LATIN AMERICA SPECIAL — Newmont, Penoles team up in Mexico

Excitement continues south of the Rio Grande, as companies — large and small, foreign and domestic — compete to lock up that big deal.

Meanwhile, some companies have tried working together in their pursuits for the yellow metal. Among them are Newmont Gold (NYSE) and Mexican state-owned Penoles, which are engaged in activities in the northern and southern part of the country.

At this point, the companies have two noteworthy properties still in the exploration phase. The first is La Herradura, a gold property in Sonora state; the other is the Mezcala gold-silver property in Guerrero state. La Herradura is a large, low-grade deposit situated southeast of Puerto Penasco, near the Gulf of California.

Newmont is understandably cagey about releasing any details on the project. Nevertheless, it has added 65.9 million tons of oxide reserves grading 0.037 oz. gold per ton to its annual reserve estimates in 1994.

This figure was arrived at after five phases of drilling. And preliminary plans for an open-pit mine and heap-leach operation are now being evaluated. The deposit is open to the south and at depth, and has a relatively low stripping ratio.

La Herradura is not a new discovery. Exploration began there in 1987. It also has been discussed directly and indirectly in geologic literature for several years. It is described as a structurally-controlled deposit similar to the Mesquite gold mine across the border in California.

Mezcala is situated in the northern part of Guerrero state.

The property, described in geologic literature as a gold skarn, is comprised of a series of targets, including Bermejal and the Guadalupe mine. Many of these targets have yet to be tested.

Newmont reports indicate the company has outlined 34.2 million tons grading 0.031 oz. gold, although this total does not include a resource of 170,000 oz. at Guadalupe. Mezcala also contains significant silver values. Like La Herradura, Mezcala is a potential open-pit mine. And again, Mezcala is not a new discovery; it has been explored since at least the 1970s. Together the two properties contain an estimated resource of 3.5 million oz. Newmont holds a 44% interest in both properties. The remainder is controlled by Penoles, which will serve as mine operator.