LATIN AMERICA SPECIAL — Triton breathes new life into Limon

Founded in 1991, Vancouver-based Triton Mining (TSE) is an emerging gold producer in Central America, and also holds several joint-venture exploration projects in South America.

Last year in Nicaragua, Triton acquired the Limon gold mine site, including a 120-sq.-km exploitation concession and a surrounding exploration concession consisting of 3,500 sq. km. This acquisition followed the privatization of the industry by the Nicaraguan government. The concession comprises several districts in which exploration work was undertaken by previous owners, and which also includes the former-producing India mine.

The terms of the acquisition are such that Triton’s 95%-owned subsidiary, Minera de Occidente, can assume full ownership of the Limon mine and its surrounding concession. To do so, it must pay US$3.85 million over three years and spend US$8-9 million on an expansion program, as well as at least US$410,000 per year on exploration. The 100% interest is subject to a 5% net smelter royalty and a 6% net profits interest held by Repadre Capital (TSE), a Toronto-based firm which holds 24% of Triton’s outstanding shares. In addition, a privately owned Nicaraguan company, Internacional de Comericio, holds a 5% net profits interest in Triton’s wholly owned U.S. subsidiary. The Limon mine lies within the mining district of the same name, northwest of the capital city of Managua. It consists of two open pits adjacent to a 50-year-old cyanide processing plant and an underground operation 4 km to the west.

Commercial gold mining in the district commenced in 1918, on the San Luis vein. A subsidiary of Noranda, Empresa Minera Septentrion, began managing the mining operations in 1937. Until 1979, about 68.4 million grams gold and 140 million grams silver (2.2 million oz. gold and 4.5 million oz. silver) were produced from the Santa Pancha mine. In that same year, the Limon mine was nationalized; it was, at the time, producing 18.7 million grams (60,000 oz.) gold per year. Exploration during the 1980s led to the discovery of the Talavera deposit, and underground mining began in 1991.

Gold mineralization occurs within a series of pyritized-banded quartz veins and silicified breccia. The vein system is limited to an andesitic unit of the Lower Coyol group. The unit has a thickness exceeding 300 metres and consists of massive andesitic flows interbedded with agglomerates and tuffs. At the Talavera deposit, two subparallel vein structures, I and II-Este, are being mined by cut-and-fill methods, in conjunction with sub-level stoping. The thickness of the veins ranges from 3 to 7 metres. The North and South open-pit deposits are vein structures previously mined by underground methods. (Mining recently switched from the South to the North pit.) The processing mill was constructed in 1941 and was later upgraded twice, in 1986 and again in 1992. It employs 3-stage cyanide leaching, counter-current decantation, and Merrill-Crowe zinc precipitation, with an operating capacity of 400-450 tonnes per day. A lack of grinding power and circuit controls prevent gold recovery from rising beyond the range of 82-84%. Since acquiring the mine, Triton has carried out several drill programs on the South and Central pits and spent US$3 million refurbishing the mine and mill.

Proven and probable minable reserves stand at 1.9 million tonnes grading 5 grams gold per tonne (equivalent to 334,800 contained ounces), compared with a previous estimate of 1.4 million tonnes grading 4.7 grams. The mine area is being explored by means of underground drifting (to test the Talavera II vein), a 5-hole diamond drill program (to test the extension at depth of the South pit) and sampling and drilling (on the Central zone). Annual gold production at the Limon mine, from 1989 to 1993, ranged between 591,000 and 808,700 grams. In 1994, the mine was besieged by equipment repairs, and these, combined with labor disputes and a lack of mine development, prevented output from exceeding 528,750 grams for the year. Triton ran the mine for four months in 1994, producing 202,170 grams (6,500 oz.) at a cash operating cost of US$299 per oz.; this compares with an operating cost of US$295 per oz. for all of 1993. In each of the first two months of 1995, production has been a little less than 62,200 grams (2,000 oz.) at an operating cost of US$250 per oz. (not including royalty payments or depreciation).

An expansion program to increase mine and mill production capacity to 1,000 tonnes per day is expected to decrease total cash costs (including royalty and depreciation) to US$244 per oz. by 1996. The cost of constructing a new mill is estimated at US$6.45 million. More than 70% of the mill is already purchased and the foundation has been poured. The increased capacity is projected to produce 1.1 million grams for 1995 and 1.5 million grams for 1996.

The chief exploration targets in the vicinity of the Limon mine are the Aparejo and Santa Emilia prospects. The former is within the exploitation concession, 5 km east of the mill, and features a 300-metre-wide, low-grade zone with a known strike length of 2 km. Drilling and trenching during the 1930s returned 0.7-6.9 grams for quartz veins, while limited sampling of the altered wall rock returned 0.7-2.1 grams.

A proposed US$272,000 program would test the zone’s bulk-tonnage potential by means of geological mapping and sampling, followed by 2,000 metres of drilling.

Drilling in the Santa Emilia area, 2 km northwest of the mill, has identified four vein structures, and reserves for the Oeste vein are estimated at 80,400 tonnes grading 9.9 grams. The Veta Nueva structure contains about 90,700 tonnes grading 8.5 grams across a width of 2.9 metres. Triton proposes spending US$321,000 on additional trenching and sampling, followed by 2,000 metres of diamond drilling on high-grade sections of the Norte and Sur veins. The India project was acquired as part of the exploration concession included with the Limon mine. Situated 75 km to the east of Limon, India entered production in the 1930s and continued cranking out gold until 1956. Exploration by the Nicaraguan government in the early 1980s focused on a group of nine mineralized quartz vein structures. The Russians concluded that India contains a geologic resource of 2.4 million oz., and Triton considers India a potential prospect for future exploration.

Triton also holds an option to acquire the Topacio project in northeastern Nicaragua. It can do so by paying US$210,000 and spending US$750,000 over two years. Upon completion of a feasibility study, a further payment of US$250,000 would be required. The property contains probable reserves estimated at 559,000 tonnes grading 6.1 grams, with additional possible reserves of 5.2 million tonnes grading 6 grams.

Farther south in Argentina, Triton has joined forces with Minerales Patagonicos to explore nine properties. Mapping and sampling are proposed for two of these, namely Organullo and Incahuasi, where anomalous gold zones have been identified. A second phase of reverse-circulation drilling would be contingent on results and availability of funds.

Triton has 13.5 million shares outstanding and working capital of about $16 million.