Gammon grows Chihuahua gold

Some 16 months worth of drilling, trenching, and underground development at the Ocampo gold-silver project in Chihuahua state, Mexico has paid off handsomely for owner Gammon Lake Resources (GAM-T, GRS-X).

Reserves at Ocampo have been boosted by 86% from the figure tabled in a 2004 feasibility study to 61.7 million tonnes running 1.2 grams gold and 55 grams silver per tonne, for 4.2 million contained gold-equivalent ounces.

Of the new total reserve, 28.2 million tonnes averaging 1.7 grams gold and 81 grams silver make up the high-grade core of the project’s proposed open pit; a halo of lower-grade reserves total 29.6 million tonnes and run 0.2 gram gold and 9 grams silver. Reserves in the Northeast area come to just shy of 4 million tonnes at 4.5 grams gold and 219 grams silver.

Likewise, measured and indicated resources have increased by 68% to 5.1 million ounces of gold equiv. contained in 83.8 million tonnes running 1.1 grams gold and 50 grams silver. Another 29.3 million tonnes of inferred material runs 3.1 grams gold and 172 grams silver, for 5.7 million oz. gold-equiv.

The estimates are based on cutoff grades varying from 0.2 to 3 grams gold equiv.

Ocampo’s resource is split between the PGR open-pit area and the Northeast area, which contains both underground and surface potential.

The work converted to proven and probable reserves a significant portion of the previous indicated and inferred resources located below the proposed open pit area. The company has also identified additional inferred resources in the pit area.

Additionally, open-pit resources grew thanks to the discovery of the San Ramon, Suerte de Lucas and Dianan structures, which are all believed to represent the same mineral horizon. Cross cutting around 76 metres below the planned pit bottom confirmed San Ramon’s width and mineral distribution, as did channel sampling in development drives in the upper part of the pit.

All three structures remain open to depth and along strike.

In the end, Gammon says the life of the open pit has been nearly doubled to 13 years, with potential for a further extension with continued exploration below, and to the east and west of San Ramon. The stripping ratio over the life of mine has also been trimmed to 3.2:1 from 5:1.

Meanwhile, in the Northeast underground project area, mining and stope development on the Las Animas structure encountered a very high-grade zone with average grades exceeding 31 grams gold equiv. Las Animas’ resources estimate has not yet been updated. The new zone is currently being stoped for first milling.

Underground resources also benefited from development work on the Chica Rica, Esperanza, Maria and Brenda structures, with the first three returning bonanza grade gold and silver. Development drives on the Brenda structures are planned for 2006.

Ocampo is expected to begin producing an annual average of 170,000 oz. gold and 6.2 million oz. silver in the first quarter of 2006. The first phase at Ocampo will entail an underground mine and 1,500-tonne-per-day mill, as well as an open-pit and 13,00-tonne-per-day, heap-leach operation.

Gammon surrendered some of its early gains to end 37, or 3.5%, better at $11.01 in Toronto following the news on Dec. 7.