A progressive approach to community relations and the technical ability to operate low-cost mines have allowed
“We are on target, on budget and ready to make gold,” Glamis’s vice-president of Latin American operations, Steve Baumann, told The Northern Miner during a recent site visit.
Acquired through the $40-million takeover of Vancouver-based Mar-West Resources in November 1998, the project’s cornerstone is the Rosa and Palo Alto hot-spring epithermal deposits. These have a combined proven and probable reserve of 39.3 million tonnes grading 0.86 gram gold per tonne, equivalent to 1.1 million contained ounces.
The waste-to-ore stripping ratio for the combined two open pits is a low 0.4-to-1. Total cash (including acquisition) costs are estimated to be less than US$210 per oz. over a 10-year mine life, resulting in a 22% rate of return with a gold price of US$275 per oz.
Capital costs for the project come in at US$27 million, which the company financed from its enviable cash reserves, which stood at US$29.7 million as of June 30, 2000.
Benefiting the heap-leach operation is a relatively low rainfall pegged at 1 metre per year, good infrastructure, and soft ore with simple metallurgy that allows a single-stage crush and a wobbler feeder going to the agglomerator. The Rosa deposit will be mined first as the ore-grade material sits right on the surface with the leach pads situated at the base of the hill. Initial mining is slated for this quarter, with gold production set to hit 14,000 oz. by year-end and 85,000 oz. annually starting in 2001.
Running neck-to-neck with
“We understood from the start that social programs are a huge aspect of any kind of business that you do here,” says Baumann. “But we want to be here a long time and intend to be the premier gold mining company in Honduras.”
The company’s first challenge to developing the project came as a result of a mining law that grants the host municipality a 1% gross royalty from the operation. Although both the Rosa and Palo Alto deposits lie within Municipio San Ignacio, the later pit is a stones-throw from the adjoining Municipio Por Veneer. According to Glamis, the neighbouring communities formed an environmental committee as soon as they realized that none of the estimated US$300,000 per year royalty was coming their way.
“They were pretty successful at making noise early on,” stated Baumann as he recalled the ordeal. “Our door has always been open, as we expect to hire a great number of these people, but the bottom line is we did not write the law.”
Glamis responded to the negative publicity generated by their newly disgruntled neighbours by launching an aggressive public relations campaign. According to Baumann, once the local communities were informed of both the financial benefits to be reaped from the operation, including full-time employment for up to 120 people, and Glamis’s proven environmental track record with its operations in the U.S., the complaints slowly died down.
Aware of the good community spirit that
“With San Ignacio getting such a huge amount of money, the bulk of the Foundation money will actually go to the surrounding communities that don’t have that resource,” said Baumann.
As part of its community relations program, the company is committed to building a tourist destination at the same gold-producing hot springs system that created the Rosa and Palo Alto deposit. Plans, which are incorporated into the mine permitting process, include an information building that would explain the geological nature of the hot springs and the mining process, a park-like setting with bathing pools and a picnic area. The government also requires that the project be cash-flow positive before Glamis turns it over to the local community. In order to achieve this, the company has been working with the ministry of tourism to promote the site and is considering building a small hotel that could service the potentially large contingency of visitors coming from the capital city, only two hours to the south.
Other benefits witnessed by the community include a new water supply for the town of San Ignacio, as well as a new medical clinic with space for more doctors and a dentist.
With a 28-sq.-km mining exploitation concession finally in-hand, Glamis still had to clear its mining equipment through customs and obtain approval from the forestry department to cut trees.
Customs snag
Under the country’s mining law, equipment used in the mining process can be imported tax-free. However, when the company’s refurbished mining fleet from its decommissioned Picacho mine in California arrived in Honduras, the customs officials demanded a 12% sales tax. Following discussions with the ministry of finance and a petition to the Honduran court, the equipment was finally released without any taxes.
According to Glamis’s on-site personnel, one of the biggest struggles in the advancement of the project has been understanding the time-consuming process involved in getting approvals for cutting trees. The multi-staged process involves at least three separate site visits by forestry officials. Just this month, the company received permission to cut trees in the leach pad area and on the Rosa deposit, while the permit for the Palo Alto deposit is still pending.
The Reno-based company also had the daunting task of dealing with local landowners. In connection with the mine development, Glamis had to buy the land and relocate 13 families that were living between the Rosa and Palo Alto deposits on the northern end of the leach pads. Hoping to purchase the land for slightly above market value, the landowners showed solid business skills as the company ended up paying nearly 10 times more than they originally thought. For the homeowners, Glamis built new houses, gave a generous moving allowance and constructed a modern school facility for the children.
“It’s important for our company to bring San Martin on-stream and into production,” says Baumann. “But it’s easy to lose sight of the fact that it has been quite a feat.”
Geology
The 141-sq.-km property is underlain by schists that have locally been subject to hot springs activity. The Rosa deposit drapes around the northern portion of the active hot spring, while the Palo Alto deposit drapes around the northern portion of a large sinter zone that represents an ancient, much larger hot spring.
Gold mineralization is associated with a silicified domal structure occurring as dissemination and minor quartz veining in a highly friable rock that is locally bleached and strongly iron-stained. The deposits contain three distinct types of ore:
– a blanket of highly-altered schist, which represents 68% of the contained ounces and has a recovery rate of 73%;
– an altered schist, which represents 29% of the contained ounces with a recovery rate of 60%; and
– an unoxidized schist, which represents only 3% of the contained ounces with a recovery rate of 40%.
The Rosa deposit hosts proven and probable oxide reserves of 20.9 million tonnes grading 0.9 gram gold, equivalent to 600,000 contained ounces. The waste-to-ore stripping ratio is 0.18-to-1, with a pit area of about 750 by 750 metres.
Palo Alto, 700 metres to the west, hosts proven and probable reserves of 18.4 million tonnes grading 0.82 gram gold, equivalent to 500,000 contained ounces. The waste-to-ore stripping ratio there is 0.66-to-1, with a pit area of 1,500 by 500 metres.
Exploration
“Right now the system is set up to operate one shift a day, six days a week, so essentially we can double the output without too much trouble,” said Baumann. “We’re pretty excited about increasing the resource and utilizing the additional capacity we have.”
Exploration drilling is expected to resume later this month, with the company testing five second-order soil geochemistry anomalies within 4 km of the minesite. These include large, previously undrilled 50-to-100-parts-per-billion gold-in-soil anomalies at five deposits: Pino, Casitis, Escabar, Bar Rosa-Casa and Lemonis prospects.
Additional drilling will also take place at the Palo Alto deposit, where the mineralization remains open to the west and southeast, and plans call for the resource classification at the southwestern margin of the Rosa pit to be upgraded.
Drilling is also planned for the 700-metre area that separates the Rosa and Palo Alto pits. Known as the Central zone, the surface exposure indicates unaltered schists, but the exploration geologists feel that this may be a down-dropped block with mineralization occurring a deeper levels.
In the first half of 2000, Glamis cranked out a total of 107,763 oz. gold from its Marigold, Dee and Daisy mines in Nevada and from the Rand mine in California. Total cash costs dropped in the second quarter to US$224 per oz., from US$236 in the corresponding period of last year. A combined US$1.3-million operating loss at the company’s Dee and Marigold mines resulted in a second-quarter loss of US$1.9 million (or 3 per share), compared with a loss of US$2.7 million (3 a share) in the year-ago period.
The company expects to produce 238,000 oz. gold this year and more than 250,000 oz. in 2001.
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