Red Rock drills confirm Mexican project reserves (April 06, 1992)

Private Australian company Walhalla Mining and 63%-owned Red Rock Mining (VSE) are set to pick up where Terra Mines left off by putting the Amelia gold project in Mexico back into production.

Three years since Terra stopped mining, equal partners Walhalla and Red Rock have established proven and probable reserves of 1.5 million tons grading four grams per tonne on the 7,438-hectare property 40 kilometres northeast of Magdalena in the state of Sonora.

Consisting of the Amelia mine and surrounding Amelia 7 claims, the property adjoins Phelps Dodge’s (NYSE) 60,000-oz.-per-year Santa Gertrudis mine, Mexico’s only heap leach gold producer.

Proven reserves established to a depth of about 500 ft. are hosted in an oxidized layer and according to Red Rock should support a 1,000-ton-per-day heap leach mine for three years at the rate of 40,000 oz. a year. Red Rock is estimating operating costs of less than US$150 per oz., while achieving 80% recovery levels based on a 20-day leach period. With capital expenditures expected to be in the US$1.5 million range, the joint venture is attempting to purchase a 450-tonne-per-day crushing and agglomerating plant built on site before Terra ran into financial difficulties.

While it cost Terra $4.5 million to build the plant, Walhalla Chairman Chris Kyriakou says he hopes to acquire the facility for about $250,000 and start production by the end of this year. The cost of buying the mill is included in Walhalla’s capital estimates.

If everything goes according to plan, the Amelia project would represent something of a comeback for Kyriakou, who was ousted from the board of Pamour Inc., now TSE-listed Royal Oak Mines, in 1988.

He gained control of the property last year after Red Rock (previously known as Giant Pacific Petroleums) signed an agreement with Chutine Resources allowing Red Rock to earn 100% of the Amelia mine claims and 50% of Amelia 7. The agreement required Red Rock to spend $1.2 million to issue half a million shares to Chutine, which still holds a 1.5% net smelter royalty. Walhalla subsequently came forward to purchase 50% of Red Rock’s stake in the Amelia mine and Amelia 7 properties and is now set to provide production financing. Terra produced about 4,700 oz. from August 1988 to April 1989, before rising debts of $600,000 forced the company into bankruptcy. But a Terra insider, who asked not to be identified, said the company got into trouble because it didn’t supervise the operation properly and he believes Red Rock will ultimately be successful. Drilling has been supervised by A.C.A. Howe International.