A new optimization study appears to have improved the economics of the wholly owned El Sauzal project of
El Sauzal sits atop steep, rugged, mountainous terrain in the southwestern corner of Mexico’s Chihuahua state, 450 km south of the U.S.-Mexico border and 15 km east of the Sinaloa state line. The project site is 250 km southwest of the city of Chihuahua and 60 km northeast of Choix.
Glamis is preparing to develop El Sauzal using open-pit mining methods and a conventional carbon-in-pulp (CIP) processing circuit.
Proven and probable oxide reserves are estimated at 18.5 million tonnes grading 3.37 grams gold per tonne, equivalent to 2 million oz., based on US$300-per-oz. gold and a cutoff grade of 0.8 gram per tonne. The stripping ratio is 1.19-to-1, and the database includes 187 diamond drill holes and 1,835 surface sample composites.
Glamis acquired ownership of El Sauzal in June of this year through a merger with Francisco Gold. A positive independent feasibility study by AMEC E&C Services was based on a mine plan delivering 5,000 tonnes per day to the mill to produce an annual 173,000 oz. over a life of 11 years.
El Sauzal is high-sulphidation, epithermal gold deposit divided into three principal zones of mineralization, known as the East, West and West Lip. All three feature a near-surface oxide unit, which contains most of the known resource. Zone boundaries are defined by a combination of fault displacement, alteration zones, structural features and topography. Each zone contains unique structural, stratigraphic and mineralization characteristics.
El Sauzal occurs in an upper sequence of Cretaceous to Tertiary volcanic and volcaniclastic strata along the western edge of the Sierra Madre Occidental. A crosscutting generation of faults, changes in slip direction during fault reactivation, and variable levels of tilting within different parts of the stratigraphic sequence all contribute to the complex structural geometry of the deposit. The main faults in the El Sauzal deposit strike northwest to northeast.
The overall geological resource of the oxide material stands at 39.5 million tonnes grading 2.2 grams, or 2.8 million oz. The sulphide portion of the deposit contains a total resource of 11.5 million tonnes grading 1.3 grams, for a further 500,000 oz.
The ultimate pit will be mined in eight phases over the life of the project. The steep terrain at El Sauzal requires a complex haulage system. The roads will be developed as links along topography and through the pit, with a grade not exceeding 10%. The planned mining phases will ensure that pit access is maintained throughout the mine life.
The processing plant will include a single-line semi-autogenous-grinding (SAG) mill and secondary ball mill feeding a gravity concentration and CIP circuit to produce gold dor. Overall gold recovery is estimated at 96%. The neutralized tailings will be filtered and transported to a dry stack facility adjacent to the plant site for permanent storage.
Recent optimization studies by Glamis indicate that a coarser mill grind can lead to reduced power consumption and lower cash costs. A 10% increase in throughput to 5,500 tonnes per day results in higher annual production of 190,000 oz. over a shortened mine life of 10 years. Improved cash operating costs of US$110 per oz. compare to feasibility-study estimates of US$114 per oz.
The capital cost is estimated at US$101 million, including a contingency of US$10 million. The results of the optimization work indicate the project has a potential pretax internal rate of return of 25%, compared with a 20% estimate in the feasibility study.
Glamis is fast-tracking development of El Sauzal. Environmental baseline studies are completed and a full archeological review is in progress. The permitting process is under way, and the company is working with government officials to approve a southern access road from the seaport of Los Mochis, some 200 km to the southwest. A proposed power line will follow the same route. Water will be sourced and pumped from the nearby Rio Urique, which sits 2 km away at a lower elevation of 300 metres.
The Glamis board of directors is scheduled to review the project for approval in November; if, as expected, approval is granted, construction should begin in the second half of 2003, leading to startup in the first quarter of 2005. The project has received enthusiastic support from government agencies and local communities. The proposed mine is expected to employ a work force of 209.
Glamis is an unhedged gold producer with working capital of US$57 million and no long-term debt. With two operating mines in the U.S. and one in Honduras, Glamis produced 125,655 oz. at an overall cash cost of US$156 per oz. and a total cost of US$226 per oz. in the first six months of 2002. This represented a 25% increase over production in the corresponding period a year ago, with cash costs improving by 10%.
The company owns a 100% interest in the San Martin mine in Honduras, a 66.7% share of the Marigold mine in Nevada, and 100% of the Rand mine in California, which is in its last year of mining. Production for the full year is expected to exceed 250,000 oz. at a cash cost of less than US$170 per oz.
Most of the company’s current exploration activity is focused on its two Guatemalan exploration gold projects, with a US$3-million drilling campaign at Marlin scheduled to continue throughout the first half of 2003.
Focus on Main zone
The Marlin project in western Guatemala was acquired as part of the Francisco merger. It was discovered through regional grassroots exploration in 1998, 25 km west-southwest of the town of Huehuetenango. Francisco had tested the property with a total of 72 holes uncovering near-surface gold-silver mineralization. Much of the focus of Francisco’s drilling was the Main zone, which occurs on the eastern end of a 2-km-long, east-west-striking quartz-adularia epithermal vein system — one of several parallel vein systems identified in the Marlin district.
The Main zone consists of a gently plunging, near-surface mineralized system associated with multiple south-dipping thrust faults and a sub-vertical feeder fault partially bounding it to the south. Most of the mineralization occurs in quartz veins and stockwork within a Tertiary-age dacitic, lithic tuff. The mineralization extends over an east-west distance of 500 metres and is up to 225 metres wide. The Main zone remains open to the west-southwest, to the east-northeast, and at depth along the main feeder.
Using the results from 69 of Francisco’s holes totalling 6,914 metres, Glamis estimates the Main zone hosts an overall resource of 1.1 million oz. gold and 15.3 million oz. silver. This is contained in a measured resource of 4.2 million tonnes grading 1.94 grams gold and 29.33 grams silver and and indicated resource of 8.6 million tonnes grading 1.46 grams gold and 22.22 grams silver, as well as an inferred resource of 14.1 million tonnes grading 1.09 grams gold and 11.49 grams silver.
Almost half the mineralization is oxidized, with the remainder consisting of transitional and sulphide material.
Glamis began an aggressive infill and stepout drilling campaign on the Main zone this past summer and currently has four rigs active on the property. So far, the company has completed 87 holes totalling 16,500 metres, of which 6,400 metres have been assayed to date. A few selected highlights of the current program include the following:
r 36.6 metres grading 5.5 grams gold and 15.5 grams silver starting at 25.9 metres of depth in hole 1, which was drilled along the southern margin;
r 35.1 metres of 2.9 grams gold and 7 grams silver between 44.2 and 79.3 metres, followed by 30.4 metres of 8.3 grams gold and 128 grams silver at 99.1-129.5 metres, in hole 31, drilled along the southeastern edge;
r 16.5 metres of 3.3 grams gold and 21 grams silver beginning at a depth of 38.4 metres in hole 9, along the eastern edge;
r 64.1 metres of 5.1 grams gold and 67 grams silver starting right from surface in hole 6, in the middle of the deposit; and
r 22.5 metres of 10.8 grams gold and 74 grams silver in hole 27, a northeastern infill.
Preliminary metallurgical tests indicate that the oxide mineralization leaches well, even at coarse crush sizes, though samples of transition and sulphide mineralization are yielding lower recoveries. In light of the metallurgical results, and in view of the many high-grade intercepts, a conventional milling operation is under consideration.
Glamis has initiated environmental baseline studies, road improvement and land acquisition programs. An internal feasibility study is expected in early 2003.
Elsewhere in Guatemala, recent deep drilling at Cerro Blanco shows promise for an underground component. The potential for a combination surface and underground operation is in the preliminary stages of evaluation.
Internal study
The wholly owned Cerro Blanco project lies just 4 km off the Pan American Highway in the southeastern part of the country. Based on the previous drilling of 71 holes and metallurgical tests, an internal economic study completed by Glamis in November 2000 indicated that Cerro Blanco held a potentially minable resource of 21.8 million tonnes grading 2.3 grams gold and 16 grams silver, at a stripping ratio of 5-to-1. This is equivalent to 1.6 million oz. gold and 11 million oz. silver.
Testwork indicates Cerro Blanco requires milling to provide adequate gold recoveries. The estimated capital cost of an operation capable of producing 170,000 oz. gold per year was US$85 million, with cash costs coming in at US$146 per oz. Using a US$300 gold price, the project yields an unleveraged rate of return of 14.9%.
To get a better indication of the potential of a deep, high-grade component of Cerro Blanco, Glamis drilled eight holes. Three of the holes cut significant values:
r hole 78 intersected 18.2 metres of 90.9 grams gold (including 193 grams across 8.3 metres) beginning at 256 metres of depth, followed by 7.5 metres of 10.8 grams at 338 metres down-hole;
r hole 85 hit 6 metres of 52.2 grams gold at a depth of 336 metres; and
r hole 87 intercepted 4.5 metres of 16.6 grams gold at 110 metres, followed farther downhole by 9 metres of 11.2 grams at 165 metres depth.
A second stage of drilling is planned, to determine the continuity of the high-grade shoots.
Glamis has 111.3 million shares outstanding.
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