Combined, the TG-1, TG-3 and B-5 precious-metal-bearing base-metal deposits in the Tambo Grande region of northern Peru rank among the world’s largest volcanogenic massive sulphide camps. And with total sulphide mineralization in the district estimated at more than 300 million tonnes so far,
The property lies 865 km north-northwest of Lima, 40 km northeast of the city of Piura and 50 km south of the Ecuadoran border. It is accessible by a paved highway that connects to the port of Paita, 107 km to the west. The project area is generally flat with low topographic relief (70 to 150 metres).
The project comprises a package of land concessions covering some 869 sq. km in the Tambo Grande area. This package includes: the Tambo Grande concessions, totalling 100 sq. km; the Lancones concessions, comprising an aggregate of 737 sq. km; and the Papayo concessions, covering 32 sq. km.
Since June 1999, when it began an aggressive campaign of exploration and delineation drilling at Tambo Grande, Manhattan has discovered two new massive sulphide deposits, TG-3 and B-5, and defined a 1-million-oz., near-surface gold resource overlying the TG-1 base-metal sulphide deposit. “It has been quite a successful program by anybody’s scale,” Manhattan President Graham Clow told shareholders at the company’s annual meeting earlier this year.
Despite its exploration success, Manhattan saw its share price erode to a 52-week low of $2.30 over the course of the summer, before rebounding in September to almost $5 on the back of a deep, high-grade copper intercept pulled from the B-5 body. Disappointment followed, however, with the release of TG-1 mineral reserve estimates, prepared by AGRA Simons, which showed lower-than-expected gold content in the oxide cap, and base metal in the underlying sulphide body.
Based on detailed drilling of TG-1 between December 1999 and May 2000, AGRA calculated probable reserves of 49.2 million tonnes grading 1.6% copper and 1% zinc, plus 0.6 gram gold and 26 grams silver per tonne, at a stripping ratio of 1.2-to-1. The overall resource, which sits within a larger, 100-million-tonne pyrite body, includes an indicated 50.5 million tonnes grading 1.6% copper, 1.1% zinc, 0.6 gram gold and 27 grams silver, plus an inferred 5.5 million tonnes grading 1.4% copper, 1.1% zinc, 0.5 gram gold and 22 grams silver. (Earlier estimates indicate a preliminary inferred resource of 64 million tonnes grading 1.7% copper, 1.4% zinc, 0.7 gram gold and 31 grams silver.) AGRA used a copper-equivalent cutoff grade of 0.75% in the updated resource model, while higher-grades were cut to 9% copper and 8% zinc. In total, 270 holes have tested TG-1, which measures 950 metres long, 350 metres wide and more than 200 metres thick.
Before infill drilling began, last December, Manhattan believed there was good potential for expanding the near-surface oxide gold resource contained in a flat-lying barite cap overlying the sulphides. At the time, the cap contained an inferred resource of 8 million tonnes grading 5.2 grams gold and 48 grams silver, equivalent to 1.3 million oz. gold and 12.4 million oz. silver. Initial estimates were based on 50 holes completed by Manhattan in the summer of 1999 and on the re-assaying of 21 past holes drilled by French-government-owned Bureau de recherches gologiques et minires (BRGM)
AGRA’s updated resource estimate showed that there is just over 1 million oz. gold and 19.9 million oz. silver contained in total indicated and inferred resources of 8.7 million tonnes grading 3.62 grams gold and 71 grams silver, based on a cutoff grade of 1 gram gold. High-grade values were cut to 40 grams gold and 4,000 grams silver.
Probable reserves stand at almost 8.1 million tonnes grading 3.5 grams gold and 67 grams silver at an overall stripping ratio of 1.9-to-1. This is equivalent to 906,300 contained ounces gold and 17.3 million contained ounces silver.
The gold deposit represents a good portion of the pre-stripping required to mine the underlying base metal sulphides. In August 1999, Manhattan commissioned AGRA to begin a feasibility study on the TG-1 deposits. Other consultants working on various aspects of the study include Klohn-Crippen SVS, Lakefield Research and Strathcona Mineral Services. The study is scheduled for completion in April 2001.
Based on the data gathered to date, Manhattan envisions mining the TG-1 gold deposit first, at the daily rate of 7,500 tonnes. The operation is projected to produce 276,000 oz. gold and 3.7 million oz. silver per year over a life of 3.5 years. Cash operating costs, after silver credits, are pegged at US$44 per oz.
Metallurgical tests are in the final stages, and AGRA has determined that recoveries of 88% for gold and 70% for silver will be used for feasibility purposes.
The underlying sulphide deposit will be developed concurrently with the depletion of the gold cap. Manhattan intends to use the cash flow generated by the gold operation to cover the initial capital costs, as well as to finance the expansion required for mining of the sulphides.
Metallurgical results to date indicate that the deposit will produce in the range of 60,000-70,000 tonnes copper and 35,000-40,000 tonnes zinc annually over a life of 10 years, based on a daily mining rate of 15,000 tonnes. Cash operating costs are expected to be about US50 per lb. copper, net of zinc and precious metal credits.
Metallurgically, the TG-1 sulphide body is complex, with four distinct types of mineralization:
Type 1 — late hypogene copper enrichment in the form of chalcocite, digenite and covellite;
Type 2 — mixed chalcopyrite and sphalerite;
Type 3 — basal chalcopyrite replacement; and
Type 4 — chalcopyrite stockwork.
The centre of the deposit is typically weakly mineralized pyrite.
To date, testwork has been conducted, to varying degrees, on all four types. Testing is essentially complete on Type 3, which yielded a copper concentrate grade of 27% at a recovery of 87%. The fourth type of stockwork material is comparable to Type 3.
Flotation tests on Type 1 mineralization achieved a 24% concentrate grade at 60-65% recovery. Further work is being carried out, including various low-cost leaching alternatives that could increase copper recovery to beyond 80%.
Metallurgical work on Type 2 has shown a zinc concentrate grade of 52% at a recovery of 75%, and a copper concentrate grade of 24% at a 60-65% recovery. Testwork is continuing, with a targeted recovery of 80% for zinc and 70% for copper.
Precious metal recoveries in the sulphides are disappointingly low. Though not yet optimized, gold recovery is expected to be less than 10% overall, while silver recovery will range from 15% to 25%.
“We have made good progress on some of the ore types,” Clow tells The Northern Miner. “But we haven’t finished yet. Metallurgy is a work in progress on every mine that I have ever worked at.”
The capital cost to build the gold and base metal mine, plus related infrastructure, is expected to US$270 million, including a US$42-million contingency, spread over five years.
The feasibility work excludes the impact of developing the TG-3 and B-5 deposits. Manhattan believes there may be potential upside for a larger-scale, 30,000-tonne-per-day base metal operation incorporating TG-3.
Situated 500 metres south of TG-1, the TG-3 deposit was discovered in June 1999. The discovery hole, on the southern flank of the TG-3 gravity anomaly, cut 42.3 metres of massive sulphides grading 1% copper, 1% zinc, 1.1 grams gold and 29 grams silver, beginning at a depth of 143 metres.
TG-3 consists of multiple stacked sulphide lenses flanking a dacite dome. It is overlain by volcanic debris flows and basalt, which together average a thickness of 120 metres. Sulphides occur in two distinct mounds of mineralization containing a total resource of 110 million tonnes grading 0.7% copper, 1% zinc, 0.7 gram gold and 19 grams silver.
The TG-1 and TG-3 deposits both lie on the Tambo Grande concessions, in which Manhattan has the right to earn a 75% interest.
In January, Manhattan discovered a third body of mineralization while drill-testing the B-5 geophysical gravity anomaly, 11 km south of TG-1. The discovery hole intersected 142 metres of massive sulphides averaging 0.5% copper, 0.9% zinc, 0.6 gram gold and 16.5 grams silver, starting at a depth of 436 metres. A higher-grade, 23-metre section ran 2% copper, 3.5% zinc, 1 gram gold and 56 grams silver between 464 and 487 metres of depth.
So far, six holes have tested the B-5 body. The most recent of these was hole 8, collared 120 metres east of the discovery hole. It encountered a 52.8-metre-thick copper zone at the base of a 200-metre-long massive sulphide intersection. The 52.8-metre intercept averaged 4.6% copper and 17.7 grams silver (including 15 metres of 10.6% copper and 38 grams silver), starting at a depth of 578 metres.
In addition, a new gold zone was identified at the top of the sulphide unit, where a 5-metre interval averaged 6.1 grams gold and 107 grams silver, beginning at 424 metres of depth. As at TG-1, the B-5 deposit has at least a partial gold-enriched cap, a thick basal copper rich zone and a flanking copper-zinc zone.
Early estimates by Manhattan suggest that the B-5 sulphide body, in relation to overall sulphides, may be comparable in size to TG-1 and TG-3. The thickest intercept of massive sulphides and stockwork encountered to date in B-5 has been 320 metres in hole 5. This intercept included 127 metres grading 0.9% copper, 2% zinc, 0.9 gram gold and 44.9 grams silver.
Manhattan is set to resume drilling the B-5 body in an attempt to determine the extent of the higher-grade zones. The company believes it may be feasible to develop B-5 as a stand-alone underground operation with its own plant.
Although he does not expect the potential minable resource at B-5 to be of the same magnitude to either TG-1 or TG-3, Clow is confident “it will certainly be a nice underground deposit.”
The B-5 deposit lies on the Papayo portion of the Tambo Grande project, in which Manhattan can earn a 51% interest from Compania de Inversiones y Exploraciones Mineras (Cedimin, a wholly owned subsidiary of Compania de Minas Buenaventura) by spending $5 million on exploration over five years.
The Tambo Grande area was first known for its iron occurrences, and it was not until 1977 that BRGM, with the co-operation of the Instituto Geologico Minero y Metalurgico, identified a weak base metal and silver geochemical anomaly. BRGM was targeting old iron occurrences as an exploration tool in a search for massive sulphides.
BRGM followed up with a geophysical survey that indicated the presence of conductive anomalies. The TG-1 anomaly was drill-tested in 1978, with the first hole intersecting 100 metres of massive sulphides grading 1.5% copper, 1.5% zinc and 25 grams silver. BRGM completed 23 holes and partially defined a resource of 42.3 million tonnes grading 2.04% copper, 1.47% zinc, 0.36% lead and 37.7 grams silver.
Early geophysical surveys proved unsatisfactory, mainly because the overburden was found to be conductive. Gravity surveys became the tool of choice, and seven gravity anomalies were originally identified by BRGM on the Tambo Grande concessions. The TG-1 anomaly measured 700 by 350 metres in size and had the highest-amplitude.
After the TG-1 discovery, BRGM carried out 500-metre grid gravity surveys and later identified some 55 anomalies in the Tambo Grande area.
In late 1993, Manhattan signed a letter of intent with BRGM to acquire an interest in the Tambo Grande concessions, and in early 1997, Manhattan purchased the balance of BRGM’s rights to the concessions for $23 million.
In May 1999, Manhattan finally received all necessary government approvals to begin exploration. The Peruvian government issued a Supreme Decree approving Manhattan’s option to earn a 75% interest. The option agreement governs the ownership, exploration and development of Tambo Grande.
The key business terms of that agreement require that Manhattan complete a feasibility study and financing plan within three years. Before it can proceed with development, the company must meet two qualifying conditions: it must be the operator of a 10,000-tonne-per-day mining operation and have net assets valued in excess of US$100 million. These terms will be waived if another company that meets these conditions owns a minimum of 25% of Manhattan.
Upon exercising the option, a new company, Empresa Minera Tambo Grande (EMTG), will be incorporated to develop and operate the project. Manhattan will own 75% of EMTG, with the remainder held by the Peruvian government through Minero Peru. EMTG will then have four years to develop Tambo Grande, with Manhattan responsible for arranging financing and contributing the equity portion held by the government.
The Peruvian government will retain a sliding-scale royalty ranging from nil at US60 per lb. copper to 5% at US$1.20 per lb.
Manhattan is required to guarantee that the mining methods used will not physically affect the namesake town of Tambogrande (population 15,000), which partially overlies the TG-1 deposits, nor harm its citizens. In addition, the tailings must not affect the agricultural areas surrounding the town.
The Piura River flows through the project area, cutting the southern boundary of the TG-1 deposit. A second tributary also flows over a portion of the deposit. The neighbouring TG-3 deposit partially sits beneath the Piura River and its flood plain.
Manhattan has set a high priority on public consultation with the people of Tambogrande and in the surrounding area. A permanent liaison office has been established. A community information campaign informs the local communities about the objectives and progress of the Tambo Grande project. This includes discussions and planning for eventual town resettlement.
Manhattan has put together a relocation team, which is working closely with a government urban planning group. “We have established relocation negotiations with the town, and they’re well in progress,” Clow assured shareholders at the annual meeting.
The three sulphide deposits lie proximal to dacite domes emplaced in pre- to mid-Cretaceous basalt flows of the Ereo Formation — a basal member within the northeasterly oriented Lancones Basin. The deposits occur in rift valleys in a marine continental margin. Sulphides filled a deep northwesterly oriented, fault-bounded trough at TG-1, whereas TG-3 sulphides filled northwesterly elongated basins near a central dacite dome structure, built on an underlying uplifted basalt block. The B-5 deposit appears to have a similar setting to the TG-1 and TG-3 deposits.
The Tambo Grande area has undergone negligible post-mineral metamorphism or structural disruption; thus the volcanic and mineralogic textures are well-preserved. The deposits are flat-lying and unusually thick; attributable to long-lived hydrothermal systems associated with prolonged periods of volcanism.
The deposits display virtually all the classic characteristics of volcanogenic massive sulphide (VMS) deposits. These characteristics include a distinct lithological break from footwall to hangingwall, zoned massive sulphides with zinc-rich distal phases, and increased copper concentrations at the base. Metal contents are similar to typical VMS deposits in bimodal, mafic-dominated sequences, though the gold content is higher.
The TG-1 gold deposit is a late-stage auriferous exhalative sulphate event preserved as a barite cap.
Manhattan attributes its exploration success to the systematic evaluation of gravity anomalies. Gravity, magnetic and, in part, electromagnetic surveys were interpreted by correlating the geophysical response to specific gravity, magnetic susceptibility and rock conductivity measurements from core samples. Using this technique, the company has been able to detect high specific gravity bodies (massive sulphides) at relatively great depths. Three-dimensional computer-modeling of the gravity data aids in prioritizing the anomalies before drill-testing.
Approximately 730 sq. km of reconnaissance and 120 sq. km of gravity surveys have been completed. The northern part of Manhattan’s land package, held under the wholly owned Lancones concessions, has not been touched yet. Preliminary exploration has been conducted on only 12 km of the 50-km strike length controlled by the company.
In May, Manhattan added to its holdings by picking up the Perla claims covering 19 sq. km of ground, 20 km west of Tambo Grande. The previous operator had allowed the claims to lapse following limited drilling that encountered disseminated and stockwork sulphides. Manhattan has reinterpreted the existing geophysical data and identified three anomalies, two of which are similar in magnitude (up to 3 milligals) to TG-3.
To date, Manhattan has drill-tested nine gravity targets and discovered three massive sulphide deposits. Of the other six targets tested, which included TG-6, TG-7, TG-8, B-7, STG-3 and R-2, Manhattan has eliminated only R-2.
Clow tells The Northern Miner that the original plan was to stick a few holes into each target, but that “unless we hit a home run on it, we didn’t follow it up.” TG-6, TG-8 and B-7 all show sulphides to varying degrees and exhibit the right basin texture and the right felsic rocks. The sulphide material encountered has been banded and fragmental. The company believes the sulphides are fringe material to some larger deposit. “It’s certainly indicative that we are on the edge of something,” says Clow. “We need to go back and chase those sulphides.” The company’s immediate focus, however, will be B-5.
All told, there are 19 additional gravity anomalies on Manhattan’s holdings that require follow-up geophysical work before drilling can be carried out.
“Over the coming months, our focus will be to improve the overall metallurgical recoveries, expand the known resource base, and locate potential new economic deposits,” states Clow.
Manhattan has about US$9 million in cash, with approximately 40 million shares outstanding and 44 million fully diluted.
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