Mexican government’s initiatives bear fruit — Eldorado

The opening of a major open-pit gold mine in this historic mining village is expected to pay big dividends in the local economy.

It is the first mine to open in the district since 1916 and, to celebrate, many of the town’s 600 inhabitants joined representatives of Eldorado (TSE) and guests at an outdoor luncheon to the tune of Mexican music. Eldorado President Richard Barclay publicly thanked local residents for helping make the mine a success.

Situated 30 miles from Hermosillo in Sonora state, La Colorada is a modest-sized, heap-leach mine which is expected to produce 25,000 oz. gold annually at US$150 per oz. Eldorado owns 70% of the operation, with the remainder held by a subsidiary of Campbell Resources (TSE).

Production was achieved at a cost of US$2.5 million and fewer than two years after Eldorado took on the project — its first venture into Mexico. Barclay praised the government’s initiatives to strengthen and modify the mining industry and attract foreign investment.

Local government officials were, in turn, complimentary of Eldorado’s progressive environmental policies, as well as its participation in and support of community programs in education, health and housing. “The dollar amount for such things as supplying paint and materials to repair and improve homes and schools is small,” Barclay said in a recent interview. “The premise of our social programs is to be a catalyst and work with the community. This is good business practice because if we take and don’t leave anything, there could be a backlash against foreign companies working in Mexico.”

Eldorado is also taking part in a study aimed at attracting new business opportunities to La Colorada so that the community will continue to thrive after the mine is closed.

The mine is expected to operate for about 10 years or more, depending on the success of exploration efforts. Current reserves are mostly contained in two main zones — El Creston and Gran Central — although geological resources have been identified in several other nearby structures.

Eldorado’s focus at La Colorada is markedly different from that of previous operators. High-grade quartz veins were the primary target in the past, starting in 1740 when the first discovery was made by Jesuit missionaries. These rich veins were selectively mined and yielded more than 1 million oz. gold, with the bulk of production spanning from 1860 to 1916 under British and American ownership.

Eldorado’s management team recognized La Colorada as a heap-leach target and was able to draw on its years of experience in this field. Besides Barclay, the team includes Chester Millar (founder of Glamis Gold), Michael Beley and Gary Nordin — all seasoned professionals.

Initial work was focused on defining the most obvious oxide gold mineralization and carrying out a 33,000-ton heap leach test. The test showed that the deposit known as El Creston was well-suited to open-pit, heap-leach mining, with good recoveries, low cyanide consumption and run-of-mine ore that requires no blasting or crushing. Information from the test was used for the final feasibility study, and construction began in September, 1993. The first ore was hauled to leach pads in November.

The geology consists of regional shears which control emplacement of granodiorite intrusives and gold stockwork systems. The main ore zones feature hematite alteration and quartz manganese stockwork, with argillic altered hangingwall and silicified footwall siltstones. The high-grade veins are localized at the contact of the hangingwall and footwall. Current production is from El Creston, which has a minable resource of 2.3 million tons grading 0.048 oz. gold and 2 oz. silver per ton (within a larger geological resource of 4.4 million tons averaging 0.044 oz. gold per ton). The mineralized zone varies from 40 to 60 metres in width and is oxidized to a depth of about 120 metres. The stripping ratio at El Creston is about 1.5-to-1 (waste-to-ore).

Contract miners extract and haul ore to the leach pads, a short distance away. Currently 40,000 tons of ore and 60,000 tons of waste are mined each month, but the ore mining rate is being increased to 60,000 tons. The pit contains evidence of previous workings, including backfill. “For us, backfill is good ore,” said Chris Harrison, Eldorado’s regional manager for northern Mexico, on a mine tour attended by The Northern Miner. The ore is consistent and grade control relatively straightforward, based on trenching, drilling and sampling.

“But we’ve had a few surprises since starting production,” Harrison added. “We’ve found more high-grade silver than initially anticipated, which prompted us to look closely at the economics of recovering (it).” A carbon column recovery system is being used, but mining of silver-rich veins has resulted in more precious metals being put into solution than the carbon can pick up. This led to a decision to abandon plans to expand the carbon column plant and, instead, install a Merrill-Crowe facility. “We bought the Merrill-Crowe plant from Bema’s Champagne mine for US$75,000 and plan to spend a similar amount to install it on site,” Barclay said. “That’s the same amount we had planned to spend on our plant expansion.” The Merrill-Crowe plant is expected to boost silver recoveries to about 30%, while increasing gold recoveries slightly and lowering overall production costs. The dore produced on site currently averages 20% gold and 80% silver. Eldorado has one leach pad in operation, which employs a drip system, and is constructing a second pad. The counter-current leaching system has an intermediate pond that will be phased in within a year and the water supply from an old shaft is being used in a closed circuit.

Eldorado is committed to high environmental standards, and uses the same practices as required for heap-leach operations in southern California. Although not required to do so, the company transplanted cacti from the pit area that will later be replanted in the mined out areas. Also, the leach pads have 60-mil double liners (with geotextile in between the two liners), rather than the required 40-mil liners.

On the exploration front, the company has resumed infill drilling at the nearby Gran Central zone. The work will consist of drilling 1,700 metres in a total of 30 holes in an effort to upgrade the resource to a minable reserve. The previously reported resource for this zone is 1.9 million tons grading 0.032 oz. gold per ton.

Another exploration target is the Las Duendes project, which lies adjacent to the southern boundary of the La Colorada property. The target here is an east-west-striking gold-mineralized zone roughly parallel to El Creston and Gran Central.

Among Eldorado’s other Mexican projects is its 50%-held La Trinidad project, 80 miles southeast of Mazatlan in Sinaloa state. Exploration is aimed at expanding and upgrading a reserve on Taunas, one of several gold-mineralized stockwork-breccia zones exposed at surface. Recent drilling has returned encouraging results (T.N.M. April 18/94), which are expected to boost the property’s preliminary resource of 1 million tons grading 0.081 oz. gold per ton.

Eldorado also owns 60% of the nearby El Encuentro gold project, which covers a bulk-tonnage gold target.

Eldorado’s goal is to advance its Mexican projects and achieve a total gold production rate of 100,000 oz. annually. For multi-million-ounce gold potential, the junior has its eye on Argentina, where a first phase of exploration was recently completed.

The company acquired about 1,000 square miles in northwest Argentina and offered associated company HRC Development the right to earn a 55% interest by spending US$1 million over three years.

The project covers a portion of the Maricunga gold belt in the north and extends into the Indio-Nevada gold belt to the south. These belts host numerous gold deposits in neighboring Chile.

Using motorcycles rather than expensive helicopters for transport, Eldorado’s geological team collected soil and rock samples from more than 20 anomalies in order to plan a second phase of
exploration.

Michael Beley, a geologist and Eldorado vice-president, describes the exploration potential of the Argentine project as “one of the best in the world,” adding that a follow-up program will begin this fall.