More and more, it seems that the toughest challenge for a mining company is not discovering a deposit but proving that it can be developed in a socially responsible and environmentally sustainable manner.
Nowhere is this more evident than at
Manhattan says the actions of these groups are not representative of the town’s 15,000 residents but instead are politically motivated and part of a country-wide campaign aimed at disrupting government and industrial activities during the ongoing presidential elections.
Tambo Grande ranks among the world’s largest volcanogenic massive sulphide projects, with total sulphide mineralization in the district estimated to exceed 300 million tonnes. The project comprises a package of land concessions covering more than 890 sq. km in the Department of Piura. This package includes: the Tambo Grande concessions, totalling 100 sq. km; the Lancones concessions, comprising 737 sq. km; and the Papayo concessions, covering 32 sq. km.
The project is an agricultural community, 865 km northwest of Lima and 40 km northeast of the regional city of Piura (population 350,000). A portion of the near-surface, 1-million-oz. TG-1 oxide gold deposit and underlying TG-1 copper-zinc sulphide deposit is overlain by part of the town of Tambogrande. Development will entail relocating a portion of the town’s population to a new site.
The Piura River flows through the project area, cutting the southern boundary of the TG-1 deposit. A second tributary also flows over a portion of the deposit. The neighbouring TG-3 sulphide deposit, 1 km to the south, partially sits beneath the Piura River and its flood plain.
Tambogrande has existed since pre-Inca times. In the early 1950s, extensive irrigation was introduced, and agriculture is now the main economic activity in the area. Mangos, cotton and limes are grown for internal and external markets.
Surrounding Tambogrande are small farming communities. North of the Piura River are privately held farmlands ranging in size from small family plots to larger commercial-scale operations. South of the Piura River there is no irrigation, and lands are held in co-operatives by small groups of people.
Per-capita income in the area varies widely but averages $480 per year, with more than half the population living in poverty.
Peruvian legislation introduced in 1990 placed certain restrictions on mining and processing within the town limits of Tambogrande and the surrounding area. Under the option agreement that was approved by a Supreme Decree, issued in May 1999, Manhattan is required to guarantee that the mining methods used will not physically affect the town nor harm its citizens. In addition, the tailings must not affect agricultural areas.
Since arriving in the area in 1997, Manhattan has undertaken a comprehensive community relations program aimed at educating and informing the local people about modern mining in general, and about the objectives and progress of the project itself. “We’re doing a lot of presentations to groups on the impacts and benefits of the project,” says Manhattan President Graham Clow. The company maintains a full and part time staff of 25 people devoted to community development.
The resettlement of a portion of the residents of Tambogrande requires agreements on terms and conditions. Strict logistical and social planning must conform to Peru’s mining development guidelines and to international standards.
The company is following the resettlement policy established by the World Bank, which calls for community participation and consultation, as well as adequate compensation for both economic and social disruption. Emphasis is placed on maintaining or improving not just the standard of living but also social, cultural and institutional standards. Since 1997, Manhattan has been working to enhance the social, health, education and economic aspects of Tambogrande and the surrounding area.
New housing
More recently, the company has been negotiating with town residents in an attempt to reach an agreement that would allow development of an open-pit mine in the town’s southeastern section. The agreement is expected to provide for mutually acceptable new housing for those being resettled, as well as new infrastructure for those who choose not to relocate. About 1,600 households, out of a total of 4,000, will be directly effected.
Villagers will be relocated in a development to be built adjacent to the town’s northern boundary. The neighbourhood will include a town square, commercial district, church and schools. The existing local church and cemetery will remain in place, though a new church will be developed in the area of relocation. The town’s roads, sewer and water supply system will be improved.
Those townspeople not moving will be compensated for the disruption through a program aimed at upgrading their existing homes. A buyout program will be available for those who prefer to leave Tambogrande.
In order to negotiate an agreement for resettlement, Manhattan is assisting in the formation of block committees. Each block comprises approximately 10 houses, the residents of which elect a representative. That person then becomes part of a town committee that will negotiate the terms of the ultimate development agreement and compensation plan.
This organization process began in the fall of 2000, since which time, 230 of the 320 required block committees have been formed. “Our communication and consultation program with the town has been positive, and there is a high level of support for this,” says Clow.
A government urban planning group is working closely with Manhattan’s team.
Regional farmers have voiced concerns over the potential for environmental damage to the local water supply and the long-term effects the mine may have on agricultural production. Manhattan has responded by extending its communications program to the surrounding farming communities.
‘Misinformation’
“The problem we face is that outside groups have come in and hijacked the process from the people and made it much more confrontational,” says Clow. “They have done that by spreading grossly exaggerated misinformation about environmental effects, scaring the people in the process.”
During the four years it has been in the area, Manhattan has encountered opposition in varying degrees, including a vocal and well-organized Peruvian group that opposes mining development throughout the country. “Through illegal violent acts, a stream of misinformation and intimidation, they prey on the fear of change in the people and have gained a constituency,” states Manhattan.
Nonetheless, the company is determined to demonstrate that a mine can be developed in harmony with the neighbouring farming community. To combat the misinformation campaign, Manhattan is continuing to educate the people about mining and its benefits.
“We find that when we do get out into some of the outlying areas, which is where a lot of this misinformation takes hold, people are very responsive,” Clow says. “We know that one-on-one contact is effective, but it’s a slow process. There is a lot of area to cover, because we do have a large land holding.”
The company is also completing an environmental impact study.
In response to the February protests, the Peruvian government granted Manhattan a one-year extension to its option agreement. The key business terms of this agreement, which now extend to May 2003, require that the company complete a feasibility study and financing plan.
The feasibility, originally scheduled for completion this June, has been rescheduled for completion by June 2002. Most aspects of the study are already completed, so the extension will give Manhattan time to advance its community relations.
Reserves
The near-surface TG-1 gold deposit contains probable open-pit reserves of 8.1 million tonnes grading 3.5 grams gold and 67 grams silver per tonne at an overall stripping ratio of 1.9-to-1. This is equivalent to 906,300 oz. gold and 17.3 million oz. silver. The underlying 100-million tonne TG-1 pyrite body hosts probable reserves of 49.2 million tonnes grading 1.6% copper and 1% zinc, plus 0.6 gram gold and 26 grams silver per tonne, at a stripping ratio of 1.2-to-1.
Manhattan envisions mining the TG-1 gold deposit first, at the daily rate of 7,500 tonnes, utilizing a conventional cyanide-in-leach (CIL) processing plant. The operation is projected to produce 276,000 oz. gold and 3.7 million oz. silver per year over a life of 3.5 years. Cash operating costs, after silver credits, are pegged at US$44 per oz. Recoveries of 88% for gold and 60% for silver will be used for feasibility purposes.
The underlying sulphide deposit will be developed concurrently with the depletion of the gold cap. Metallurgical results to date indicate that the deposit will produce, annually, 60,000-70,000 tonnes copper and 35,000-40,000 tonnes zinc over a life of 10 years. This estimate is based on a daily mining rate of 15,000 tonnes. Projected cash costs are US44 per lb. copper, net of zinc and precious metal credits.
The capital cost of building the gold and base metal mine, plus related infrastructure, is expected to approach US$270 million, including a US$42-million contingency, spread over five years. The mine is expected to create up to 1,500 jobs during construction and 400 permanent jobs during operation.
Feasibility work to date excludes the impact of developing the TG-3 and B-5 deposits. TG-3 contains a resource of 110 million tonnes grading 0.7% copper, 1% zinc, 0.7 gram gold and 19 grams silver. The TG-1 and TG-3 deposits both lie on the Tambo Grande concessions, in which Manhattan can earn a 75% interest.
The B-5 body is 11 km south of TG-1. So far, 10 holes have tested B-5. Last fall, the company tested the continuity of a deep, higher-grade copper zone that had previously been encountered in hole 8. A 52.8-metre intercept at the base of a 200-metre-long massive sulphide intersection in hole 8 averaged 4.6% copper and 17.7 grams silver, starting at a depth of 578 metres.
Based on drilling to date, the company believes B-5 hosts copper mineralization at a grade that should support an underground mining operation. The B-5 deposit lies on the Papayo portion of the Tambo Grande project, in which Manhattan can earn a 51% interest from Compania de Inversiones y Exploraciones Mineras (Cedimin) by spending $5 million over five years.
Before Manhattan can proceed with development of Tambo Grande, it must be the operator of a 10,000-tonne-per-day mining operation, and have net assets valued in excess of US$100 million. These terms will be waived if another company that meets them owns a minimum of 25% of Manhattan.
Upon exercising the option, a new company called Empresa Minera Tambo Grande (EMTG), will be incorporated to develop and operate the project. Manhattan will own 75% of EMTG, with the remainder held by the Peruvian government through Minero Peru. EMTG will then have four years in which to develop Tambo Grande, with Manhattan assuming responsibility for arranging financing and contributing the equity portion held by the government.
Manhattan is seeking a joint-venture partner or partners to help develop Tambo Grande. The company spent US$16.4 million on the project in 2000, primarily on exploration drilling, feasibility work and community relations. At the end of 2000, Manhattan had US$4.4 million in cash.
Be the first to comment on "Manhattan rises to challenge at Tambo Grande"