Latin American Special — Chilean copper, gold projects

With 10-15 new copper projects scheduled to start up by the year 2000 and several major gold projects waiting to be exploited, Chile is one of the most attractive countries for mining investment.

Last year, gold output reached 1.2 million oz., making it the second-largest gold producer in Latin America, after Brazil. With several projects in the advanced stages of development, output should continue to rise over the next decade.

Refugio, one of the larger projects being readied for production, is in the Maricunga district, 700 miles north of Santiago. Partners Bema Gold (TSE) and Amax Gold (NYSE) are negotiating $US120-130 million to finance its completion. A feasibility study on Refugio’s Verde deposit outlined minable reserves of 3.3 million oz. gold and recommends annual production of 233,000 oz. for about 9.5 years. Operating costs are estimated at US$175 per oz. Just 18 miles south of Refugio, Arizona Star Resource (VSE) is continuing to drill-test the Aldebaran property. The company can earn a 51% interest by spending US$4 million on exploration and paying US$2 million by September. One of the zones, the Cerro Casale, is minable by open-pit methods. Reserves are estimated at 81.1 million tons grading 0.02 oz. gold per ton with a stripping ratio of about 1-to-1.

In central Chile, Dayton Mining (TSE) has decided to develop the Andacollo project on its own, after a series of failed merger proposals. The property contains proven and probable minable reserves of 30.7 million tons grading 0.035 oz. gold. Preliminary feasibility work projects an annual output of more than 125,000 oz. gold at US$170 per oz.

Atna Resources (VSE) has signed a deal with Princeton Mining (TSE) to earn a 75% stake in the Cumbre gold project. The property hosts a large silica cap alteration zone which, according to Atna, has the potential to host a bulk tonnage and/or “bonanza,” vein-type deposit. Mapping and sampling results are expected shortly.

By the end of the century, Chilean copper output is expected to be nearly 3.3 million tons, compared with current levels of 2.2 million tons (17% of total world production). Spearheading the increase in production is the development of several major deposits that will employ relatively inexpensive and environmentally safe solvent extraction-electrowinning.

One of the first new projects to come on stream is Rio Algom’s (TSE) Cerro Colorado deposit, 75 miles inland from Iquique. In mid-February, the operation produced its first 220 tons of copper cathode. The mine, which came in slightly under budget at US$285 million, is expected to produce 33,000 tons of London Metal Exchange grade-A copper cathode annually at a cost of US60 cents per lb.

About 90 miles south of the Rio project, Cominco (TSE), Cominco Resources International (TSE) and Teck (TSE) expect to start up operations at their jointly owned Quebrada Blanca project in the first half of 1994. The mine, which has secondary chalcocite reserves of 98 million tons grading 1.3% copper, is expected to yield 82,500 tons of cathode at US50 cents per lb. Around the corner from Quebrada Blanca, Falconbridge, Shell Chile and Minorco have completed a prefeasibility study on the Collahuasi deposit. It is expected to produce 165,000-330,000 tons of copper cathode and concentrate annually, beginning in 1998.

Mine planning studies are in progress and a pilot plant is being built to test leachability.

Construction is also under way at Minera Rayrock’s (TSE) Ivan copper project near Antofagasta. Annual production of 11,000 tonnes of copper cathode per year is scheduled to begin in the third quarter at a cost of US55-60 cents per lb. Minera is also exploring its wholly owned Sierra Valenzuela copper project, 25 miles northeast of Ivan. Reserve potential is 11-16 million tons grading 1.75% copper.

Placer Dome (TSE) and Outokumpu Copper Resources of Finland are developing the Zaldivar property, 110 miles east of Antofagasta. The deposit, expected to come on stream in 1995, will produce 225 million lb. copper per year at US52 cents per lb. during a 17-year mine life.

In the same vicinity, Princeton Mining (TSE) has made a deal with Teck and Cominco Resources to help fund work on the Elenita copper property. The 7.7-sq.-mile property hosts several manto-type oxide deposits, yet it has never been drilled. A small underground mine is producing about 825 tons of ore per month with an average grade of 5% copper. Teck and Cominco can jointly earn up to a half interest in the project.

Lac Minerals (TSE) and Cyprus Amax Minerals (NYSE) have yet to close the deal on El Abra, a copper deposit 100 miles north of Santiago. Last fall, the partners bid US$400 million for a 51% interest in the Codelco-owned project, which is said to host the world’s largest copper reserve. Apparently, the delay is due to the fact that a recent Cyprus-Lac feasibility study found significantly lower grades than Codelco’s mid-1970s study. The deposit has more than 770 million tons of oxide reserves grading 0.7% copper.