Trevali sees exciting future at old Santander mine

Vancouver – Would you like a zinc-laden tailings pond, a nearly functional mill, and a dedicated, hydroelectric power plant to go with your promising drill results?

In late 2007 Trevali Resources (ZINC-C) purchased the past-producing Santander mine in Huaral province, Peru, and got just that. Santander has it all: a 1,000-tonne per day mill, a 1,000-person camp complete with a school and hospital, a tailings pond containing over 5 million tonnes of ore likely grading close to 2% zinc, 1.5 MW of power from a dedicated hydroelectric plant, and exploration targets turning out some high grade silver-zinc-lead numbers.

Trevali has a two-phase production plan for Santander. The first stage is to re-start the mill to process material from the tailings pond just a few hundred metres distant. Santander operated as a lead-silver mine for 20 years, directing the ore’s zinc straight into the tailings facility. For another 15 years of operation zinc was recovered but low metal prices dictated a 6% zinc cutoff and a coarse crush size led to poor recoveries, adding more zinc to the tailings. The result is a bulk-tonnage, low-cost, readily exploitable zinc resource.

Trevali just finished drilling the entire 500 by 500 metre tailings ponds at 50-metre spacings and expects a resource estimate shortly. Some of the best results include 24.5 metres grading 3.06% zinc, 25.4 metres grading 2.44% zinc, and 19.4 metres grading 2.67% zinc. In the northwestern part of the pond grades average between 2 and 3% zinc; moving to the southeast grades sink to 1 to 2%.

Initial testwork indicates conventional flotation processing recovers 80 to 84% of the zinc in the tailings to produce a 49% zinc concentrate. Trevali expects to produce roughly 45 tonnes of zinc concentrate per day from the tailings and hopes to be doing so by the fourth quarter of this year.

The second production phase Trevali is working towards at Santander is to start processing fresh ore from a new mine. The company is currently focused on four exploration targets on the property, all of which are carbonate replacement-type targets.

Drilling commenced at Magistral Norte, where 40 holes have now been completed. The first hole into the zone, hole 2, cut 28.4 metres grading 5.16% zinc, 8.6% lead, 85 grams silver per tonne, and 0.33% copper from 43 metres depth.

Hole 16 returned 13.7 metres grading 10.37% zinc, 5.45% lead, 178.5 grams silver per tonne, and 0.25% copper from 134 metres below surface. Hole 18, a parallel hole collared 25 metres southeast, cut two horizons: 4.65% zinc, 4.39% lead, 66.8 grams silver, and 0.1% copper over 7 metres from 141 metres depth and 7.85% zinc, 6.66% lead, 277.3 grams silver, and 0.1% copper over 6.3 metres from 153 metres downhole. Hole 20, another 25 metre step to the southeast, cored 14.7 metres grading 2.22% zinc, 2.19% lead, and 24 grams silver from 173 metres depth followed by 19 metres grading 1.26% zinc, 1.37% lead, and 25 grams silver from 220 metres.

Mineralization at Magistral Norte remains open partially to the north and specifically at depth.

Trevali’s diamond drills then moved to Magistral Sur and Central. At Magistral Sur, 700 metres southeast of Magistral Norte, logistical constraints positioned the first four drill holes at the southern-most extend of the outcropping zone. Modest results from those four holes, such as 7 metres grading 2.4% zinc and 0.5% lead in hole 15, indicate mineralization increases to the north. A more recent drill hole, hole 50, supported this theory by intersecting disseminated and semi-massive to massive sulphide mineralization over a 47-metre interval.

The company plans to prepare a resource estimate for each zone as drilling concludes.

At Santander a major, southwest-dipping fault runs northwest-southeast across the property. Smaller crosscutting faults provided a route for hydrothermal fluids to access and replace the limestone beds with galena and sphalerite in classic carbonate replacement body mantos.

Trevali’s work indicates, however, that there was not just one but two mineralizing events. Cores from Magistral Norte show the drills are perpendicular to the mantos but also show parallel silver veins. That indicates silver veining came later and overprinted the carbonate replacement body at a right angle. Trevali’s drills, which are oriented to test the lead-zinc deposit, are therefore running parallel to the silver veins and so not actually intersecting many.

Trevali plans to drill down-dip the deposit parallel to the mantos and perpendicular to the silver veins at a later date in order to determine the extent of silver mineralization. At present the company is simply saying “the current drill program may be underestimating” the distribution of silver veins.

The mine at the main Santander pipe, which is more than 1 km distant from the current exploration targets, operated from 1957 to 1993 to produce some 8 million tonnes of ore grading 7% zinc, 1 to 4% lead, and 60 grams silver. By the 1990s the operation had reached a depth of 480 metres and water was rushing in. The mine’s owner, Minerales Santander, went into bankruptcy as rising operating costs collided with falling metal prices.

Trevali acquired the project by taking on Minerales Santander as a subsidiary. In doing so the company took on several million dollars worth of liabilities left behind by the bankrupt operator. Trevali has paid off a significant portion of those liabilities, including paying former mine workers the wages they lost when the mine closed up.

The abrupt end to operations left behind a swath of infrastructure at Santander, most of which has been well-preserved in the arid chill of the Andes. The 1.5 MW Tingo power plant, located 17 km downstream from the mine, has been in operation since 1958. While the mine sat idle for 15 years the plant fed into the local grid but when Trevali starts processing material from the tailings pond the mill will have all the power it needs. To support hard rock processing the company will have to add to the plant’s generating capacity.

The camp, school, and hospital have been cleaned up and are ready to use. More importantly, many of the major mill components are still functional. An engineering report on refurbishing the mill should be finished shortly and Trevali has been notified that capital costs to bring the mill back to production will be small.

The mill is designed to process 1,000 tonnes per day. In the refurbishment phase Trevali plans to increase that capacity to 1,500 tonnes per day. When the company is ready to start processing hard rock it wants to up the capacity again, to 3,000 tonnes per day.

Trevali currently trades on the CNQ index where its share price in 2008 has ranged from $1.70 to $2.60. The company is currently applying for a listing on the Toronto Stock Exchange.