Trevali pushes towards Peruvian production

Vancouver-based Trevali Mining (TV-T, TREVF-Q) is getting closer to launching Peru’s next polymetallic mine with a little help from a well-known player in the metal game: Glencore International (GLEN-L).
The two companies plan to have the Santander mine up and running by September, which should put it in a good position to capture a forecasted supply shortage in the zinc market.

The 44-sq.-km project is located in the central Peru polymetallic belt and is accessible by road, 215 km east from Lima. Its easy access owes in part to the area’s rich mining history.

First explored in the early 1900s, exploration had carried on through the 1950s until an open-pit and underground operation was built in 1957 to mine the Santander mineralized pipe. Once in operation the deposit produced until 1992, when at a depth of 480 metres, the operation was halted due to low metal prices.

Believing the old mine had more to give, Trevali arrived on the scene in 2007 and began exploring for new mineralized bodies. Its faith in Santander was rewarded with the discovery of two distinct mineralized trends: the Magistral trend with a strike length of 14 km, and the Santander Puajanca trend, which is a splay off the Magistral trend and carries a strike length of 3 km.

Following the two trends, Trevali drilled 171 drill holes totalling 33,000 ­metres and came back with four more mineralized bodies.

Three of the new deposits were found in the Magistral trend. The Magistral North deposit has indicated resources of 2.2 million tonnes grading 60 grams silver, 2.58% lead, 3.02% zinc and 0.08% copper. Magistral Central has 2.5 million tonnes of indicated resources grading 44 grams silver, 0.72% lead, 4.31% zinc and 0.09% copper, and Magistral South has indicated resources of 1.1 million tonnes grading 11 grams silver, 0.17% lead, 4.84% zinc and 0.05% copper.

In the Puajanca trend, which also contains the original Santandar mine, the company discovered the Puajanca South massive-sulphide deposit, which has indicated resources of 183,000 tonnes grading 36 grams silver, 1.96% lead, 2.14% zinc and 0.01% copper.

Mineralization is open at depth for all four deposits.

Remnants of the old Santander mine show that the historical mine can give more. Tailings from the old mine have indicated resources of 100 million lb. zinc at an average grade of 2.74% zinc.

When all the resources are put together, Trevali says it has enough ore to support 10 years of mine life.

The plan is to mine the three ­Magistral deposits as open-pit mines for 18 to 24 months, after which it would switch to underground stope mining.

After doing a solid job on the exploration front, Trevali handed the reins to Glencore for the design, construction and operation of a 2,000-tonne-per-day concentrate plant.

Glencore — which has years of experience running base-metal mines around the world, and plenty of experience in South America — is taking on the workload in exchange for a life-of-mine concentrate offtake agreement on all of the mine’s production at international benchmark pricing.

The deal with Glencore leaves Trevali with full ownership of the mine. It will acquire the processing plant once completed.

When commissioned later this year the mill is expected to yield efficient results because of the deposits’ coarse-grained mineralogy. Trevali pegs recoveries at 90% lead at a 40% concentrate grade, 80% to 85% zinc recovery at a 52% concentrate grade and 70% silver recovery.

Trevali is confident it will expand resources, which includes expanding the mill in 2014 to 4,000 tonnes per day.

Trevali also enjoys advantages on the cost side because of its Tingo hydroelectric plant, which sits 17 km down valley to the west of the mine. The plant is being upgraded to 10 megawatts (MW).

The plant, which has been in operation since 1958, generates 1.6 MW of power and partly services the power needs at Santander. Once expansion wraps up in 2013, the company estimates that power costs will come in at a penny per kilowatt hour, which compares favourably to the 8¢ to 12¢ per kilowatt hour charged when power is drawn from the national grid.