Peruvian tailings issues hurt Century

Peru’s Ministry of Mines has allowed Century Mining (CMM-V) to resume milling and processing operations at its San Juan gold mine after the ministry completed an evaluation of the mine’s tailings dams. The company has yet to downgrade its gold production forecast for 2011, but said milling activities were down for 16 days. 

The Ministry of Mines originally ordered Century to shut down all operations at San Juan because it said the company did not have the proper permits in place for its tailings areas. However, after Century “provided documentation demonstrating that appropriate permits were properly issued,” and filed a formal petition to lift the order, the government changed tack.

It then allowed Century to resume mining operations and stockpile ore but not process the ore through the mill. That had to wait until the ministry completed an “evaluation of the stability of the San Juan tailings disposal areas because of information received from external consultants and issues that have occurred with similar impoundments at other locations,” the company explained in a recent press release.

Those issues at other locations likely include an environmental disaster in the nearby Huancavelica region last summer, when the tailings dam of a polymetallic mine collapsed, sending 21.5 million litres of tailings waste into the Opamayo River. Local reports accused a private Peruvian mining company of failing to maintain the dam and said it was one of the worst mining-related disasters in Latin America since a 1996 cyanide spill at the Omai gold mine in Guyana.

Century Mining’s vice-president of legal and corporate development, Richard Meschke, confirmed consultants for the Ministry of Mines visited the property before deciding to halt the company’s milling operations. 

After milling activities resumed, the company reported it is in full compliance with “applicable government and environmental requirements in the permitting, construction and operation of our tailings disposal areas.” 

The San Juan mine is on the slopes of a valley near the Ocona River, which hosts several downstream communities and reaches the small town of Camana, population of 16,500, on the Pacific coast. 

The company says all its tailings areas at San Juan meet “relevant engineering standards,” including the levee system it built last year to prevent spillage into the Ocona River. It notes an engineering company contracted by Century last year evaluated the tailings dams and determined that they are stable and properly constructed.

Though Century acquired San Juan in 2006, it has been operating at various production levels since the 1970s. According to Century’s 2008 technical report for the project, mill tailings from past operators remain on the property, including cyanide-treated tailings and flotation tailings held in a large, five-section impoundment on the west side of the Rio Chorunga, a tributary of Ocona. The report noted, “flooding of the Rio Chorunga has washed away a large portion of the flotation tailings in the past so the 4.1 million tonnes of tailings (previously produced) has been reduced considerably.”

The recent halt at San Juan is Century’s second major setback in as many months, following the breakdown of a cone crusher in February at its Quebec gold mine, Lamaque. That helped reduce gold production from the mine to 5,815 oz. in the first quarter, down from 6,018 oz. in the last quarter of 2010. Century is hoping to pour up to 75,000 gold oz. at Lamaque this year, or roughly 18,750 oz. a quarter, leaving it far behind schedule already. In February, Century said it took out a $4-million bridge loan because of cash flow problems.

The company has yet to downgrade its production forecast for the year and says recent developments at Lamaque, including remobilizing a mining contractor for the North Wall zone and the completion of a third mill refurbishment, should help it ramp up operations.

“This has been a difficult quarter for Century,” said president and CEO Daniel Major in a news release. “We are working diligently to overcome these issues and re-establish our development schedule at Lamaque.” He also noted, “We are glad to have the (Peru) issue resolved without extended downtime of the San Juan milling operation.” 

Both issues have hindered the efforts of a group of Century’s minority shareholders, who are trying to drum up support to block the company’s proposed merger with Maxim Finskiy’s White Tiger Gold (WTG-T). The shareholders say the all-share merger undervalues Century’s assets and presents a conflict of interest, as White Tiger’s chairman Finskiy, a Russian businessman, is the largest shareholder of both companies. 

On April 25, Century was down 2¢ to 37.5¢ a share, just 1¢ shy of its 52-week low.