EXPLORATION ’95 — Santa Fe seeks to expand reserves

With a 3-pronged approach to exploration, Santa Fe Pacific Gold (NYSE) has become one of North America’s most aggressive exploration-oriented gold mining companies.

Its strategy involves exploring around its mines, acquiring advanced-staged projects both inside and outside the areas of these mines, and carrying out grassroots exploration in selected gold regions of the world. Santa Fe is looking for properties with potential reserves in excess of 1 million oz. and which could yield more than 100,000 oz. annually The company hopes that, ultimately, exploration will add at least 1 million oz. to its reserves each year.

In 1994, Santa Fe’s exploration budget was US$28.6 million, most of which was spent in Nevada, either on advanced projects close to existing operations or on joint-venture projects with juniors. More than 40 projects were evaluated and more than 900,000 ft. of drilling carried out.

This year, Santa Fe has bumped its exploration budget to almost US$30 million, 60% of which will be spent in the U.S. where the company controls mineral rights to more than 7 million acres in nine states. A large portion of this will be applied to a 2-million-acre package in northern Nevada. The exploration and development projects to which Santa Fe attaches the highest priority are Mule Canyon and Trenton-Valmy, northeast of Reno, Nev., and Elkhorn, southeast of Helena, Mont.

Mule Canyon, which contains an estimated 1.3 million oz. of indicated mineralization, is being re-evaluated in conjunction with a proposed plan to modify operations at the nearby Lone Tree mine.

Metallurgical testing at Lone Tree indicates the low-grade sulphide ore could be better treated using a proprietary flotation technique. Concentrates produced from the flotation circuit would then be processed using the Lone Tree autoclave. (Concentrates in excess of the autoclave’s capacity could be transported to Mule Canyon for processing.) Santa Fe will make a decision regarding the feasibility of the plan this year.

Trenton-Valmy hosts a shallow oxide deposit which contains 620,000 oz. of indicated mineralization. A feasibility study, currently under way, includes metallurgical testing and mine planning, and if results are positive, Santa Fe will put the heap-leachable deposit into production as a satellite project of the Lone Tree operation.

Drilling, metallurgical testing and environmental studies will soon begin on the Elkhorn project, which contains 900,000 oz. of indicated mineralization. If results warrant, Elkhorn could be developed as a combined surface and underground gold mine.

Santa Fe expects to complete exploration work on 50-60 projects in 1995, most of which are joint ventures in the U.S., involving, among other companies, International Calneva Resources (VSE).

Santa Fe can earn a 65% interest in Calneva’s 15-claim Blue Spider property, which is adjacent to Placer Dome’s (TSE) South Pipeline project in Crescent Cty., Nev. Last year Santa Fe had a work commitment of US$75,000 and, according to Calneva spokesman Scott Baxter, the company has “spent well in excess of this amount” on geochemical sampling, mapping and 6,000 ft. of drilling. Santa Fe will resume drilling on the property in the weeks ahead. Santa Fe has also optioned Calneva’s SBD claims, which are adjacent to Trenton-Valmy. Previously, Calneva optioned the claims to Echo Bay Mines (TSE), which carried out mapping, geochemical surveys and 24 shallow drill holes on the northeastern portion. In 1994, Santa Fe established an option agreement to acquire a 70% interest by spending US$500,000 on exploration and development, and additional drilling is planned for March.

Besides exploring in the U.S., the company will spend US$12 million on foreign projects in 1995. It has opened exploration offices in Canada, Mexico, Chile, Uruguay and Australia and is evaluating projects in those countries, as well as other properties in South America, Central Asia, the Southwest Pacific, Indonesia and West Africa.