LATIN AMERICA — Campo Morado project draws junior explorers to Mexico — Reforms pave way for influx of North American companies

Situated halfway between Mexico City and Acapulco in Guerrero state, the Campo Morado region is luring several North American companies, including Farallon Resources (FAR-V), Teck (TEK-T) and Newmont Gold (NGC-N).

Recent economic reforms, which removed long-standing restrictions on investment in so-called “strategic minerals,” have made it easier for foreign companies to invest in properties there.

“With the change in ownership laws, Mexico is just starting to attract significant capital,” says Scott Cousens, a director of Farallon. He points out that, until recently, his company’s project, also known as Campo Morado, has not been subjected to modern exploration techniques.

Those are confirming the presence of a large deposit of gold, silver, copper, lead and zinc mineralization, Cousens says. To date Farallon has completed 35,545 metres of diamond drilling.

Other companies active in the area include Valerie Resources (VLG-V), which has a joint venture with TVX Gold (TVX-T) on the Mamantla Mineral Reserve, northwest of Farallon’s ground, and Mexican-based Miranda Mining & Development, which has formed a partnership with Teck on the Nukay project, 50 km to the southeast.

Also active are two other members of the group of companies run by Farallon’s Robert Hunter and Robert Dickinson, namely Anooraq Resources (ARQ-V) and Amarc Resources (AHR-V). The former recently sold $3.3 million worth of special warrants, with proceeds going to fund exploration at the junior’s 88,000-ha Santa Rosa concession, 90 km north of Farallon’s property.

Santa Rosa covers the geological extensions to the Tizapa mine, operated by Peoles and Japanese miners Dowa and Sumitomo.

Miranda Mining, which is listed on the Bolsa stock exchange in Mexico City, controls 500,000 ha in the region. The open-pit mine at Nukay has produced 50,000 oz. gold since current operations began in 1988. Production averages 16,000 oz. per year at a cash cost of US$143 per oz.

Prefeasibility

A study is under way to investigate the feasibility of constructing a larger mill, which would use feed from Nukay and the nearby Subida and Aguita deposits. The companies hope such a facility would boost annual production to between 75,000 and 100,000 oz. by 1999.

Meanwhile, Vancouver-based Miranda Industries (MAD-V) — not to be confused with Miranda Mining — is working on the Leticia gold project, 10 km southeast of Nukay. The company is spending US$900,000 on mapping, trenching, soil and rock sampling, and magnetic surveys.

A recent road cut through the 100-ha concession uncovered 26 metres averaging 6.48 grams gold per tonne. Sampling in an underground adit, 100 metres from the road cut, found 30.5 metres of 1.5 grams gold. Miranda says the relationship between the two zones is unknown.

Surrounding Leticia is Mezcala, a joint venture between Mexican silver giant Peoles (56%) and Denver, Colo.-based Newmont Gold (44%). Peoles also owns the Rey de Plata massive sulphide deposit, 50 km northwest of Mezcala.

Recent exploration at Mezcala has increased the resource by 50%, says Douglas Hock, a spokesman for Newmont. To date, the partners have identified a resource of 55 million tons grading 0.027 oz. gold.

Newmont in engaged in a similar, though more advanced, joint venture with Peoles in the northern state of Sonora. Production at the Herradura project is slated for 1998.

Farallon’s current focus at Campo Morado is a drilling effort aimed at delineating the Reforma, Naranjo and Suriana deposits, as well as exploratory drilling at the San Rafael and Lucha zones. The company has spent $13 million on the property since acquiring it in 1995 and has budgeted $18 million for 1997.

50-metre spacings

A mine operated at Suriana for nine years before being shut down in 1912 at the outset of the Mexican Revolution. Historical reports suggest the deposit contains a 5.5-million-tonne resource grading 3 grams gold, 574 grams silver, 0.4% copper and 7.5% combined lead and zinc.

Farallon is spending $1.3 million a month on drilling, road-cutting and support services. Drilling is being carried out chiefly at the Naranjo and Suriana deposits, while preparatory work is under way at the Lucha and San Rafael targets. The company has drilled off the Naranjo, Suriana and Reforma deposits at 50-metre spacings.

Drilling has delineated a large-scale massive sulphide deposit with a northwestern strike length of 800 metres and a downdip extension of 400 metres. Results include a 6.7-metre intersection grading 4.43 grams gold, 233 grams silver, 0.56% copper and 6.3% combined zinc-lead.

Valerie Resources, part of the stable of veteran mining promoter Frank Lang, acquired the Mamantla mineral reserve in 1994. The concession consists of a 100% interest in 20,800 ha, with the Mexican government entitled to a 3% net smelter return royalty on silver and gold production, and a 1% royalty on lead, zinc and copper.

Last year, TVX agreed to manage exploration and development of the property in return for a right of first refusal. The most recent drill results, from the Capire zone, showed silver-lead-zinc mineralization occurring in a flat-lying, 30-metre-thick body with open-pit potential.

Two other Lang companies — Sultan Minerals (SUL-V) and Cream Minerals (CMA-V) — are also active in the area.