Geomaque’s San Francisco prepares for production

Construction of the San Francisco mine here in Sonora state is moving ahead as Geomaque Explorations (TSE) works toward its goal of pouring gold by August of this year.

Output for 1995 is projected at 30,000 oz., increasing to 50,000 oz. in 1996.

A recent tour of the property by The Northern Miner showed that construction of the leach pad area, as well as the adjacent pregnant, barren and storm water ponds, was nearly complete.

The foundation for the gold recovery plant was being poured and the gold plant, which was built in Colorado, was on site. The primary crusher was expected to arrive shortly, as was the mining fleet, with the pads scheduled to be loaded in mid- or late July.

In a country where infrastructure can be problematic, the San Francisco is in the enviable position of being a stone’s throw from a major 4-lane highway which runs between Nogales and Hermosillo. A rail line also passes by the property, which is near the village of Estacion Llano, just south of Santa Ana (population about 20,000), and ample power is available.

Michael Carter, general manager, believes the property’s proximity to Santa Ana will attract quality workers. Moreover, a slowdown in public works projects since the devaluation of the peso earlier this year is expected to provide a good pool of workers, and Geomaque has already received enquiries from employees of other mines in the area. Many of these mines are camp operations, and workers are naturally interested in a job which allows them to live at home with their families.

Carter was initially concerned over the prospect of finding local workers with the necessary technical skills, but no longer. “We’ve found that the quality of engineers, geologists, surveyors and accountants is excellent,” he said.

The work ethic of some of the workers is not quite so apparent. The young workers for the contractor on the leach pad, for example, appeared to be spending a great deal of time standing around the nearest pick-up truck chatting. But, as Carter concedes, a certain level of torpidness is to be expected among workers in the “land of manana.”

On the regulatory side, Carter said government authorities have been supportive of the project. Permits took about a year to receive, which actually compares favorably with typically longer periods in Canada and the U.S. To ensure that the mine was designed to North American environmental standards, the company made a conscientious effort to leave vegetation undisturbed wherever possible.

Gold mineralization occurs as tabular, stacked zones ranging up to 20 metres in thickness and dipping gently to the northeast. The mineralization is hosted primarily in granite or granite gneiss, but it also cuts across lithological units. Within zones, the gold occurs as free form in quartz tourmaline veins, stringers and breccias, as well as disseminations.

The current mine plan encompasses four open pits, with a combined proven and probable reserve of 6.7 million tonnes grading 1.37 grams gold per tonne. About three-quarters of the reserve is contained within the Main pit, with the balance spread out among the surrounding zones.

The topography of the area reserved for the pits and leach pads is flat, which is a distinct advantage with respect to construction.

Richard Graeme, a consultant with Mine Development Associates, said the ore is clean and contains no deleterious elements. Nevertheless, the gold mineralization is associated with minor amounts of pyrite, which will necessitate the addition, prior to leaching, of about 2 kg of lime per tonne of ore.

The stripping ratio is estimated at 3.2-to-1, and the waste portion includes an estimated 1.1 million tonnes of mineralized material which has yet to be categorized as proven or probable.

Further infill drilling is not planned, as the company is concentrating its resources on bringing the property into production. Final definition of the ore zones will be accomplished during drilling and blasting.

Contained in the pit limits is low-grade material which does not meet the 0.4-gram cutoff grade. This may be leached as run-of-mine material once the operation is up and running, although further tests are required.

Daniel Maya, project geologist, is enthusiastic about the property’s exploration potential. Work to date has focused on 1.5 km of what is termed the San Francisco trend, and rocks hosting the deposit are believed to extend for several kilometres. In the hope of uncovering adjacent zones, Geomaque is doubling its permitted area to 600 hectares.

Maya is interested in drill-testing several targets, although exploration spending outside the existing deposit will be limited until startup.

Ore-grade material will be crushed to minus 16 mm in order to achieve a recovery rate of 72%. Standard leaching and carbon recovery technology will be used to produce a final dore product.

To date, Geomaque has spent US$4 million on capital and pre-production work, and President John Paterson expects to spend a further US$2.5 million to reach the production stage.

The mining fleet will be leased, as will a large crusher which should enable operators to ramp up to the 50,000-oz.-per-year production level with little additional cost.

Geomaque has enough in the bank to cover the remainder of the capital expenditures, and Paterson is looking at arranging a bank line of credit to cover working capital requirements during startup. Cash operating costs are projected at US$7.11 per tonne, or about US$218 per oz. gold recovered over the life of the operation.

Geomaque has arranged to buy the back-in right and royalty held by the original vendor (Fresnillo). On closing, the company will hold a 100% interest.

The purchase will be financed through the issuance of 3.5 million shares to Goldcorp (TSE) at $1.40 per share plus warrants for 2.5 million shares exercisable at $1.55 per share. In return for the interest, Fresnillo will receive US$3.5 million plus 1.2 million shares of Geomaque.

At press time, the closing of the financing to buy back the royalty and back-in option was delayed. Geomaque expects the matter to be resolved by month-end.