Expansion at Sao Bento mine — Eldorado Gold exemplifies Canadian efforts in Brazil

Following its recent merger with exploration affiliate HRC Development, Eldorado Gold (ELD-T) has climbed into fifth spot among landholders in Brazil, behind state-owned Comphania Vale de Rio Doce, RTZ, Anglo American and TVX Gold. Its holdings in the South American country now exceed 15,000 sq. miles.

Among the company’s Brazilian assets are the 100,000-oz. Sao Bento underground gold mine, which The Northern Miner recently visited, and numerous exploration projects, which are at various stages of development and cover five major gold belts and one copper-nickel-platinum group belt.

Along with the projects, Eldorado acquired an experienced exploration team, which has spent the past 10 years operating in Brazil.

Eldorado and HRC acquired these assets, as well as 21 other exploration and development projects in Turkey, from South Africa’s Gencor Group in transactions completed in July.

As part of the deal, Eldorado also acquired the North American licence for the BIOX bacterial oxidation technology, which is used to treat complex refractory gold ore in an environmentally safe and economic manner.

On a fully diluted basis, Gencor is Eldorado’s largest shareholder, with a 42% interest.

Brazil is the world’s fifth-largest country and has a population of 170 million. Its economy is the tenth-largest in the world: Gross domestic product totalled US$753 billion in 1995, with a 4.2% growth rate that is expected to remain unchanged for 1996.

The “Plano Real,” an economic reform plan implemented in August 1994, is strengthening the Brazilian economy and attracting new foreign investment.

The plan was designed mainly to bring inflation under control, which, in July 1994, was reaching 45% per month. Since then, the rate has fallen steadily and is currently about 1%.

Gold production in 1995 totalled 2.1 million oz., which, on a global basis, makes Brazil the eighth-largest producer. Industrial producers accounted for 1.3 million oz. of the total, while production by garimpeiros (local miners) provided for the rest.

Brazil was largely ignored by the international mining community until a change to its constitution in August 1995 lifted restrictions and allowed 100% foreign ownership in mining ventures. Up to that date, foreign ownership had been limited to 49%.

The country has a corporate tax rate of 33% and allows free movement of capital.

“Today, Brazil is experiencing a gold exploration boom, with probably 30 foreign companies having arrived in the past 12-18 months, in addition to those that were already established,” explained Joseph Griebel, Eldorado’s senior vice-president of exploration.

He said the list of roughly 40 exploration and mining companies active in Brazil reads like a Who’s Who of international gold mining. Many of the juniors on the list are Canadian, but Griebel adds that companies from Australia, the U.S. and Europe are also establishing a presence.

“I estimate that exploration expenditures in gold alone will exceed US$100 million in 1996,” he said. “And I predict that in 1997 this will increase to more than US$150 million.”

Eldorado is carrying out its own exploration efforts in Brazil through two companies: the wholly-owned Brazilian subsidiary Unamgen and the joint-ventured company Mineracao Aurizona. The latter is a 50-50 partnership with the Brazilian subsidiary of Brascan.

For 1997, Eldorado plans to spend US$15 million on exploration in the country.

Sao Bento mine

The company owns a 100% interest in the Sao Bento gold mine through its wholly owned subsidiary Sao Bento Mineracao. The 100,000-oz.-per-year producing underground mine is in Minas Gerais state, about 100 km by road southeast of the provincial capital of Belo Horizonte and 375 km north of Rio de Janeiro.

The mine has been intermittently worked for gold since the 1860s. Mine manager Andres Hevia estimates some 211,000 oz. were produced between 1896 and 1905.

Gencor acquired the property in the 1970s and spent US$14 million on exploration and development, plus another US$36 million securing the mining rights. Mine construction began in 1985 and the first phase was completed in late 1986 at a cost of US$90 million.

Since then, a BIOX pilot test plant was added to the processing plant in 1991, followed by the installation of a shaft in 1993 at a total cost of US$37 million. A second BIOX plant was added to the circuit in early 1995 at a cost of US$800,000.

The mine is a high-cost producer, with cash costs projected at US$325 per oz.

for 1996. Last year, Sao Bento produced 101,950 oz. at a cash cost of US$309 per oz.

Geology

Proven and probable minable reserves stand at 2.3 million tonnes grading 10.66 grams gold per tonne, equivalent to 789,000 contained ounces. The overall geological resource is estimated at 4.4 million tonnes grading 12.45 grams gold.

Sao Bento is a banded iron formation deposit with associated chloritic graphitic schists confined to the Nova Lima group. It is hosted in a regional assemblage of Archean and Proterozoic volcanic and fine-grained sedimentary rocks, which have been subjected to green schist metamorphism. The lithology is comparable to that of the greenstone belts in Canada, Africa and Australia.

The banded iron formation is complexly folded along a northeast-trending axis and dips moderately to the south in the range of minus 50.

The ore zone is sub-divided along a strike length of 1,000 metres into a series of lenses, consisting of Orebody 1, Orebody 2 and Orebody 3 (also known as the Pinta Bem zone). The banded ore zone consists of alternating layers of sulphides and iron carbonates, with associated quartz and magnetite. The deposit remains open along strike and at depth.

Milling process

Gold mineralization is fine-grained and closely associated with the sulphides pyrite, pyrrhotite and arsenopyrite. It occurs both freely on crystal boundaries and in sulphide grains.

Ore is currently being mined from levels 17 to 21 by a combination of manual, mechanized cut-and-fill, and manual shrinkage-stoping methods. Manual cut-and-fill mining accounts for half of production. Backfill is provided by waste from development work, together with flotation tailings.

A 910-metre-deep shaft, which services as far down as level 23, is used to hoist ore and waste to surface. Hoisting capacity is limited to 40,000 tonnes per month.

The processing plant is a complex, high-cost component of the operation. Ore is autogenously ground to minus-200 mesh, and about 25% of the gold is liberated and recovered by plane tables and a gravity-separation circuit. A Knelson concentrator, deemed to be more efficient, will soon replace this circuit.

The mill product from the grinding circuit is run through a bulk-sulphide flotation circuit to yield a concentrate, which is then re-ground to minus-325 mesh and treated through a combination of two autoclaves and two smaller capacity BIOX tanks. The autoclave and BIOX processes oxidize the sulphides, allowing subsequent gold recovery via a 6-stage carbon-in-leach circuit. Gold recoveries from April to September averaged 92.1% The processing plant has a capacity to treat 34,000 tonnes of sulphide ore per month. Throughput to date in 1996 averages 32,000 tonnes per month.

The plant is also capable of processing oxidized ore, which constituted 15% of last year’s total production. With only 14,760 tonnes (grading 10.12 grams gold) of oxide reserves remaining, oxide production is slowing down, and, come April 1997, sulphide ore will account for 100% of the production.

Expansion program

When Eldorado acquired Sao Bento in July, its first initiative was to begin a 27,300-metre, multi-stage drill campaign, combined with 1,640 metres of development work.

The program, which is aimed at upgrading the inferred resource into the proven and probable category, is budgeted at US$2.6 million, of which US$700,000 has been spent to date. It is management’s intention to outline sufficient reserves for at least 10 years of production.

The main focus of the drilling and development work is the downdip southern extensions of Orebodies 1 and 2, between the 21 and 25 levels. To date, 30 holes have been drilled below level 21. The ore zone’s average width of 2.5 metres is approaching 4 metres at depth , with slightly higher grades averaging 11.6 grams. Each level contains an inferred resource of 500,000-600,000 oz.

Infill drilling is targeting Orebody 2, between levels 17 and 21.

Only one hole has been completed beyond level 25, and it intersected ore mineralization at level 28, indicating potential for expanding the geological resource. The orebody is projected to extend as deep as the 32 level before passsing on to ground held by Anglo American.

The recent discovery of Orebody 3 (the Pinta Bem zone), between the 16 and 21 levels, adds to the potential for further expanding the reserve base. The zone was previously mined at surface by open-pit methods, and Griebel said it clearly continues to depth.

Gary Nordin, a director of Eldorado, and its chief consulting geologist, sees considerable potential for Sao Bento. “It’s a good mine and it could produce gold for long time,” he said. “We’re just trying to make it more efficient.” Toward that end, Eldorado is taking steps to reduce costs and increase production, including a conversion to mechanized, trackless mining. It has also purchased new underground equipment, which will enable the company to take over from the mining contractor by year-end. The move is expected to reduce the workforce to 600 from more than 1,000 employees.

Eldorado’s vice-president of mining, Paul Wright, explained that the Sao Bento orebody lends itself to mechanized mining. It is the company’s intention to convert primarily to sublevel, long-hole stoping by 2001.

With the objective of increasing production to 125,000 oz. by 1998 and 135,000 oz. by 2001, a second hoist will be added in 1997 at a cost of US$6.4 million. The upgrade is designed to boost hauling capacity to 100,000 tonnes per month.

Plant modifications

Sweeping changes are also planned for the processing plant, so that sulphide capacity can be increased to 43,000 tonnes per month. The plant expansion will not begin until July 1997, so Eldorado will have sufficient time to determine the most economic process suitable for treating the deeper ore. The estimated cost of expanding the plant is US$12.9 million.

The various changes being made at Sao Bento are expected to decrease the operating cash cost to US$270 per oz. in 1998 and to US$250 per oz. by 2001.

Wright is optimistic about exploration potential in the area, and pointed out that there has been no exploration drilling since startup. At present, there is one drill rig on surface, testing the potential for oxide ore, while three rigs operate underground.

In the surrounding district, Eldorado’s fully owned subsidiary, Sao Bento Mineracao, owns four prospects totalling 3,500 ha, including a potential oxide resource target of 2 million tonnes grading up to 3 grams gold.

The subsidiary has also optioned 24 other prospects in the area, comprising 5,000 ha.

Eldorado has 62.3 million shares outstanding, or 71.8 million fully diluted.