Mexico Gold Output seen topping 100 t/y by 2017
Better known as the world’s biggest silver producer, Mexico may soon deliver the next ‘mega’ gold deposits, with explorers Newstrike Capital and Westridge Resources reporting significant resources at their targets.
The North American State is currently the tenth-largest gold-producing country globally, having churned out 86.6 t of the yellow metal in 2011, up 307% from the 21.3 t it produced in 2002, Thomson Reuters GFMS mining analyst Matthew Piggot told Mining Weekly Online from London.
“With a number of projects ramping up to full production and many more projects being evaluated, we expect production to increase to about 100 t over the next five years,” he said.
By comparison, world number-four producer South Africa mined 187 t of gold in 2011, according to Chamber of Mines statistics.
Mexico is one of the lowest-cost mining jurisdictions in the world. Where it cost the rest of the world on average $649 to produce an ounce of gold, in Mexico it cost an average of $325/oz.
Government-controlled fuel prices, low labour costs, and a skilled pool of workers all contribute to keeping production costs low. The country’s mines also often produce large amounts of high-value by-products.
But the mining industry is not completely immune from the drug wars that have ravaged parts of Mexico.
A report by security consultancy Control Risks rated the country’s security risk as ‘medium’, adding that the security situation would deteriorate in 2012 as a result of ongoing drug-related violence, as well as kidnappings, extortion and increasing demand for corrupt payments.
It is important to note, though, that most of the drug cartel violence takes place in Mexico’s northern areas, near the US border. Most gold production takes place in the central and southern parts of the country.
Newstrike CEO Richard Whittal is upbeat about the country’s gold future, telling Mining Weekly Online Mexico is rising rapidly as a significant new bullion producer, apart from the gold by-product produced at the country’s large silver mines.
He said the Ana Paula project Newstrike bought from Goldcorp in 2010, in the Guerrero gold belt, has the potential to yield more than three-million ounces of gold, with significant upside as exploratory drilling is only about halfway complete.
Located about four hours from Mexico City, the Guerrero gold belt is a newly established gold district, hosting Goldcorp’s Los Filos complex – the largest gold mine in Mexico with proven and probable resources of 7.7-million ounces – and Torex Gold Resources’ Morelos project.
The resource comprises an unusual discovery for Mexico, owing to the high-grade core penetrating deep into the earth, enveloped by a vast lower-grade orebody, Whittal said.
Grades within the orebody core had proved to be significant, while the lower-grade outer sheath held significant tonnage.
“The core orebody of Ana Paula could hold enough resources to justify opening a mine, however, it is the outer sheath that would ensure the payload based on sheer volume,” he said.
The company planned to spend $15-million on exploring the tenement during this year, following on from $10-million spent in 2011.
“We plan to drill 45 000 m this year, after we have hit significant mineralisation in almost every drill hole before,” he said.
The belt has good infrastructure, including road and rail access, as well as water and electricity, making it ideal for an eventual takeover deal by a major, according to Whittal.
“We think we are only at ‘Chapter 1’ of this project. We endeavour to prove this resource up to between three- and four-million ounces to grab the attention of the gold majors,” he said.
Whittal added that some of the bigger producers in the country may have been under the impression that the last significant gold resources had been found, and, because they were focused on developing mines, they neglected proving up existing exploration targets.
Newstrike’s game plan is to develop a turnkey mine, with the aim of eventual takeover.
The TSX-V-listed firm has experienced members on its exploration team, including Gillian Kearvell, who had made her third significant gold discovery, and Dr Craig Gibson, who had made five significant gold discoveries, three of which were in Mexico.
Meanwhile, Westridge CEO Peter Schulhof said when his company acquired the Charay gold property in western Mexico, from Canadian explorer Musgrove Minerals, the Padre-gold vein was thought to be only about 250 m in length.
Subsequent drilling had expanded the gold/silver resource to multiple veins over a 4 km area, with gold grades of between 2 g/t and 20 g/t.
“The silver resource alone, with grades of up to 70 g/t could justify a mine,” Schulhof said.
He is resolute to continue drilling. “One would ruin this project if one was to stop now,” he quipped.
Westridge had, to date, explored about 1% of the 105 km2 tenement, with Schulhof unofficially expecting the resource to hold about five- to six-million ounces of gold.
“That, of course, still needs proof,” he said.
Schulhof likened the Charay project to the El Peñón mine, in Chile, saying the deposits and history bore significant resemblances.
“The original owners did not understand the epithermal deposit and divested. Later, when experienced chief geologist John Drier continued exploration on the resource, it was proved up to hold about 2.2-million ounces of gold and about 66.5-million ounces of silver,” he said.
El Peñón produced 475 586 gold-equivalent ounces in 2011.
With Drier heading up the gelogical team, the company now seeks to raise between $3.5-million and $5-million for a further round of exploration, looking towards investors in London, Oslo and in Switzerland, who had shown interest during a recent road show.
“We have the ingredients for a success story.
“We have a senior, experienced team of geologists working on the discovery, the company’s share price has held steady over the past year and the asset is ‘off the charts’,” he said.
Source: Mining Weekly