Globestar eyes producer status in Dominican Republic

Santo Domingo, Dominican Republic — Globestar Mining (GMI-V) (formerly TGW Corp.) has taken a step toward joining the ranks of mid-tier base metal producers by signing a mining resolution for its Cerro de Maimn gold and copper deposit, about an hour’s drive south of here.

The signing occurred at a ceremony attended by Dominican President Hipolito Mejia and Canadian Prime Minister Jean Chrtien during the latter’s visit to the Caribbean island nation. Globestar’s permit was one of seven deals worth about US$474 million to be signed by the heads of state. At the same meeting, Placer Dome (PDG-T) received permission to revive the Pueblo Viejo gold project, 8 km northeast of Cerro de Maimn.

Said Globestar President William Fisher: “We are pleased to receive international recognition for the Cerro de Maimn project. The project adds another strong Canadian presence to the Dominican mining sector.”

The last major permitting hurdle at Cerro de Maimn is approval of an environmental impact study. Fisher says the EIS process has involved consultation with the local population and that support is strong. “Really, it’s just a matter of compliance,” he said.

The EIS is part of Pincock Allen & Holt’s (PAH) ongoing feasibility study, which is expected to wrap up by July. Approval by the Dominican Ministry of the Environment and Natural Resources would follow.

“Without the permit, we can start on the sub-surface pouring of concrete (in preparation for mill construction in July and August),” said Fisher. “That would allow for the concrete to cure.”

Once fully permitted, mine construction is expected to take 4-6 months. That would allow time to dismantle and reassemble Boliden‘s (BLS-T) Premier gold-silver mill, near Stewart, B.C., which Globestar recently optioned.

Engineers from PAH and Hatch & Associates are reviewing the suitability of the 2,500-tonne-per-day mill during the 60-day option period; preliminary inspections indicate the mill is in reasonable condition.

“Logically the mill for Cerro de Maimn should be able to handle around 1,000 tonnes per day,” said Fisher.

About 70% of the mill is suited to the processing of oxide ore from Cerro de Maimn; flotation cells would be added to handle the sulphide portion of the deposit.

Globestar says shipping the mill from Stewart, B.C., and trucking it to the project site will cost half as much as building a new mill. The entire acquisition would cost about $2.5 million, including miscellaneous used equipment.

“Usually the feasibility study dictates the size of the mill required,” said Fisher. “We’ve jumped the gun a bit, which is a sign of our confidence.”

Globestar acquired Cerro de Maimn from Falconbridge (FL-T) in early 2002, and paid US$350,000 on closing. The deal requires Globestar to pay an additional US$250,000 a year after completing a positive feasibility, plus US$250,000 a year after startup. Falconbridge retains a 2% net smelter return royalty, which can be halved for US$1 million at any time.

In a separate deal, Globestar sold a half-interest in Cerro de Maimn to 4-Star Group for $2 million in cash. 4-Star, an arm’s-length group of investors based in Denver, Colo., also subscribed to a private placement of 2.75 million Globestar shares at 40 apiece. To maintain its 50% stake, 4-Star must invest a further US$500,000. The Denver group is funding the ongoing feasibility study as part of its earn-in obligations. Globestar is the operator, and retains possession of the mineral rights; it also receives a 10% management fee.

Boosting grades

Falconbridge discovered Cerro de Maimn in 1978. The measured resource was estimated to be 3.4 million tonnes grading 3.9% copper and 1.9% zinc, plus 0.56 gram gold and 47.3 grams silver per tonne, based on a cutoff grade of 1% copper. The oxide cap’s resource was pegged at 323,000 tonnes grading 3.1 grams gold and 59.9 grams silver.

In the summer of 2002, Globestar completed a 1,500-metre, 28-hole program of infill drilling. Fourteen of the holes cut the upper, copper-rich portion of the massive sulphide, more than doubling previous gold grades to 1.7 grams per tonne. The drilling also boosted copper, zinc and silver grades by 30-36% on average.

Highlights of that drilling included the following:

— Hole 111 — 22.4 metres (from 42.8 metres below surface) grading 1.4 grams gold, 45.1 grams silver, 2.9% copper and 1.9% zinc.

— Hole 112 — 16.4 metres (from 37.6 metres) grading 1.85 grams gold, 69.7 grams silver, 7.8% copper and 2.9% zinc;

— Hole 117 — a 6.6-metre section (from 62.3 metres) of 3.3 grams gold, 173.7 grams silver, 6.5% copper and 5.2% zinc.

— Hole 129 — 9.25 metres (from 35.6 metres) running 2.8 grams gold, 150.7 grams silver, 14% copper and 0.85% zinc.

Limited check sampling more than tripled gold grades in old Falconbridge core.

Globestar attributes the increase in gold grades to its use of fire-assay methods; Falconbridge originally used another method in its nickel laboratory at the 85%-owned Falcondo operation, 6 km to the west.

Fisher says there is potential to increase gold grades in the sulphides but adds: “Unless we re-assay every single sample in 100 drill holes, we can’t demonstrate that potential.”

Globestar’s drilling also confirmed that the resource is widest directly beneath the oxide cap where copper grades are enhanced.

Armed with Globestar’s results from infill drilling, Pincock Allen & Holt (PAH) pegged the measured sulphide resource at 1.9 million tonnes grading 3.25% copper, 1.7% zinc, 1 gram gold, and 36.4 grams silver. The indicated resource is about 2.3 million tonnes of 2.7% copper, 1.75% zinc, 0.95 gram gold and 34.4 grams silver, while the inferred portions consist of 560,000 tonnes running 1.8% copper, 1.7% zinc, 0.77 gram gold and 30.5 grams silver.

The estimate does not include material that could be mined by a potential underground operation beneath the current proposed pit.

Earlier this year, Globestar updated the deposit’s oxide resource. In the measured category are 323,000 tonnes running 2.5 grams gold, 64.6 grams silver, 0.2% copper and 0.02% zinc. Indicated resources consist of 288,000 tonnes of 2.6 grams gold, 65.4 grams silver plus 0.2% copper and 0.02% zinc. In the inferred category are 41,000 tonnes grading 2.3 grams gold, 67.8 grams silver, 0.2% copper and 0.01% zinc. The new figures include oxide intervals cut during the 28-hole summer drill program.

When the cutoff grade is halved, measured and indicated tonnage climbs to 858,000 tonnes, while gold and silver grades slip to 1.9 and 47 grams, respectively.

Fisher believes that with the extra capacity of the mill, and with most of the oxide ore already included in the proposed sulphide pit outline, the lower-grade oxide material will probably be mined.

Globestar expects to release estimates for the open-pit reserve and the underground resource as soon as Resource Development and PAH complete the process flow sheet and mine design.

Geology

The Cerro de Maimn deposit comprises a stratabound volcanogenic copper-and-zinc-rich exhalative massive sulphide lens topped by a gold-and-silver-bearing oxide cap. The gold-silver gossan outcrops at an elevation of 200 metres. Weathering extends up to 35 metres but averages 20 metres in thickness.

The 1.2-km-long lens averages 12 metres in thickness (ranging between 5 and 30 metres) and strikes in a southeasterly direction. The deposit dips 30-50 to the south and plunges 48 to the southeast at depths of between 10 and 170 metres below surface.

Ore mineralization in the massive sulphide portion of the deposit is characterized by pyrite, chalcopyrite, bornite, sphalerite, galena and tetrahedrite. The sulphides have been affected by supergene oxidation and copper enrichment.

The 22.5-sq.-km project is easily accessible via the Carretera Duarte, a 4-lane divided highway from Santo Domingo. It is one of several massive sulphide occurrences hosted by the 50-km-long Maimn volcanic belt.

Mining plan

Initially, Globestar would mine the deposit’s oxide
cap via a starter pit at the daily rate of 2,000 tonnes. The rate could be increased (possibly to 3,500 tonnes), as the ores are much softer than those previously being fed to the Premier mill.

The gold recovery rate for the oxides is pegged at 93%; the silver recovery rate, at 90%. Agitated cyanide leach would be used to produce dor. At those rates, production from the oxide cap would approach 50,000 oz. gold and 1.2 million oz. silver.

Profits generated by mining the cap during the first year would cover all capital, acquisition and mining costs.

In year two, mining would begin on the underlying sulphide deposit with annual production estimated at 30,000 tonnes copper and 15,000 tonnes zinc, both in concentrate. The open-pit main supergene copper-rich zone lies immediately beneath the oxides. The copper-to-zinc ratio varies from 4:1 to 1:1 with increasing depth and proximity to the primary mineralization.

“Luckily for us, zinc isn’t on the top,” explains Fisher. “I don’t want to be producing zinc in two years. Zinc is going to be OK in the long term, but in the short term it’s a disaster.”

The sulphide ore will be processed by conventional flotation, and should yield up to 30,000 oz. gold and up to 800,000 oz. silver over three years. Metallurgical tests are ongoing, but initial results indicate 25-36% recovery of copper to concentrate; zinc is around 23%, though the company is confident that will rise to 40-50%.

Globestar is considering going underground at Cerro de Maimn in the fifth year of operation.

Two or three condemnation holes will be sunk on the proposed mill site later this month. The mill should arrive during the third quarter of this year, with production slated to begin in the first half of 2004. The mine is expected to provide 150-200 jobs, and the proximity to the Pueblo Viejo project is considered an advantage.

“Pueblo Viejo closed down three years ago, leaving 800-900 local workers laid off, so there’s a large, skilled mining talent pool available,” says Fisher. “Since we plan to be in production before Pueblo Viejo, we’ll have the first pick of a highly trained workforce.”

Power supply will be a concern at Cerro de Maimn, as higher oil prices are hitting hard in the Dominican Republic. However, Globestar hopes to keep the cost in check by negotiating a “piggy-back” arrangement with its neighbour, Placer Dome, at Pueblo Viejo.

When all is said in done, the mine is expected to generate US$350 million in revenue during its lifetime. Capital costs are pegged at US$10-$20 million. The project is subject to the Dominican’s flat corporate tax rate of 25% (net of government royalties) and a minimum yearly income tax equivalent to 1.5% of gross proceeds.

Elsewhere in the DR

About 70 km to the east, Globestar is partnered with Everton Resources (EVR-V) on the 78.4-sq.-km Bayaguana properties, which are situated along an 18-km-long strike length of the Los Ranchos formation, the same geological formation that hosts the Pueblo Viejo gold mine.

Under a deal inked in mid-February, Everton can acquire a half-interest in the project, which comprises the contiguous Managua, Rincon Abajo and Trinidad exploration concessions, by spending US$1.5 million on exploration over two years. At least US$500,000 must be spent in the first year. Everton is also responsible for another US$500,000 once the option is exercised.

The deal also calls for Everton to issue to Globestar 750,000 shares in three equal tranches by the agreement’s second anniversary.

Fisher says the deal allows for exploration at Bayaguana while his company focuses on development at Cerro de Maimn.

Two deposits and two large-scale exploration targets have been identified on the Bayaguana properties.

At Cerro Kiosko, a zone of vein-type mineralization hosts an indicated and inferred resource of 4.9 million tonnes grading 2 grams gold, 5.1 grams silver and 1% copper. Mineralization is controlled by normal faulting and alteration.

Previous drilling by Falconbridge at Dona Amanda defined 45 million tonnes of inferred material running 0.45% copper and 0.22 gram gold. The deposit represents a secondary enrichment blanket overlying a volcanic centre.

The Dona Loretta showing returned up to 23.4 metres averaging 2.1% copper and 0.3 gram gold. Soil sampling and geophysical surveys suggest a possible extension to the mineralization. Dona Loretta exhibits the same geologic setting as Dona Amanda.

The three projects are on the Managua and Rincon Abajo concessions, part of an extensive hydrothermal alteration zone related to the Managua volcanic centre.

The Trinidad anomaly is on the eastern portion of the Bayaguana properties. Selected outcrop samples returned up to 24.1 grams gold per tonne. The target represents a 1.2-by-2.5-km hydrothermal alteration system coincident with elevated gold values in geochemical surveys.

The partners recently collected 307 rock samples from a 10-sq.-km area on the Trinidad and Loma Managua targets. About 70 of the samples returned more than 100 parts per billion gold, with 15 samples from Trinidad yielding between 0.5 and 5.5 grams gold, and 8 samples from Loma Managua returning 0.5-2.7 grams gold plus minor silver credits.

About a kilometre north of the Trinidad target, sampling of a coincident copper-in-soil and induced polarization anomaly returned up to 1.3% copper.

Globestar says the results suggest the presence of a 15-km-long zone of east-west striking hydrothermal alteration across the entire Bayaguana project.

The partners are in the midst of a US$500,000 exploration program including soil sampling, ground geophysics, trenching and drilling. Work is focused on the Trinidad and the Dona Loretta targets.

Some 24 km to the northwest of Cerro de Maimn, and still on the Maimn belt, lies the Loma Pesada project, which is home to an inferred resource of 1 million tonnes running 2.15% copper, 0.75% zinc, and 4.5 grams silver, and 0.16 gram gold.

In Canada

Meanwhile, Globestar and equal partner Virginia Gold Mines (VIA-T) have evaluated the resource at the Orfe gold zone on the Poste Lemoyne property in Quebec’s James Bay region.

Based on all surface and drill results up to the end of March, measured resources are estimated at 88,588 tonnes grading 9.4 grams gold per tonne. Another 114,895 tonnes of inferred material average 18.4 grams gold. The estimates are based on a minimum width of 3 metres and a cutting level of 90 grams gold.

So far, Orfeee’s main mineralized zone has been identified along a strike length of 50 metres with widths ranging from 3 to 9 metres. The zone has been defined to a depth of 250 metres but remains open at depth. Mineralization is less continuous to the east, where it is cut by several pegmatites.

Earlier this year, hole 49, the deepest hole on the property so far, returned 3.82 metres (from 321 metres below surface) averaging 24.5 grams gold and 5.75 metres (at 337 metres) averaging 3.9 grams gold. The deeper interval was cut 10 metres south of the Main zone and is believed to represent a second zone of mineralization.

Most of the remaining holes in the 2,000-metre drill program returned wide swaths of low-grade mineralization. The longest interval, 30.1 metres, also had the lowest grade: 0.15 gram.

The Orfe zone strikes northwesterly and dips steeply to the north. Mineralization is characterized by disseminated-to-semi-massive sulphides in a mixed package of siliceous sediments and iron formation.

The highest grades from the stepout holes were 1.54 grams over 1.49 metres and 1.45 grams over 2 metres. Three holes averaged 0.19-0.49 gram over 10-24.2 metres, and six came up empty.

Globestar’s shares have hovered around the 80-to-90 range during the past 30 trading days in Vancouver. The shares trade in a 52-week range of 32 to $1, climbing fairly steadily over that period. Average trading volume is around 4,200 shares. The company has 34.4 million shares outstanding.