Vancouver — For the past seven years
The Vancouver-based junior holds about 60 sq. miles of ground on or along extensions of several prolific gold trends, including the world-famous Carlin and Battle Mountain areas, where more than 50 million oz. gold have been produced to date. Gold is the main target on 10 of these properties, silver being the prize on two others.
“Over those grueling years [in Nevada], we’ve acquired and dropped about 200 projects,” Hottman says, “but the end result is that we believe our remaining ten projects have strong potential for being million-ounce deposits.”
Nevada Pacific is preparing for another busy season of exploration on its land package in Nevada, where the goal is to find a “company-maker” deposit. But since early February of this year, the company has also focused on building a production base in Mexico — at its newly acquired Magistral gold mine in Sinaloa state.
The Magistral acquisition was not greeted with industry fanfare, which isn’t surprising given its modest size and troubled and short-lived production history. But Nevada Pacific’s management saw more than a small turnaround opportunity. It saw a base of operations in an emerging, prospective mining district that offered good potential for low-cost growth in the years ahead.
“We’re focused on profitable production growth, not growth for growth’s sake,” Hottman says. “Building companies is what drives us professionally.”
Nevada Pacific’s team was previously involved in the growth phase of two mid-tier producers,
The company acquired Magistral for about US$9 million in cash and shares. Previous operator
Before production began, an independent engineering firm estimated total proven and proven reserves of 6.9 million tonnes averaging 2.07 grams per tonne, or about 465,200 contained ounces. Measured and indicated resources (including reserves) stood at 11.8 million tonnes averaging 1.62 grams gold. Gold mineralization is typical of low-sulphidation, epithermal systems, and occurs along a series of structural zones.
Mine construction was completed in the fall of 2002, with mining and leaching starting in October of that year. Commercial production began in early January.
By the end of 2003, 914,068 tonnes averaging 1.58 grams gold had been mined, along with 4.4 million tonnes of waste, for a waste-to-ore stripping ratio of 4.9-to-1. Leaching from October 2002 through to the end of 2003 recovered 27,684 oz. gold, below budget estimates.
Queenstake did not release its costs of production, but it was no secret that Magistral suffered an extended startup period and was plagued with production problems. There were breakdowns of the tired equipment purchased from a nearby Mexican mine that had closed after failing to perform to expectations. As a result, the first pit was soon waste-bound. Recoveries were affected by poor-quality lime, and less than ideal stacking practices used at the heaps.
Nevada Pacific has since taken the following corrective measures to reach its initial production target of 35,000 oz. annually at cash costs of US$250 per oz.:
— About 650,000 tonnes of the 1.1 million tonnes in place have been re-stacked on the pads to allow for the addition of good-quality lime to improve pH control, and to minimize the effects of coarse-size segregation from previous stacking that had inhibited recoveries.
— The secondary crusher was re-tooled and re-installed, and a larger capacity screen-plant was purchased. These modifications to the crushing circuit are expected to increase throughput to 80,000-plus tonnes per month, with the added benefit of optimizing gold recovery by improving size-fraction control.
— More carbon columns have been added to the recovery plant to improve gold and silver recoveries, along with other modifications to improve capacity to 275 cubic metres per hour (from 175 cubic metres) of solution throughput.
— The mine fleet has been augmented to allow ramping up to an annualized mining rate of 7 million tonnes, compared with 4.7 million tonnes mined in 2003.
San Rafael and Samaniego
The company is also updating the San Rafael and Samaniego resource models (open pits), based on an expanded blast-hole database. This work will allow reserves to be recalculated, based on a gold price of US$300 per oz., and allow for improved long and short-term mine planning.
Nevada Pacific’s management team has previous experience operating mines of this type in Mexico, namely at Eldorado’s La Colorada and Trinidad mines developed in the early 1990s.
Hottman expects that the corrective measures undertaken at Magistral will be completed by the end of June. “We expect to reach an annualized production rate of 40,000 oz. by year-end,” he adds.
A new resource and reserve estimate will be released in the next few months. Down the road, the company envisions adding an underground mine on the shallow La Prieta zone to boost Magistral’s output to an estimated 70,000 oz. per year.
“We think we can do this over the next few years,” Hottman says, adding that Magistral has numerous exploration targets near the existing mine that have yet to be fully tested. “Over the longer term, we see potential for developing one or two million ounces of gold resources.”
At last report, the high-grade La Prieta zone hosted a resource of 462,000 tonnes averaging 8.47 grams, based on a 4-gram cutoff grade. The zone is still open down-dip and along strike. A recent hole in this zone returned 9.4 grams gold over 34.4 metres.
Extensions to the Samaniego and San Rafael open pits will also be explored, along with nearby parallel structures and geophysical targets.
Nevada Pacific has also carried out some regional mapping and sampling outside the minesite, but within the surrounding land package that now covers 400 sq. km. The company is the dominant landholder in the district, which is in the western foothills of the Sierra Madre, about 100 km northwest of the state capital of Culiacan.
While exploration and mine revitalization take place at Magistral, Nevada Pacific intends to continue its search for deposits in Nevada.
One of the company’s projects, BMX, is being explored by
BMX is in the Battle Mountain trend and covers more than 24 sq. miles. Drilling to date has identified a gold-copper system.
Earlier this spring, Nevada Pacific launched a first-phase of drilling at its wholly owned Amador Canyon silver project in the Austin mining district.
The targets of interest include numerous gossanous zones and historic workings on the property. The primary target is a disseminated stockwork-type silver deposit amenable to open-pit mining.
Another 10,000 ft. of drilling are planned for the first half of this year, divided between the wholly owned Limousine Butte and Keystone properties.
About 3,000 ft. are planned for Limousine Butte in White Pine Cty. Previous work by a former joint-venture partner outlined a preliminary mineral resource containing about 620,000 oz. gold in five disseminated oxide zones.
Some 2,000 ft. of drilling will test the Keystone project, which lies in the Battle Mountain/Eureka gold trend. Placer Dome has made several new gold discoveries (Pediment, Cortez Hills and ET Blue) north of the Keystone property, and Nevada Pacific sees potential for similar deposits on its land package. The company also plans to test high-grade massive sulphide skarn mineralization where float boulders have returned bonanza values for both base and precious metals.
Hottman says the current program budgeted at US$500,000 will be followed up by another round of exploration on the Nevada properties, at an estimated budget of US$1 million.
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