Adding to properties down Mexico way Manhattan options five

Manhattan Minerals (VSE) intends to add to its fold of Mexican properties by acquiring an option to buy five concessions covering a large copper-gold-silver skarn zone in central Sinaloa state.

Manhattan can buy the concessions, which encompass the El Promontorio property, by making prepayments totaling US$100,000 per concession over four years. A total of US$1 million per concession must be paid by May, 1998. The company sees large-tonnage potential in the property, with the skarn zone covering more than four kilometres of strike length. Surface chip sampling from several locations along the zone returned values ranging from 1.1% copper, 0.011 oz. gold and 1.1 oz. silver per ton, up to 4.1% copper, 0.017 oz. gold and 23.8 oz. silver.

Open-pit production in the 1980s reportedly yielded about 50,000 tons grading 2% copper, 0.06 oz. gold and unknown silver.

Only one hole has been drilled to date. Collared about 2.5 km from the area of past production, it intersected 95 ft., from 30 ft. to 125 ft., grading 1.5% copper, 0.022 oz. gold and 2.9 oz. silver. The hole bottomed in skarn mineralization grading 1.65% copper, 0.06 oz. gold and four ounces silver. A summary study by the Mexican government’s mineral exploration department states that nine channel samples, covering an area of 300 ft. by 150 ft., averaged 1.06% copper and 5.1 oz. silver. The government did not assay for gold, although check sampling by Manhattan returned an average grade of 2.4% copper, 8.9 oz. silver and 0.026 oz. gold.

Manhattan will presently begin a geophysical program to define the skarn zone along its strike extent. Follow-up drilling is planned shortly thereafter. Meanwhile, at its Moris project in northwestern Mexico, Manhattan is working to complete a feasibility study before the end of the year.

Although El Promontorio offers “blue sky,” Moris is expected to be the company’s bread and butter, said President Peter Tegart.

Manhattan can earn a 100% interest in the open-pit, heap-leach project by placing it in production. The vendor retains a 5% net smelter return and a 20% net profits interest after payback of all exploration, development and capital costs.

A prefeasibility study outlined minable reserves of 4.3 million tons grading 0.058 oz. gold in three contiguous deposits with an overall strip ratio of about 0.64-to-1.

Based on an 8-year mine life and gold recoveries projected at 75%, Manhattan expects to produce about 30,600 oz. gold in the first year and about 191,000 oz. over the life of the project.

Cash operating costs are estimated at US$150 per oz. and, based on a gold price of US$344 per oz. and a preliminary capital cost estimate of US$10.5 million, Manhattan estimates the project will generate a 30% rate of return including royalties. Further feasibility work is expected to decrease initial capital cost estimates.

The company is well-funded for the near future, following a recent private placement, with about $1 million in the bank and about 5.4 million shares outstanding.