The discovery of the 7.3-million-oz. Lagunas Norte deposit in northern Peru testifies to the success of
The deposit is part of the Alto Chicama property, which is just one of 35 in Barrick’s global portfolio being drilled this year.
“It’s all part of the new investment we’re making on the exploration and development front,” says President Randall Oliphant. “I’m confident it’s going to provide this company with new sources of organic growth for a long time to come.”
The company is focused on generating “high-quality” gold targets with the potential to deliver more than 2 million oz. and provide double-digit returns at a gold price of US$300 per oz. The company tries to maintain a geographical mix of projects at various stages of exploration. By establishing and maintaining a presence in various regions, Barrick ensures it is ready for third-party discoveries. Aggressive grassroots exploration campaigns are currently being conducted in the Patagonia region of southern Argentina, the Tanami area of central Australia, and the Lake Victoria greenstone belt in Tanzania.
Recently, the major announced it was embarking on a 5-year, US$2-billion plan to bring four new mines into production between 2005 and 2008. The new growth will come from Alto Chicama, which has been fast-tracked through to project development, Cowal in Australia, Veladero in Argentina, and Pascua-Lama, which straddles the border between Chile and Argentina.
Combined, these four projects are expected to add 2 million oz. in annual production by 2008 at an average cash cost, in the first 10 years, of US$125 per oz. Barrick projects an internal rate of return of 14% based on a gold price of US$325 per oz., and 11% at US$300 per oz.
Barrick’s existing operations are expected to continue to produce, on average, 5.5 million oz. annually at US$175 per oz. through to 2006.
Lagunas Norte is a high-sulphidation, disseminated, epithermal-type deposit hosted in volcanics, sedimentary breccias and tuffs in the southeastern area of the Alto Chicama property. The flat-lying mineralization outcrops and extends over an area of 1,600 by 750 metres and to depths of up to 300 metres.
Based on an updated estimate, Lagunas Norte contains an indicated resource of 93.5 million tonnes grading 1.91 grams gold per tonne, equivalent to 5.7 million oz. A further 30 million tonnes grading 1.59 grams, or 1.5 million oz., are categorized as inferred.
The property is in the Department of La Libertad, 140 km east of the coastal city of Trujillo and 42 km west of Huamachuco. It lies midway between Barrick’s existing Pierina mine, 175 km to the south, and
Barrick started regional grassroots exploration La Libertad in 1998, and in early 2001, the major won the Alto Chicama property in a privatization auction held by state-owned Centromin. In order to acquire 100% title on the 185-sq.-km property, Barrick must spend US$6 million over three years and complete a feasibility study. Upon a positive production decision, a US$2-million advance royalty payment is due to Centromin, which retains a 2.51% net smelter return royalty.
Barrick began field work at Alto Chicama in March 2001, identifying three drill target areas during a program of geological mapping, channel sampling and ground geophysics. Field crews uncovered altered tuff and anomalous gold-bearing breccias containing quartzites and vuggy silica clasts. Drilling began in June 2001 and consisted of an initial 4,700 metres drilled in 27 holes. The first 15 holes tested an area 3-3.5 km south of Lagunas Norte, before drilling shifted to the discovery area. As an aside, several significant intercepts were encountered at Lagunas South, including 1.6 grams over 54 metres and 1.7 grams across 18 metres.
By the time Barrick announced the discovery of Lagunas Norte in April 2002, 45 holes totalling 14,500 metres had defined a 3.5-million-oz. inferred resource of 55 million tonnes grading 1.95 grams. The initial drilling was widely spaced on 200-metre centres.
Budget increase
With a large promising discovery on its hands, Barrick increased Alto Chicama’s exploration budget to US$20 million from the original US$5 million and began infill drilling on 100-metre centres. More than 45,000 metres in 172 holes had been completed by early July, when Barrick announced an updated inferred resource estimate of 123.5 million tonnes grading 1.83 grams, for a contained 7.3 million oz. At that time, the deposit was still open to the south and southeast.
The property occurs on the western flank of the Peruvian Andes at an elevation of 4,000-4,260 metres. The regional geology of the Alto Chicama area is dominated by a thick sequence of folded and thrusted Mesozoic marine clastic and carbonate sedimentary rocks, plus andesitic and dacitic volcanic rocks of the Tertiary Calipuy group. The Mesozoic sequence is unconformably overlain by the Tertiary group and cut by numerous small intrusive bodies. The sequence has been affected by at least one or possibly two stages of compressive deformation during Andean orogenesis.
Most of the Lagunas Norte deposit is contained in oxide breccias, with about 1 million oz. of the resource in sulphides (17 million tonnes grading 2 grams). Some of the sulphide material overlies oxide mineralization on the western side of the deposit.
Preliminary metallurgy on the oxides indicates recoveries of 85-95% in bottle-roll and four column tests. More work is required on the sulphides, which have so far returned poor recoveries of less than 50%. Metallurgical bulk tests will be carried out over the next 12 months.
Brecha Alexa
A plan map of grade versus thickness for Lagunas Norte shows two “hot spots” — one in the northwest, called Brecha Alexa, and a large one in the south-central area. Brecha Alexa is a breccia pipe surrounded by sediments. A couple of holes in Brecha Alexa ran 7 grams over 105 metres and 3.5 grams over 93 metres.
Highlights from the south-central area include 6.2 grams over 82 metres and 5 grams across 200 metres. The hotspot in the south-central area may be controlled by northwest-southeast-striking structures.
Although the mineralization is controlled largely by lithology, Barrick’s geologists believe these northwest-southeast structures may be controlling some of the higher-grade, thicker mineralization, either by down-dropping sections or in some other way.
“I don’t think that it is a coincidence that these structures are oriented northwest-southeast and that the deposit is opened to the southeast,” said Alexander Davidson, Barrick’s senior vice-president of exploration, in a July presentation to analysts.
The mineralization in the volcanics is all breccia and tends to form either a skin on top of the sediments or occur as breccia pipes. The mineralization in the sediments tends to follow the lithology or the bedding. Deeper sulphide mineralization in sediments can be higher-grade. The sulphides in one hole ran 9 grams over 43 metres. Lagunas Norte exhibits typical high-sulphidation, advanced argillic alteration, silicification and vuggy silica.
Feasibility in ’03
The project’s exploration budget was further increased to US$35 million in July to allow for additional infill, stepout and condemnation drilling, along with mine planning, processing, environmental, archaeological and economic development studies, with the view to completing a feasibility study in 2003.
Based on the deposit’s similarities to the Pierina mine, Barrick envisions a valley-fill, heap-leach mine at Lagunas Norte running 29,000 tonnes per day to produce 500,000 oz. per year at a cash cost of US$130 per oz. over the first decade.
Capital costs are expected to range from US$300 to US$350 million.
The project is a look-a-like to Pierina; the only difference is that Lagunas Norte would stockpile the sulphides for future processing. Pierina does not produce any sulphide material.
“We’ve got a lot of work to do next year at Alto Chicama because we want to get this on-track and into production [in 2005],” says Oliphant.
Further infill drilling was designed to tighten-up the drill-space density to an indicated resource status. This infill drilling has been done at 100-metre spacings along lines that are 50 metres apart. The holes are offset from the holes on adjacent lines so that the effective distance between each drill hole is 70 metres at the most. There may be some areas of the deposit, like Brecha Alexa, which will be more closely drilled.
By September, Barrick had completed 298 holes and reclassified 5.7 million oz. of the resource as indicated and 1.5 million oz. as inferred. There have been as many as 12 rigs on-site. Six rigs currently remain on the property as drilling continues. The deposit remains open to the north and south, and to the southeast.
“The infill drilling is going as we expected,” says Alan Hill, executive vice-president of development. “We are seeing no surprises, good or bad. We should have most of the oxide orebody filled-in to a drill spacing that would allow us to put it into a measured and indicated category by the year-end.”
Another 80 holes are required to complete the infill program. In addition, a lot of condemnation drilling is required. A new resource estimate for Lagunas Norte will be out at the end of the year.
Barrick has assembled a land package of more than 1,200 sq. km in the immediate area of Alto Chicama through 100% holdings, or joint-venture and option agreements with local partners. In addition, Barrick entered into a 70% option agreement with
Barrick can earn an initial 65% interest in Tres Cruces by spending US$1.7 million over the next 40 months and carrying New Oroperu through to a production decision. In addition, it will make cash payments totalling US$700,000 over 42 months and US$200,000 per year thereafter.
During the past six months of so, Barrick’s geological team has identified at least eight specific drill targets with similarities to Lagunas Norte. Davidson says the prospects all have “spectacular alteration and decent gold,” adding “I don’t think we’re looking at just a single deposit here.”
Exploration drilling on the prospects, which lie within 20 km of Lagunas Norte, will be carried out in the new year.
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