The prolonged slump in gold prices has taken its toll on a number of low-grade, bulk-tonnage gold projects in South America, leaving only a handful of robust projects able to survive the rocky road to production.
Placer Dome holds a 70% interest in Las Cristinas, which hosts proven and probable reserves of 193 million tonnes grading 1.2 gram gold per tonne, or 7.4 million contained ounces. It has the size, but the grade isn’t high enough to provide a decent return in a persistently weak gold market. Accordingly, construction of a mine was suspended last summer.
The suspension has cast a cloud of uncertainty over the project because Placer’s partner, Corporacion Venezalana de Guayana (CVG), has the right to rescind its contract if the suspension exceeds 12 months. While this development is considered unlikely, the vagaries of Venezuelan mining law are such that few analysts have dismissed it entirely.
While Venezuela enjoyed an exploration boom for gold in the late 1980s, it has since taken a back seat to Peru. The latter is currently South America’s gold darling, a reputation earned by the spectacular success of the US$260-million Pierina mine, owned and operated by Barrick, in the Ancash region.
In 1999, its first year of operation, the mine turned out 837,407 oz. gold at a total cash cost of US$42 per oz., the lowest in the world. Over the next five years, Pierina’s annual production rate will average 750,000 oz. gold at a cash cost of US$60 per oz.
Another, more established Peruvian winner is the Yanacocha open-pit mine, operated by
Chile’s more entrenched mining traditions have made that country a favoured destination for gold companies, notwithstanding the mixed track record brought about by some high-profile mine failures in the Maricunga district in the late 1980s. The first crop of mines in the region — Marte and Lobo — didn’t fare well, and that trend has continued at the Refugio open-pit mine, high in the Chilean Andes.
Refugio is owned equally by
Refugio’s rocky performance has cast a shadow of doubt over the fate of the Cerro Casale porphyry gold-copper deposit on the nearby Aldebaran property, even though a final feasibility study by Placer Dome indicates it can be developed economically as a large, low-grade, open-pit mine.
Aldebaran is owned 51% by
At a daily processing rate of 150,000-170,000 tonnes, the mine would produce an estimated 975,000 oz. gold and 287 million lbs. copper annually over an 18-year mine life. The capital costs are a lofty US$1.43 billion, while cash costs are projected at US$98 per oz., and total costs, including life-of-mine capital, at US$203 per oz.
While large, low-grade projects are not having an easy time in the current gold environment,
The mine is expected to contribute 250,000 oz. gold and up to 4 million oz. silver annually for eight years, or longer as additional resources are found and developed. Cash operating costs at the open-pit/underground operation are expected to remain under US$100 per oz.
El Peon is the largest gold-silver operation in Chile, at least until Barrick’s Pascua mine comes on-stream. Barrick is a relative newcomer to Chile, having acquired a sizable land package in the El Indio region as part of its 1994 takeover of Lac Minerals.
The small mines Lac operated at that time had high operating costs, and Barrick initially planned to close the Tambo and El Indio mines. However, both have since reduced their costs enough to continue operations, though Tambo is earmarked for closure in the next few years unless new reserves are found.
Barrick took a district-wide approach to exploration, and soon focused its efforts on the Pascua property, where reserves at the time totalled 1.8 million oz. in the Esperanza zone. By 1999, exploration had boosted reserves to 17.1 million contained ounces and 560 million ounces silver, with some of this coming from the Penelope and Morro Oeste mineralized zones in neighbouring Argentina. An international agreement allowing equipment and labour to cross the borders of the two nations freely has set the stage for a mine that will process ore from deposits in both countries.
The US$950-million Pascua mine is poised to become Barrick’s cornerstone gold operation in South America, eventually surpassing Pierina in Peru. The Pascua open-pit mine is expected to begin production at an initial rate of 800,000 oz. gold and 35 million oz. silver annually, starting in 2003.
An 11,000-tonne-per-day expansion, scheduled to be completed in 2005, will boost total daily throughput to 44,000 tonnes and annual output to more than 1 million oz. gold. A third-phase expansion is still under review. It would involve relocating the Tambo mill to the property and thereby boost production to 1.2 million oz. annually. The latter two phases would cost an additional US$300 million to complete.
Earlier this year, Barrick’s vice-president of development, Allan Hill, told analysts that Pascua should become the world’s lowest-cost gold mine. “And its potential is still unfolding,” he added. “Our district development program envisions US$100-$200 million in exploration over the next decade.”
Pascua’s estimated cash costs were reduced to US$60 per oz. in the first five years, down from last year’s estimate of US$125 per oz., while the average life-of-mine cash costs are estimated to be under US$100 per oz., down from US$150 as estimated last year. The average grade to date is 2 grams gold and 66 grams silver.
Barrick also holds a 40% stake in the nearby Veladero gold-silver project, operated by partner
The reserves are divided into two categories: 16.7 million tonnes grading 4.97 grams gold and 48 grams silver, which will require milling; and a heap-leach portion of 67.1 million tonnes of 0.99 gram gold and 18.51 grams silver.
These reserves are part of a previously announced mineral inventory (covering the Amable and Filo Federico targets) of 200.1 million tonnes grading 1.09 gram gold and 20.8 grams silver, based on a cutoff of 0.31 gram.
Homestake and Barrick plan to spend US$18 million on the property in an effort to expand reserves and advance the project to production. It remains to be seen if Veladero will be developed as a stand-alone operation, or
as a satellite to Barrick’s existing Pascua mine complex.
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