Mining company forms alliance with contractor

An agreement-in-principle sets the stage for a mining company and a contract miner to develop the Peregrino copper-gold project in Chile, as well as other, less advanced projects in that country and Peru.

South American Gold & Copper (TSE) plans to enter into a contractual mining arrangement with Thyssen Mining, the Chilean subsidiary of Thyssen Mining Construction of Canada, which, in turn, is owned by Thyssen Schachtbau of Germany.

The Peregrino gold-copper deposit is about 50 km northwest of Santiago and, within the Zorro mine, hosts proven reserves of 17,725 tonnes grading 4.75 grams gold per tonne and 1.42% copper.

Peregrino is a steeply dipping vein system measuring about 7 km long; it exists within an intrusive, and silicification is evident adjacent to the vein. Elevation varies from 400 to 1,000 metres.

Past work includes 6 km of road trenching and 630 metres of diamond drilling in eight holes spaced out over 2,000 metres. Vein walls are strong in the existing workings on the Zorro vein, which varies in width from 1 to 5 metres. The average vein width is 2 metres.

The metallurgy of the chalcopyrite-pyrite-magnetite mineralization is described as “uncomplicated,” with gold and copper recoveries exceeding 90%. The agreement calls for three possible phases of development work, for which Thyssen Mining will initially bear about 80% of the costs. The goal will be to block out sufficient reserves and several other nearby prospects in order to justify an initial 500-tonne-per-day (tpd) plant operation. This would later be increased to 1,000-tpd increments and on up to a potential 5,000 tpd. The first phase will consist of about 570 metres of drifting below the existing reserves, as well as development of two raises, one up to the existing mine workings and one for ventilation. The purpose of the drift is to confirm the structure of the Zorro vein at the 403-metre level at Peregrino. Some diamond drilling may also be carried out in order to delineate the Claudio vein system which is believed to run parallel to Zorro. It is expected that the entire program will block between 300,000 and 400,000 tonnes grading 4.5 grams gold and 1.25-1.5% copper.

Under the proposed agreement, Thyssen can discontinue operations at any time. But, in order to recover its cost, it can look only to the net profits received from mining and selling the reserves that were blocked out. South American Gold & Copper agreed to reimburse 150% of Thyssen’s costs when a 500-tpd plant is put into operation, or, at its option, Thyssen can elect to recover 200% of its costs through a net profits interest in the mine.