Metallica’s Cerro San Pedro on hold

With no assurance its operating licence will be renewed, Metallica Resources (MR-T) has suspended construction of the Cerro San Pedro heap-leach gold-silver mine in Mexico.

The suspension will cause about 150 employees and contractors to lose their jobs. The company will retain a core group of technical and administrative staff on site. Contract miner Washington Group International will maintain its equipment and critical employees on a stand-by basis.

“The decision to suspend construction is regrettable and unfortunate,” says Metallica CEO Richard Hall, who insists the project “complies with the highest social and environmental standards, and meets all applicable regulations.”

Earlier this month, Metallica warned of “significant delays” in obtaining an explosives permit from Mexico’s Secretariat of Defence, even though the company says it has met all necessary requirements.

Metallica will continue to work to resolve matters with local, state and federal authorities but says it has not ruled out legal action.

The company is also continuing its Federal Court appeal of an earlier ruling by the Agrarian Court in San Luis Potosi state that nullified Metallica’s land lease. The lease was signed in 1997 with the Ejido of Cerro San Pedro (a group representing the historic occupants of the land); the court quashed the authority of the Ejido representatives who signed. The company expects a decision in October.

Metallica began building Cerro San Pedro in mid-February and was planning to start leaching in September. The recovery plant had been slated for completion in October, followed by the first gold pour in November. The operation was expected to produce an average of 90,500 oz. gold and 2.1 million oz. silver annually for more than eight years.

Construction of the mine and processing facility had been expected to cost US$28.2 million. Another US$98 million is required to fund contract mining.

At last count, reserves stood at 61.1 million tonnes grading 0.59 gram gold and 24 grams silver per tonne, based on a gold price of US$325 per oz. and a silver price of US$4.62 per oz.