Orvana develops Don Mario project

San Jose de Chiquitos, Bolivia — Faced with Bolivia’s new environmental laws and permit regulations, Orvana Minerals (ORV-T) is seeking the advice and experience of various parties as it attempts to develop the Don Mario gold project.

In a ceremony at the property, in the country’s eastern region, Orvana invited permitting officials from the national capital of La Paz, as well as local community leaders, to inform them of its development plans.

In July 1997, the Bolivian government passed new mining and environmental regulations designed to elevate standards to North American levels.

The regulations roughly parallel those in place in the U.S., said Cindy Gee, Orvana’s environmental manager at Don Mario. “I feel comfortable with being the first to test the new system. The Bolivians are very knowledgeable about mining and want us in their country.”

The recent gathering was attended by nearly 30 guests, including The Northern Miner, representatives of the mines and environment ministries, and community leaders from Santa Cruz province.

Orvana was not required to invite the regulators, but did so anyway. “We believed the descriptions and maps could not accurately portray the scope of the project,” Gee said. “So we decided to show them first-hand.” Those in attendance were taken on a tour, during which a wide range of questions were asked. “Did the stream from the mine area flow through the village of San Juan?” asked a woman from the village. “What was the specific gravity of the ore?” enquired a regulator from La Paz.

Orvana’s president, Leigh Freeman, was pleased with the reception: “I think the trip was well-received. Everyone seemed to come away with a clearer understanding of the project, with a feeling that this is the way permitting should be done in Bolivia.

“We wanted the regulators from La Paz to have a look at the physical setting of Don Mario, and we wanted to give them a chance to meet with us personally. We wanted the local people too, who represent those who will live and work near the mine, and we wanted to introduce them to the regulators.”

The event coincided with the beginning of construction of a decline into the underground deposit known as the lower mineralized zone (LMZ). With the help of Redpath of Canada, the company will place the portal at the base of Cerro Don Mario, just south of the main camp. The decline will tunnel into the hill for 330 metres, dropping nearly 50 metres in elevation, at which point the company will drift along the LMZ for 250 metres.

The decline is part of a final feasibility study and is intended to investigate ground conditions and grade control. These factors will play an important role in calculating reserves and determining the deposit’s economic feasibility. “The cost structure is anticipated to be somewhere around US$125 per oz.,” Freeman said. Construction of the decline is expected to be completed by early December.

LMZ is believed to have an undiluted resource of 1.5 million tonnes grading 13.3 grams gold per tonne, equivalent to 624,000 oz. gold, based on 157 drill holes. In 1998, the company focused its efforts on infill drilling, and, consequently, 90% of the resource is in the measured and indicated category.

Mineralization is hosted in a northerly dipping structure beneath Cerro Don Mario, which varies up to 6 metres in width. Mineralization, found at a contact zone of magnetic-rich metamorphic rocks with a granitic intrusive, is open below a depth of 300 metres.

The final feasibility study is expected by the end of the year, at which time Orvana will begin considering a production decision on the underground portion.

The open-pit portion of the project is known as the upper mineralized zone (UMZ). A treeless, nearly barren hill, it consists of metamorphosed dolomitic rocks of Precambrian age with high levels of copper mineralization.

The UMZ contains copper and gold mineralization nearly equivalent in value to the LMZ. To date, the company has outlined about 6 million tonnes of mineralization grading 1.5 grams gold (equivalent to 290,000 oz.) and 1.5% copper. The UMZ is currently undergoing a prefeasibility study.

Freeman expects the company will need up to US$40 million to place the project in production. Construction could begin as early as March 1999, with startup tentatively slated for the second half of the year.

First, however, Orvana must convince the Bolivians that it can operate the mine at high environmental standards. Consistent with the new regulations, Orvana has submitted an environmental plan of operations for the underground portion of the project. The ministries of mines and the environment are reviewing the plan and will decide whether the company must submit a full environmental impact statement (EIS), which is required for larger projects, or an environmental assessment, which is for smaller operations. Even though Don Mario is not considered large and is situated far from any settlement, Orvana has already opted to proceed with an EIS. The company believes the EIS will carry more weight with lending institutions when it comes to seeking financing.

Don Mario is close to the drainage divide between the Amazon and Paraguay River systems. Despite being in the tropics, the area is dry and many of the streams around the project area run for only part of the year.

This region is poorly developed and frontier-like, Freeman says. It became open to agriculture only in the last decade.

Don Mario is the first gold mine to be developed in the under-explored Precambrian rocks of this part of South America. The deposit was first discovered by local timbermen looking for hardwoods in the rainforest. They brought back brightly colored copper-bearing rocks to geologists who immediately understood their potential.