Mar-West weighs scoping study for San Martin

A $2-million exploration and development program is well under way on the San Martin hot spring deposit in Honduras, Mar-West Resources (MSR-V) reports.

The program, designed to advance San Martin to the feasibility stage, includes definition drilling, metallurgical testing and mine planning, as well as baseline environmental and socioeconomic studies.

San Martin is owned 80% by Mar-West and 20% by Curion Ventures (CUV-V).

More than 100 additional holes have been completed as part of a second-phase definition drilling program, comprising 5,000 metres in 125 holes, designed to upgrade the 600,000-contained-ounce gold resource to the measured and indicated category.

The San Martin deposit is a near-surface, flat-lying mineralized body that occurs within a series of schists and mirrors the topographic surface of a dome-shaped hill. Last year’s drilling defined a zone measuring 800 by 600 metres and having an average thickness of 20 metres. Based on the first 73 drill holes, the geological resource is estimated at 18.5 million tonnes grading 1 gram gold, with a stripping ratio of 0.22 to 1.

Preliminary metallurgical bottle-roll testwork suggests gold recoveries of between 70% and 80%. Initial work recorded an average of 71.1%; detailed column-leach testwork is progress.

A preliminary scoping study was completed Fluor Daniel Wright to assess the viability of an open-pit, heap-leach gold mine. That study projected a total capital cost of US$44 million (including a 15% contingency) to construct a 1,100-tonne-per-day mine capable of producing 100,000 oz. gold per year. The costs included US$23 million for mining equipment, ore crushing, agglomeration and pad liners.

Mar-West is conducting an in-house engineering study to review the scoping study, with the objective of reducing the capital cost.

In a research report dated March 25, Michael Durose of Bunting Warburg says a potential costs savings of US$10-20 million could come from the following: * Elimination of a truck haulage fleet in exchange for a conveyor belt system;

* use of contract mining;

* reducing or eliminating the crushing stage (reflecting the low work index of the rocks given the very soft nature of the ore); and

* construction of a smaller heap-leach pad area with higher stacking, thereby resulting in much lower liner costs.

Durose is of the opinion that the San Martin deposit is likely to be developed as a 60,000- to 70,000-oz.-per-year mine, with cash operating costs well below US$200 per oz. gold. He predicts that San Martin could average 65,000 oz. gold per year at a cash operating cost of less than US$150 per oz. over a 7-year mine life, based on a mining rate of 8,000 tonnes per day. He estimates a capital cost of US$32.25 million, including US$1 million in working capital.

Don Poirier, an analyst with Goepel McDermid Securities, pegs potential production from the San Martin deposit at 50,000 to 70,000 oz. per year. He projects that a 2 million-tonne-per-year operation (5,500 tonnes of ore per day) could produce 50,000 oz. annually at a cash cost of about US$200 per oz. Poirier estimates an operation of this scope can be built for US$32 million.

Mar-West has 16.6 million shares outstanding, or 17.4 million fully diluted, and a working capital of about $6.5 million.