Great Lakes plans to develop Mexican gold deposit

Tucked away in the quiet backwaters of northern Sonora state, a gold mine is taking shape for Great Lakes Minerals (TSE).

Following the completion of a positive feasibility study by Scotia Corp., a Salt Lake City-based engineering firm, Great Lakes has decided to put its wholly owned Lluvia de Oro project into production at a rate of about 780,000 grams (25,000 oz.) per year.

Just prior to the production announcement, The Northern Miner visited the project, which is nestled in a predominantly agricultural region of northern Mexico, about three hours’ drive south of Tucson, Ariz.

Activity at Lluvia de Oro appears to date back to at least the turn of the century, as evinced by the number of historical workings present on the property.

Modern exploration began in 1988 when Compania Fresnillo (a joint venture between Amax and state-owned Penoles) conducted a program over a 500-sq.-km area northeast of Lluvia de Oro.

Between 1988 and 1990, Fresnillo carried out mapping, sampling, trenching and reverse-circulation (RC) drilling on three prospects — Creston, El Cobre and El Pozo — in an attempt to uncover a porphyry-hosted gold deposit. At Creston, several shallow holes encountered mineralization which yielded gold values of between 1 and 2 grams per tonne; a shallow hole drilled at El Cobre intersected 7.5 grams over 6 meters; and drilling at El Pozo cut values of up to 1 gram gold over 7 metres.

Since acquiring the project in the fall of 1993, Great Lakes has carried out additional trenching and has drilled 128 RC holes totalling 11,992 metres. Geologically, the Lluvia de Oro occurs in an elongated, northeast-trending sedimentary basin bounded on all sides by metamorphic rocks. The sedimentary package consists of siltstones, sandstones, conglomerates and carbonates. The regional metamorphic complex consists of schists, gneisses and lenticular bodies of pegmatite. Contacts between the metamorphics and the sediments are structural rather than depositional. To the northeast, andesitic volcanics locally overlie the sediments.

The project area is dominated by a series of northeast-trending zones which are characterized by intense shearing, brecciation and faulting. Gold mineralization occurs as disseminated zones, which are associated with the northeast-trending shears.

Most of the work to date has focused on the 200-to-300-metre-wide Lluvia shear, which has been traced for 3 km along strike. The central portion of the shear hosts the Creston deposit, which measures 670 metres long by 200 metres wide.

Mineralization at Creston is accompanied by silicification, decalcification and possible argillic alteration of the host rocks. Box work textures are common after primary sulphides. In most places, the primary sulphides have been oxidized to vertical depths of more than 60 metres.

Grades at Creston are extremely consistent, ranging between 0.7 and 2 grams. “It’s a low-grade, but very homogeneous, orebody,” explained Douglas Martin, Great Lakes’ Tucson-based project manager. Based on drilling to date, minable reserves at Creston are calculated at 5 million tonnes grading 1 gram. The feasibility study calls for open-pit mining and heap-leach processing at a rate of 750,000 tonnes per annum, with an initial head grade of 1.1 grams. The capital cost is estimated at US$2.9 million, which the company anticipates funding through internally generated cash flow. Equipment for mining, crushing and pad loading will be supplied and operated by a contractor.

During early mining, the stripping ratio will be negligible, since the Creston orebody outcrops as a small ridge. In the ensuing period, the ratio is expected to be 0.92-to-1.

According to Robert Turner, operations manager, the ore is metallurgically simple, relatively soft and does not require agglomeration. He said the ore will be reduced to minus 2.5 cm using a 2-stage crushing process. It will then be trucked to one of six pads for heap leaching. Each pad will be 150 metres wide by 300 metres long, with a capacity of 1.3 million tonnes. Cyanide consumption is expected to be about 0.25 kg per tonne of ore leached. “To cut down on evaporation, we’ll use emitters (drip solutions),” Turner explained. Recoveries are estimated at 80%, and cash costs are anticipated to average US$245 per oz.

Martin expects permitting, now under way, to be completed by early this summer. Locations for ponds and pads are currently being considered, and plant construction is expected to begin in September. Construction should be completed by November, with production slated to commence by year-end. Although the project is only a few kilometres from Magdalena, the company plans to use diesel generators for electric power. On-site generation was chosen to avoid any time delays associated with the laying of power lines; besides, fuel costs are comparable with those in the U.S.

Exploration potential at Lluvia de Oro is considered excellent, and work to date has concentrated on drilling out a minable reserve at Creston and completing a feasibility study. “There is a lot more scope than we have tested,” Martin said, adding that “the potential for deeper, richer sulphide ore is very good.”

Diamond drilling, designed to test four additional targets on the property, is scheduled to begin in the second quarter. Additional targets on the 1,200-hectare property are being evaluated by geological mapping. One company which was quick to recognize the potential of the Lluvia de Oro property was Repadre Capital (TSE). In 1994, it bought a 3% net smelter return royalty on future production from the deposit for $250,000.