the local community association. The revenue will come from the sale, by one subsidiary, of crushed ore to another incorporated under the tax shelter, which owns the land on which the leach pads and adorption/desorption plant will be situated.
“In Costa Rica, this is the first time the law has guaranteed money to community associations,” says Chaverri. “This is important because the municipal county is run by politicians, not community members . . . who are really the ones who want to do things, such as cultural development.”
The municipal government also is entitled to annual land ($300 per hectare) and real estate taxes (0.25% of the value of land and buildings). Neither tax extends to the processing area.
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