Refugio mine on track for production

When the Refugio mine pours its first gold late this year or in early 1996, it will become one of the largest open-pit, heap-leach mines in the world, with projected gold production of 233,000 oz. annually.

“Had I known this project would end up being this large, I might have thought twice about taking it on, eight years ago,” Bema Gold (TSE) President Clive Johnson told The Northern Miner during a recent visit toRefugio.

The mine is situated west of Copiapo, high in a desert portion of the Chilean Andes.

Construction of the US$127-million project began in November 1994, and is being overseen by Compania Minera Maricunga (CMM), the operating company owned jointly by Bema and its senior partner, Amax Gold (NYSE).

The site is a veritable beehive of activity, with more than 1,000 workers putting the finishing touches on a modern, 33,000-ton-per-day mine that will operate under North American environmental standards at an altitude of about 14,000 ft. To meet Chile’s earthquake code, the structures were built stronger and more heavy-duty than those at typical North American mines.

Construction is ahead of schedule and on budget. To ensure this, CMM negotiated a fixed-price contract with Fluor Daniel Chile, a company with considerable experience in high-altitude mine construction, guaranteeing on-time construction within budget.

Albert Brantley, CMM’s general manager, said the senior people at the project have previous experience with large-scale projects at high altitudes. “We anticipate it will be a challenging project, but projects are where geologists find them.”

When Bema first took an interest in Refugio, it was hoping the Chilean project would help it grow from a 25,000-oz.-per-year producer to one turning out more than 200,000 oz. It was an ambitious undertaking for a junior, partly because, in those days, Chilean projects did not enjoy the favorable rating they have today.

“The history of Refugio really goes back to our Champagne gold mine in Idaho,” Johnson said, referring to Bema’s first mine, opened in the summer of 1989. “We found that North America was becoming a hard place where to build mines, and that is why we came to Chile.”

The first gold showings at Refugio were discovered by the same discovery team that found the El Indio deposits, also in Chile. However, Johnson points out that much of the work that outlined the current minable reserves was accomplished by Bema’s exploration team, which then included Michael Hopley, Barry Rayment, Thomas Garagan and Gary Nordin (now with Eldorado).

Less than a year after taking on the project, Bema had spent $14 million to outline and define the Pancho and Verde deposits, thereby earning a 50% interest in the 42-sq-mile Refugio property from its Chilean partner. By this point, both deposits were estimated to contain 8.6 million oz.

“We’ve grown the hard way, which is through exploration,” says Johnson. “We have an excellent team that has discovered more than 12.5 million oz. gold in South America.”

Refugio is described as a typical porphyry-style gold deposit, Miocene in age. Mineralization is found within quartz-magnetite stockworks, hosted in silicified, sub-volcanic diorites.

Bema’s exploration team is currently busy drawing up a regional program, aimed at finding similar deposits in the Maricunga district. “We have a lot of experience in this region, and have exploration techniques that we will apply to recognize more of these deposits,” says Michael Hopley, vice-president of corporate development.

Bema and its VSE-listed subsidiaries, Arizona Star Resource, El Callao Mining and Puma Minerals, expect to spend a total of $10.7 million on exploration this year in Chile, Argentina and Venezuela. But for the time being, exploration is taking something of a back seat to the construction and engineering work at Refugio.

Johnson said this phase is critical for the company because for years, Refugio had to endure its share of skeptics. In part, this was because the Marte and Lobo gold mines, also in the Maricunga district, failed to live up to expectations. “I’ve spent a lot of time explaining the difference between Refugio and the Marte and Lobo mines, and I’m not going to do that any more,” Johnson said. “Our mine will be pouring gold in a few months, and that will tell the story.”

The first feasibility study for Refugio was completed in 1991. In early 1993, Amax Gold bought a 50% interest in the project from Bema’s Chilean partner, and together, they set out to finance the project. At this point, whatever could go wrong, did. Amax Gold ran into operating problems at its existing mines, the gold price slumped, and Bema’s financing efforts were sidelined as its stock price tumbled. “A few people thought we were finished,” Johnson recalled.

But then the tide began to turn in Bema’s favor. Cyprus bought Amax (to form New York-listed Cyprus Amax Minerals), and gold prices improved. More important was the fact that Cyprus’s hard-nosed due diligence upheld Bema’s original feasibility study, as well as subsequent feasibility studies and audits. “There is pressure on Bema and Amax Gold to bring this project on successfully,” Johnson said. “We are very motivated partners.” On the technical front, Albert Brantley is expecting no unpleasant surprises. “The technical work on this project has gone through more scrutiny than any other project I’ve heard of. Every time, the scrutiny has turned up no surprises. This is a conventional heap-leach mine, with off-the-shelf technology, and new equipment.”

The current mine plan is focused on a “base case” for the Verde deposit, where 233,000 oz. would be produced annually for 9.4 years at a cash cost of US$208 per oz. (or slightly above, if cyanide costs continue to rise). Minable reserves under this base case are 112 million tons at 0.03 oz. gold, or about 3.3 million oz. The stripping ratio is less than 1:1.

“The real story at Refugio is that it has potential to be expanded,” Johnson said. “We’ve built a facility that can increase in size to bring on another deposit.”

Under the “extended base case” mine plan, gold production would average 200,000 oz. annually over a mine life of 17.2 years, based on a reserve of 204 million tons at 0.026 oz., or 5.3 million oz.

With all the technical data in hand, Bema and Amax were able to complete financing for the project early this year. The financing package involved a US$85-million gold loan, and equity financing of US$21 million from each of Bema and Amax Gold.

Refugio is a conventional heap-leach operation. Ore will be blasted and loaded in the pit, and hauled to the primary crusher in 120-tonne trucks, where it will be reduced to minus 6-inch. It will then be transported by way of a 1,700-metre overland (covered) conveyor to the coarse ore stockpile. Brantley says the conveyor option was chosen because it will be cheaper than trucking, and will not be affected by weather.

The coarse ore will then be fed to fine crushers and reduced to minus 1/2-inch, and loaded into trucks to be hauled to the leach pads.

The ore will be dumped in 5-metre lifts on the heaps, spread, and ripped by dozer. Over time, there will be eight lifts in each of 36 cells. Drippers will be used that will be partly submerged in furrows.

The pregnant solution is pumped through carbon columns where gold loads onto carbon. The gold is then recovered from solution by electroplating onto electric cathodes and smelted into dore bars. There will be a 30-day leach cycle on fresh ore, followed by another 30-day leach on “old” ore, to provide overall gold recovery of 68% over the life-of-mine. As part of its feasibility work, Bema studied cold-weather, heap-leach operations, and is confident weather conditions at Refugio will not hamper leaching. “We have plenty of sunshine, and even in winter the temperature will usually rise to above freezing in the day,” Brantley said.

Power is generated on site, and water is pulled from a valley 28 km away.

Mining will be done by Elton, an Australian mining contractor that is well-established in Chile. “They will be using large, track-mounted excavators on the benches above, rather than face shovels,” Brantley said. “We like this system because it gives us good productivity and good grade control.”

Once up and running, the mine will employ about 400 people, and operate under a 7-days-in/7-days-out cycle. Camp accommodations are at a slightly lower altitude than the minesite.