Caledonia acquires Spanish gold mine

In a deal retroactive to Jan. 1, 1994, Caledonia Mining (TSE) has increased, to 83.2% from 24.8%, its interest in the Filon Sur gold mine in southern Spain.

The mine, which employs 45 people, is in Huelva province. Since startup in 1988, it has produced gold and silver from the heap leaching of gossan and morrongo ores. These ores are obtained from shallow open-pit mining and from surface stockpile dumps.

This year, the mine is scheduled to process 400,000 tons of ore grading 0.067 oz. gold per ton, resulting in the recovery of 20,000 oz. gold and 103,000 oz. silver. For the first half of 1994, production totaled 9,870 oz. gold and 61,086 oz. silver, resulting in a net profit of $2 million.

In 1994, the cash operating cost was $US214 per oz., compared with $US241 per oz. in 1993.

The additional 58.4% interest was purchased for US$6.25 million and 350,000 purchase warrants, of which 250,000 are exercisable at $7.63; the other 100,000 warrants are exercisable at $6.37. Each warrant is exchangeable for one common share within a period of two years from Sept. 12, 1994. A recent 13,700-ft. reverse circulation program on the Tharsis and La Zarza concessions helped establish proven and probable reserves of 5.3 million tons grading 0.058 oz. gold and 0.84 oz. silver per ton. A further probable reserve of 3.3 million tons grading 0.023 oz. gold and 0.84 oz. silver is contained in residues from present and previous processing plants. In addition, Filon Sur reports that the two concessions may contain a geological resource of 8 million tons. The above reserves are sufficient to maintain operations for more than 10 years.

Based on these reserves, Caledonia is considering doubling the plant processing capacity to 2,250 tons per day and improving metallurgical recoveries by finer ore crushing. It is anticipated that these changes will be implemented by late 1995 and result in a net profit of $7.9 million per annum.

Further exploration work is planned within and outside the concession area, with the objective of increasing reserves.

In addition, metallurgical testwork is under way at Lakefield Research Laboratories, near Peterborough, Ont., to evaluate the economics of alternative processing methods.