LATIN AMERICA SPECIAL — Chile offers mine-friendly

The list of mining companies with advanced projects in Chile is extensive, and featured prominently are Canadian companies ranging from a “who’s who” of senior producers to fledgling juniors.

Besides the highly prospective geology, especially for copper, Chile offers a decidedly business-friendly environment. Hugh Leggatt, a spokesman for Placer Dome (TSE), said the time frame for mining projects in Chile includes a 6-month rule-of-thumb estimate for receiving permits. Leggatt said the actual lead time is effectively even less, since once a mining company applies for a permit, it can begin construction. This compares with an estimated 2-year-plus lead time for British Columbia, from the point of a positive production decision to receiving permits.

Operations at the La Coipa mine, jointly owned by Placer and TVX Gold (TSE), were a resounding success during the first nine months of 1992 with 69,999 oz. gold produced at an average cash cost of about US$133 per oz. Placer started production at La Coipa in late 1991 at a rate of 16,500 tons per day, bringing the project on-stream at a capital cost of US$218 million, US$33 million under budget. Ore reserves at the end of 1991 were stated at 75.8 million tons grading 0.038 oz. gold per ton and 2.28 oz. silver. Placer added to its interests in Chile last September with the acquisition from owner Outokumpu Copper Resources of a 50% interest in the Zaldivar copper project for US$100 million.

Placer will also provide financing of up to US$400 million for project development. The property hosts a large near-surface deposit estimated to contain about 1.1 billion tons grading 0.57% copper at a 0.2% copper cutoff. The total includes a higher-grade zone containing about 290 million tons grading 1.16% copper at a 0.7% cutoff grade.

The copper mineralization is largely amenable to solvent

extraction-electrowinning (SX-EW) technology. Preliminary estimates put potential copper production at about 200 million lb. per year. Feasibility work is continuing and the joint venture expects to make a production decision by mid-year.

The El Indio mining complex, 300 miles north of Santiago, continued to generate profits for 83% owner Lac Minerals (TSE) in 1992. The complex, which includes six underground and six open-pit mines plus three roasters and a 3,300-ton-per-day mill, produced a total of 223,688 oz. gold, 27,323 tons copper and 1.2 million oz. silver during the year at an average cash cost of US$183 per oz. (including credits).

At its 100% owned, 1,100-ton-per-day underground Toqui mine, Lac reported 1992 production totalling 31,385 tons zinc. The company has not released any cash production cost figures for the operation.

Dayton Mining (TSE) recently brought a Malaysian group on board to help fund development of its Andacollo gold project. In return for a 25% interest, the group will pay Dayton US$11.3 million on closing and a further US$11.3 million (plus interest) from operating cash flow.

The company will also provide Dayton with a US$20-million line of credit, bringing the project a step closer to arranging financing. The estimated capital cost to bring the open-pit heap-leach operation into production is about US$31.7 million. The proposed 12,000-ton-per-day operation is expected to produce about 140,000 oz. gold per year at a cash cost of about US$165 per oz.

Dayton had hoped to close the deal by the end of 1992, but the two groups are still working out the details.

Bema Gold (TSE) and Amax Gold (NYSE) were recently teamed up at the Refugio gold project. Amax bought a 50% interest late last year from Bema’s Chilean partner for 3.15 million restricted common shares.

The two companies are now reviewing financing plans to raise the required US$135 million capital cost. A previously completed feasibility study estimates the open-pit operation will produce about 233,000 oz. gold per year at a cash cost of about US$189 per oz. over the first nine years of production.

Construction and stripping are continuing at the Quebrada Blanca copper project, owned 42.5% by Cominco (TSE), 32.5% by Teck (TSE) and 10% by Cominco Resources International (TSE). The Chilean government and a private company hold the remaining 15% interest in the project.

The joint venture expects Quebrada Blanca to begin production in 1994, yielding about 165 million lb. of low-cost cathode copper per year for at least 14 years. The figures are based on current reserves. No cash cost estimates have been released by the owners.

Joint venture partners International Mahogany (TSE) and North Lily Mining (NASDAQ) recently resumed operations at their Tuina copper heap-leach operation. The companies were forced to suspend operations last August as a result of a contractual dispute with the mining contractor.

The operation currently sends its copper precipitates to the U.S. for plating to a copper cathode product and the joint venture is now reviewing plans to construct a US$6-million SX-EW plant at the site.

Minera Rayrock (TSE) is in the process of arranging financing for its Ivan copper project in northern Chile. The project hosts open-pit and underground reserves of about 5 million tons grading 2.5% copper. The company estimates the capital cost of developing a SX-EW operation at about US$30 million. David Hutton, vice-president, said the operation could be in full production within a year of starting construction. Yearly production is projected at about 22 million lb. copper at a cash operating cost of about US56 cents per lb. The company also has an early-stage copper project in northern Chile where recent drilling encountered widespread mineralization with good grades of 1.5% to 2% copper (mostly oxide) over widths of 65-196 ft. The company plans to spend US$580,000 on the next stage of exploration at Sierra Valenzuela.

Rio Algom (TSE) hopes to be in production at its Cerro Colorado copper mine in northern Chile in 1994. The capital cost of the open-pit leach operation is estimated at about US$290 million, and the company projects annual production at about 88 million lb. of cathode copper per year over a 23-year mine life.