Meridian makes headway at El Penon

Results from an ongoing prefeasibility study at the Chilean gold property known as El Penon will be used by Meridian Gold (MNG-T) to make a production decision by year-end.

The Nevada-based company is nearing completion of a preliminary feasibility study on three of the project’s five known deposits and will soon begin a final feasibility study, to be carried out over the remainder of the year.

In the initial study, Meridian has focused on developing the Quebrada Orito, Cerro Martillo and Orito Sur as a combined open-pit and underground operation. Together, the three deposits host nearly 90% of the project’s total resource of 1.8 million oz. gold and 34.7 million oz. of silver, and, if brought to production, would almost double the company’s current reserve base and gold production.

Situated 100 miles southeast of this port city in the country’s northern region, El Peon is accessible year-round by a 25-Mile-long gravel road that runs off the paved Pan American Highway. It lies at an elevation of 5,900 ft.

and is situated in the Atacama Desert, which Meridian President Brian Kennedy regards as a distinct advantage.

“We don’t have snow, rain or bugs, and the only environment we have here is what we bring into it,” he told The Northern Miner, which recently visited the site. “That’s one good thing about El Peon; it has a nice mild climate, and so year-round operations will not be a problem.”

Despite the extremely dry conditions, an abundance of water is supplied from three nearby, wholly owned wells. Furthermore, the company has water rights to additional land nearby and is confident this will supply any of the project’s future needs.

Geologically, El Peon is a quartz-Andularia epithermal vein system within a Paleocene-Aged rhyolitic flow dome complex. Gold mineralization is fine-grained and occurs within structurally controlled quartz veins and hydrothermal breccias. The mineralization is typically oxidized with little sulphides, allowing for liberation of the gold by direct cyanide leaching.

Although classified separately, Quebrada Orito and Orito Sur have now been found to be a continuous 5,000-ft.-long, north-south-striking zone hosted within a hydrothermal breccia unit that dips steeply to the west.

Mineralization is still open at depth and along strike to the south. The separate Cerro Martillo deposit, which lies to the northeast, strikes north-Northeast and dips steeply to the east.

Up to the end of 1996, total resources on the property were calculated at 8.8 million tons grading 0.211 oz. gold and 4.1 oz. silver. Two-Thirds of these resources are classified as drill-indicated and are contained in Quebrada Orito and Cerro Martillo, which, respectively, host 3.2 million tons grading 0.209 oz. gold and 2.3 oz. silver, and 2.6 million tons grading 0.175 oz.

gold and 5.1 oz. silver. The remaining resources fall in the drill-inferred category, more than 70% of which is contained in Orito Sur, which hosts 2 million tons grading 0.269 oz. gold and 5.4 oz. silver.

.SFinal payment

Meridian owns 75% of these resources and is optioning the ground containing the remaining resources from a private Chilean company. Next year it will make its final payment for US$1 million, and, as part of the deal, it has granted the vendor a 1% to 3% net smelter return on a sliding scale, depending on the price of gold. Once this is exercised, Meridian will be the sole owner of 230 sq. miles of contiguous mineral claims.

Quebrada Orito and Cerro Martillo are being considered as open-pit operations, while Orito Sur is envisaged as a future underground operation.

The company will first focus on Orito Sur and then modify its plans for Quebrada Orito and Cerro Martillo, based on drill results received to date.

Stripping ratios are anticipated to be 12-To-1, with cash costs pegged at US$200 per oz. Although the mining plan for Orito Sur is in the early stages, overall cash costs are expected to remain unchanged.

“We think this is going to be a very economical project,” said Kennedy. “The preliminary feasibility is going to indicate something between 2,000 and 3,000 tons a day.”

Meridian first viewed El Peon as a project of merit back in late 1992, after its exploration team stumbled upon an area containing abundant float samples which displayed characteristics indicative of a hydrothermal origin. Although a sample sent back for analysis at the time averaged only 0.029 oz. gold per ton, the company’s geological team was confident it had made a discovery worthy of further investigation.

.SLarge system

“Despite the low grade, the intensity of the veining and brecciation kept us coming back to the area,” recalled Meridian geologist Charles Robbins. “It pointed to a much larger system and looked intense enough to tell us that we were on to something.”

In May of the following year, Meridian acquired several concessions in the surrounding area. Over the following three months, the reconnaissance team carried out additional exploration in the area now dubbed Discovery Wash.

Tracing this surface mineralization southeastward over 6,500 ft. led the team to the north-south-Trending Quebrada Orito zone, where an unearthing of a subcrop yielded the first visible gold. The discovery provided the first hard evidence of the existence of a significant underlying system of mineralization and, according to Robbins, “set the whole project off.” Since then, Meridian has drilled more than 700 holes into the property. One of the main goals for the current study is to confirm proven and probable reserves. In this respect, the company’s efforts have been focused on Quebrada Orito, where crew members have completed a 2,450-ft. ramp, 400 ft of drifting, and five crosscuts totalling 984 ft.

As well, 10 drill stations have been positioned along the ramp, from which two diamond drill rigs are currently engaged in a 13,000-ft., 25-hole program of definition and exploration drilling. While this work is confirming surface results, it is also providing the company with invaluable information for Orito Sur.

“The development work is helping us understand the structural controls for mineralization, which will help our exploration and understanding at Orito Sur,” explained Meridian geologist Alfredo Garcia.

.SMilling

The milling process will include either semi-Autogenous grinding or cone crushing. Ground material will initially pass through a gravity circuit to recover loose gold and then pass through a Merill-Crowe circuit. Dore bars will be produced on site.

For Quebrada Orito material, recovery rates of up to 93% for gold and 92% for silver have been achieved by using cyanide leaching. Gravity methods have recovered up to 20% of the gold and 36% of the silver. For Orito Sur material, cyanide leaching in initial tests indicates recovery rates of 88% for gold and 85% for the silver.

Electrical power for the operation will come from Argentina via overhead power lines, to be installed in mid-1998. The company will also maintain some on-site generators for backup power.

Looking to the future, Meridian is continuing to explore for additional resources through drilling and geophysical surveying. Prime targets include exploring for a southern extension from Orito Sur and proving up additional tons at Orito Norte, where an inferred resource has been outlined at 400,000 tons grading 0.204 oz. gold and 1.6 oz. silver.

“What’s important to realize is that we have spent all of our efforts on only 10 sq. miles,” said Kennedy. “We don’t yet know how far north Orito Norte goes or how far south Orito Sur extends.”

The Orito Norte zone lies along strike, and immediately north, of Quebrada Orito. The zone has so far been outlined by drilling over a 1,000-ft. strike length. Drilling of eight additional holes this year had bridged the gap between the two zones and, with geophysical evidence pointing to a further northern extension of 1,600 ft., the zone may provide for significant future growth in resources.