Mineral ‘orphanage’ grows in Central America

They’re the orphans of Central America: mineral deposits that were on the verge of development, or in production, when low metal prices forced their owners to abandon them. While the failure of Greenstone Resources may have left the greatest number of orphan projects behind, other orphans can be found from Nogales to Panama City.

Manhattan Minerals (MAN-T) has sold its Moris gold mine in Sonora state, Mexico, to a group of Mexican investors. Mining at Moris was shut down in April 1999, though the leach pads continued to produce gold into 2000. Manhattan is recording a US$1-million loss on the Moris sale.

As part of its restructuring under the proposed merger with MSV Resources (MSV-T) and Geonova Explorations (GNE-M), Campbell Resources (CCH-T) has written down the value of its Santa Gertrudis gold project, in Sonora state, and its Cerro Quema gold property in Panama.

Santa Gertrudis, which was in production until October 2000, is now dormant, and an exploration program for new near-surface resources was suspended in December. Campbell posted a $10.6-million writedown on the mine and is looking for a buyer.

At Cerro Quema, where a resource of 8.8 million tonnes grading 1.2 grams gold per tonne had been outlined, Campbell has found a buyer who will take over ownership and provide it with a 9% net profits interest (NPI). The deal is expected to close by the end of the current quarter.

Not far from Cerro Quema, on the northern coast of Panama, low copper prices are spelling trouble for the Petaquilla project. A development decision is still in the hands of Teck (TEK-T), which must annually update a feasibility study, completed in late 1996. Each year, Teck has the option to defer production, and majority owner Adrian Resources (ADL-T) can elect to terminate Teck’s option to earn half of Adrian’s 52% interest. Meanwhile, Adrian is participating in oil-drilling plays.

Adrian’s partner, Inmet Mining (IMN-T), can go along with a production decision, sell its interest to Adrian and Teck, or be diluted to an 8% NPI. So far, Teck has annually deferred a production decision, citing poor economic conditions.

Petaquilla has a minable reserve (under favourable economic conditions) of 1.1 billion tonnes grading 0.5% copper, 0.016% MoS2, and 0.09 gram gold per tonne. The stripping ratio of the pit plan is about 1-to-1.

The principal stumbling block appears to be the large initial capital cost to bring Petaquilla into production — a misfortune Petaquilla shares with the large Cerro Colorado copper deposit, farther to the southwest. In February, Aur Resources (aur-t) picked up Cerro Colorado from Tiomin Resources (tio-t) in exchange for forgiving a US$2.3-million loan.

Cerro Colorado holds a resource, in all categories, of 3.5 billion tonnes grading 0.42% copper, based on a cutoff grade of zero. It had been Tiomin’s plan to start a solvent extraction-electrowinning (SX-EW) operation with a lower up-front cost, exploiting a supergene oxide resource of 243 million tonnes grading 0.51% copper. Cash flow could have funded construction of an open pit and mill to take on the main primary deposit.

Aur’s corporate plans centre on its new Chilean copper project, Quebrada Blanca, bought from Teck and Cominco (CLT-T). Having been through one financing to buy Quebrada Blanca, Aur’s appetite for a new development project may take a while to come back.

The large gold deposit at Cerro Crucitas in Costa Rica was dropped by Placer Dome (PDG-T) after Placer examined the results of a 1997 prefeasibilty study. Crucitas had a measured and indicated resource of 59 million tonnes grading 1.2 grams gold per tonne, plus an inferred resource of 14 million tonnes grading 1 gram.

In 1998, Placer dealt an option on the property to Lyon Lake Mines, which continued exploration and feasibility work. As gold prices fell, the project, which could be justified on the back of Crucitas’s reserve figure, shrank to a 4,500-tonne-per-day mine and mill.

A full feasibility study, contracted in 1999, was submitted to the Costa Rican government for approval, but, in the poor investment climate of the time, Lyon Lake never found the financing to bring Crucitas into production.

In May 2000, Vancouver-based Vannessa Ventures (VVV-V) bought the project from Lyon Lake in exchange for 250,000 shares, $25,000 in cash, and the clearing of about $500,000 in payables off Lyon Lake’s books.

The deal with Vannessa, together with Lyon Lake’s sale of physical assets to its Costa Rican contractors, also helped Lyon Lake to close down its Beta Vargas mine, in the northwestern part of the country. Beta Vargas had opened in September 1997 but had to be closed a year later, owing to metallurgical problems. Lyon Lake used the proceeds from the sale to complete mine closure at the Beta Vargas pit.

Vannessa, mindful of the dangers of large, low-grade gold projects in the present climate, is looking at a much more modest plan for Crucitas. Using Placer and Lyon Lake’s date, the company has revised its estimate of the amount of near-surface saprolitic material contained in the deposit. Saprolite, the product of tropical weathering on silicate rocks, is usually rippable and consequently cheap to mine; it is also oxidized, offering the possibility of a heap-leach project that would not have the same capital cost as a full-scale conventional mine and mill.

The new resource estimate is 10.4 million tonnes with an average grade of 2.2 grams gold per tonne in the measured and indicated categories. A further 3 million tonnes of 1.9 grams are inferred. All the resources are based on a 0.8-gram cutoff.

The saprolite extends to 60 metres in places but appears to have an average depth around 21 metres. The topography at Crucitas — essentially two hills — offers a low stripping ratio.

Metallurgical tests by Placer and Lyon Lake show that direct cyanidation can yield recoveries of around 92%; Vannessa plans further metallurgical tests to get a handle on the response of the mineralization in the saprolite zone.

With Vannessa now holding $6.7 million in cash, thanks to exercised warrants, it appears Cerro Crucitas may be one Central American orphan that knows where its next drill hole is coming from.