Gammon Lake joins the producers’ guild

Years of land consolidation and drilling have come to a head for Gammon Lake Resources (GAM-T, GRS-X), with the first pour of gold-silver dor from its Ocampo mine in Chihuahua, Mexico.

The 100-kg bar runs around about 93% silver, with the balance being gold. It is valued at around US$158,000. In all, the first day of pouring saw some US$400,000 worth of the metals recovered. Gammon expects the pours to become a daily occurrence as concentrations in the heap leach solution increase.

Engineering firm Kappes, Cassiday & Associates estimates that after just 7 days under cyanide irrigation on the heap leach pad, some 40,000 tonnes of ore has surrendered 20% of its gold and 8% of its silver to the Merrill Crowe recovery plant. The normal leach cycle is 120 days.

The first production was derived from the Conico deposit, one of six planned pits in the open-pit portion of the project. Ore stacking on the pad began in mid-January.

High-grade ore is currently travelling from the 20,000-tonne-per-day primary crusher directly to a 6,000-tonne-per-day high-grade secondary and tertiary crushing facility that was commissioned earlier this year. Low-grade material from the pit will be shunted to a 7,000-tonne-per-day secondary crushing line slated for completion in mid-February. Thereafter, plans call for the daily delivery of 13,000 tonne of crushed ore running 1.8 grams gold equiv. per tonne to the heap leach pad by quarter’s end.

During its first year of operation, the Ocampo open pit is expected to produce 136,735 oz. of gold and just shy of 4 million oz. of silver. Additional production from the underground portion of the mine is expected to boost total production to around 190,000 oz. gold and 6.6 million oz. silver. Construction of the mill facilities for processing underground ore continues on schedule, with the foundry portion nearing completion.

The first phase of mining at Ocampo includes an underground mine and 1,500-tonne-per-day mill, as well as an open-pit and 13,000-tonne-per-day, heap-leach operation. Cash costs are forecast at US$10 per oz. gold (after silver credits), or US$152 per oz. on a gold-equivalent basis.

Meanwhile, Gammon has suspended development of access roads into the open-pit on the Plaza de Gallos deposit, after cutting a very high-grade “clavo.” Initial channel sampling on the showing returned 15 metres grading 2.95 grams gold-equivalent per tonne, adjacent to a 14-metre section running 39.5 grams gold and 520 grams silver, or 48.2 gold-equiv. ounces.

Gammon plans to stockpile the highest-grade material for processing once the mill is completed. The remaining material will be placed on the heap, and is expected to significantly impact production for 2006. The new zone is not currently included in Ocampo’s reserve estimate or mine plan.

Trenching and drilling are under way.

Road construction into the to Picacho deposit is nearly done, with production from the pit slated for mid-February. The deposit is Ocampo’s largest ore body, and contains 1.5 million tonnes of shallow (to a depth of 72 metres) material averaging 3 grams gold-equiv. Included is a 600,000-tonne, higher-grade core running 4.3 grams. The deposit requires virtually no stripping.

Development at Picacho will also open up access to the recently discovered San Ramon deposit, several years earlier than planned. Moving Picacho and San Ramon onto the current production schedule will also see the high-grade crushing facilities expanded to 9,000 tonnes per day by adding another tertiary crusher.

Gammon also plans to open up the La Estrella deposit by the end of February with an eye toward feeding the low-grade crushing circuit at a planned rate of 1.2 million tonnes per year. La Estrella is home to an estimated 10 million tonnes averaging 0.76 gram gold and 18 grams silver.

The company is considering what low-grade cutoff to apply to allow for the processing of around 70,000 gold-equiv. ounces to the heap leach pad, that’s up from the 30,000 oz. the low-grade circuit was to have contributed under the feasibility study. Profitable lower-grade ore will be stockpiled for later processing.

Late last year, Gammon boosted total reserves at Ocampo by 86% to 61.7 million tonnes grading 1.2 grams gold and 55 grams silver per tonne, for 4.2 million contained gold-equivalent ounces.

Of the new 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 underground 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.

The increase comes on the back of some 16 months worth of drilling, trenching, and underground development. 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. Additional inferred resources were also identified in the pit area.

The bigger resource figure also reflects the discovery of the San Ramon, Suerte de Lucas and Dianan structures, which are 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’ resource 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.

The Ocampo project also recently grew by 60 sq. km to 100 sq. km after a government lottery awarded the company some surrounding concessions.