PRECIOUS METALS — Homestake, Codelco consolidate holdings

Homestake Mining (HM-N) and state-owned Corporacion Nacional Del Cobre de Chile (Codelco) have added to their land position at the Agua de la Falda gold mine in northern Chile.

The partners will each contribute land to the joint venture, tripling the size of the operation.

Under an agreement, Homestake will contribute the Buitre and Gaucho claims, to the northwest and southwest of Agua de la Falda, as well as US$7 million in unspecified exploration spending. For its part, Codelco, the world’s largest producer of copper, will toss in the Coya Maya, San Antonio and Pedernales claims, situated northwest and southeast of the mine. The addition expands the total land package to 63,700 acres.

Around Agua de la Falda, in the Potrerillos mining district, Tertiary copper porphyries intrude Jurassic sediments. Nearby are the El Salvador and Portrerillos mines, which have been producing copper for more than 80 years.

The underground Agua de la Falda mine started up late in 1996 and achieved commercial production in April of the following year.

Mapping by Homestake geologists has recognized a spatial link between porphyry copper mineralization and gold mineralization in the Potrerillos area. Consolidation of lands around the mine resulted from Homestake’s recognition of geologic similarities between the mine and the surrounding concessions.

Codelco will receive a net smelter return royalty of 1.5% on the first 1 million oz. produced from the Coya Maya claim. Thereafter, the royalty increases to 2.2%. Some of the funds will go to Codelco immediately, through US$2 million in advanced royalty payments by Homestake.

Because of the proximity to El Salvador and Potrerillos, Codelco retains rights to any copper mineralization found. However, the ownership interests of Agua de la Falda, in which Homestake controls 51% and Codelco 49%, remain unchanged.

Homestake’s share of production in 1998 was 24,100 oz. at a cash cost of US$198 per oz. By the end of the first quarter of this year, cash costs had climbed to US$212 per oz. on production of 6,600 oz. The operation remains on target to produce more than 25,000 oz. in 1999.

In 1998, the company spent US$2.1 million on exploration at the mine, resulting in a minor increase in reserves. Proven and probable reserves at the end of the year stood at 684,000 tons grading 0.185 oz. gold per ton, equivalent to 126,500 oz. The operation also contains, in the Jeronimo deposit, 2.8 million oz. in 16.9 million tons grading 0.17 oz. per ton.

This year, Homestake expects to complete bio-leach testing and start a feasibility study for the development of Jeronimo. Early pilot-scale testing of bio-oxidation as a pre-treatment step has generated favourable results for the sulphide mineralization.