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Projects Overview
Industry Overview
South America is a largely under-explored region with respect to gold. The gold mining industry in South America currently resembles that of Australia in the late 1970's. In the late 1970's, the Australian gold industry was dominated either by the extremely large mining operators with a production focus on multi million ounce deposits or the smaller prospecting low tonnage high grade private operators. Little attention was paid to the potential of medium grade, medium tonnage gold resources.
In the early 1980's, the Australian gold industry, assisted by technical innovations such as commercialised carbon in pulp processing, expanding contract mining and a trained technical workforce that was available to the medium-sized companies, redirected its focus towards exploring and exploiting medium-sized gold deposits.
The effect of this focus was a major change in the status of Australia as a gold producer. In the late 1970's, Australia was the world's 13 th largest gold producer. By the mid 1980's Australian gold production had increased largely through exploitation of medium-sized mining operations to the stage where Australia was established as the world's 2 nd largest gold producer.
The mining industry in South America, and in particular Brazil , is currently in a similar position to Australia in the late 1970's. Gold mining is predominantly undertaken by the major gold mining companies, exploiting multi-million ounce ore bodies, or small private operators focused on small high grade ore bodies.
There are a number of medium-sized gold-focused companies that have invested in Brazil in recent years. Many of these have developed impressive resource asset bases.
The geological potential of Brazil is demonstrated by the statistics shown in the comparison below.
 Exploration Investment per Country
| |
Brazil |
Australia |
| Total surface area (M sq km) |
8.5 |
7.7 |
| Archean Shield (M sq km) |
2.5 |
1.2 |
| Production (Au kg/sq km) |
0.9 |
5.7 |
Exploration expenditure seeking gold projects
|
$US/ha |
| Australia |
28.00 |
| Canada |
21.00 |
| Chile |
21.00 |
| Brazil |
2.70 |
Source: Jaguar Mining Inc Corporate Presentation Dec 2005
These statistics clearly demonstrate the potential of Brazil to emulate the expansion of gold production that was experienced in Australia in the early 1980's. Brazil has a slightly larger land mass than Australia but with an area of Archean shield double that of Australia . The Archean shield is the geological setting where many of the medium-sized gold deposits have been discovered in Australia . Importantly, where Australian exploration companies have spent US$28 per hectare exploring for gold resources, Brazil is clearly under-explored with only US$2.70 having been invested in seeking gold resources.
Brazil and Peru have strong active mining industries with appropriate legislation and mining tenure. Most of the major international resource companies are active in the countries with major mining operations being managed by these companies. Mining support infrastructure in both Brazil and Peru are well established and Mundo Minerals is confident that it will be able to access all technical services internally in each country as required.
A comprehensive overview of the mining regulations and country analysis is contained in the independent geologists report in the Prospectus that can be viewed from this website.
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Project Summary
Engenho, Minas Gerais, Brazil
Geology and Resources
The Engenho Gold Mine, formerly known as Engenho d´ Água, is located within a 711ha mining license in the historic Iron Quadrangle mineral province in Minas Gerais, SE Brazil .
The deposit is a structurally controlled mesothermal mineralized system characterized by quartz-carbonate-sericite alteration and sulphidisation of the host Achaean pelitic meta-sediments. The ore-body is tightly folded about north-south trending fold axes and dips east at approximately 35 degrees. The mineralization is best developed within the fold hinge zones where ore thicknesses exceed 20 metres at grades of 6-9 g/t Au. Ore grades in the fold limbs are generally in the 3-5 g/t range over widths of 2-8 metres. Consistent with all the principal gold deposits in the Iron Quadrangle (e.g. Morro Velho, Cuiabá, Raposos, São Bento, Lamego, Bicalho, Morro da Gloria, Faria) the geometry of the deposit is characterized by a large plunge length to strike length aspect ratio, with consistent down-plunge grade and thickness continuity.
The deposit was mined by open cut methods to a depth of 50 metres by AngloGold (now AngloGold Ashanti ) from late-2001 to mid-2004, yielding 171,257 tonnes at 3.97g/t Au. Mining was carried out to a 1g/t cut-off. Based on the results of 31 diamond drill holes and pit floor sampling, AngloGold Ashanti has estimated the underground resource to be 1.130Mt at 5.82g/t, at a 4g/t cut-off, to a vertical depth of 270 metres below the pit floor. This has recently been upgraded to 1.82 million tonnes at 5.59 g/t (for 326,500 ounces of contained gold) based on a 3 g/t cut off (refer ASX announcement dated 22 November 2006). Due to the limited lateral extent of the fold hinge zones, these are under-represented in the broader-spaced deeper drilling. It is therefore believed that the resource grade in the lower portion of the deposit is understated. The mineralization remains open at depth.
The ore was treated at AngloGold Ashanti´s nearby Queiroz treatment plant, yielding an average recovery of 93% from standard gravity separation and cyanide leaching.
Mundo Minerals´ Strategy
Mundo Minerals plans to re-open the Engenho mine via a trackless underground operation, driving a decline into the footwall from a point close to the pit floor. A very preliminary mine plan envisages the location of the bulk of the primary development within the mineralized fold limbs, which are generally of marginal grade. This will allow ready access to the thick, higher grade hinge zones and will yield development ore at an estimated mean grade of around 3g/t. Gold recovered from treatment of this material is expected to fully cover development costs. Drilling and extraction levels will be developed within the hinge zones at approximate 20 metre vertical intervals, and the ore mined by long-hole sub-level stoping methods. Those portions of the fold limbs which can be extracted at above the operating cut-off grade will be subsequently mined, leaving an adequate decline protection pillar. Underground diamond drilling will be routinely carried out for grade control and mine planning purposes. The northern higher grade mineralized hinge zone remains unmined in the north wall of the lower portion of the pit, and can be readily extracted from within the pit.
Mundo Minerals will establish a treatment facility alongside the existing open pit allowing for excellent logistics between mining and processing. The treatment facility will be a CIP treatment plant with a capacity in excess of 200,000 tonnes per annum to manage the anticipated mining rate of 194,000 tonnes per annum.
Prior to commencement of mining Mundo Minerals will dewater the pit complete a detailed mine design including a geotechnical analysis, select a mining contractor, recruit a quality operating and management team and convert AngloGold Ashanti´s current mining license to an underground license. AngloGold Ashanti have conducted monthly testing of the water that is in the open pit and is subject to the proposed dewatering. The water contains no contaminants that will cause an regulatory concerns with respect to getting authority to dewater the pit. Discussions have been held with the environmental authorities to confirm this. Mining approvals will be a routine exercise as the underground operation will require no additional infrastructure and will produce no new environmental impacts . AngloGold Ashanti have previously mined part of the Engenho ore body and obtained all approvals necessary to allow these mining operations to commence. Currently the mine is subject to a three year suspension from mining activities imposed by the Brazilian mining authorities at the request on AngloGold Ashanti when they ceased the mining activities. This suspension can be lifted when new mining plans have been lodged with the relevant authorities and approvals to recommence mining can be reissued. Discussions with the relevant authorities indicate that this is a procedural matter and that the Company should have no issues in having mining approvals reinstated.
It is anticipated that initial production will commence from the second calendar quarter of 2008.
The Engenho mine offers Mundo Minerals a rapid and low-risk entry into gold production. Capital requirement is minimal, the level of confidence in the resource and the ore-body characteristics are high due to the experience gained from open pit mining and metallurgical parameters are well-understood as a result of previous treatment of the ore in the same plant. All key mining and engineering-related services are readily available in the region, as is a well-trained workforce. The project is expected to provide Mundo Minerals with an early and sustainable cash flow approximately 10 years, based only on the current open-ended resource.
Engenho Key Statistics
| Item |
Value |
| Resource |
1.82million tonnes at 5.59g/t for 326,500 oz |
| Mine Life |
10 Years |
| Ore Throughput |
195,000 tpa |
| Gold Production (Life of Mine |
275,000 oz |
| Gold Production annual (est.) |
30,000 oz |
| Forecast Capital Expenditure |
A$15m |
| Forecast Cash Operating Cost |
US$272/oz (A$344/oz) |
| Forecast Total Operating Cost |
US$376/oz (A$475/oz |
| Forecast Free Cash Flow |
A$88.4 million |
| Internal Rate of Return |
60% |
| NPV- Post Tax (8% discount rate, US$640/oz) |
A$48.8 million |
Milestones and Future Programme
July 2006: Project acquired
November 2006: All key personnel recruited
March 2007: Feasibility complete
April 2007: Crusher site works commence and crusher and ball mill acquired
August 2007: Plant construction commences
October 2007: Mining commences
Second Quarter 2008: Gold production commences
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Torrecillas, Gold Project, Peru
Geology and Mineralization
Mundo Minerals negotiated a heads of agreements that provides Mundo Minerals with an option to acquire 17 exploration tenements, covering 9000 ha, at Torrecillas and Tumi in south-eastern Peru . The properties are located between Nazca and Arequipa in the Nazca-Ocoña gold belt, close to the coastal town of Chala . The tenements are controlled by a Lima-based family company, Sociedad Minera Surex S.A.C. and have been mined intermittently for over 20 years and continuously for the past 7 years. The area has been subjected to very little modern exploration, with drilling limited to 8 diamond holes in the late-1990´s, principally testing porphyry copper-gold targets. The region hosts a number of small to medium sized gold mines, including the Arirahua, Calpa and Ocoña operations, each with an annual production in the range of 50,000 to 80,000 ounces of gold.
Known mineralization at Torrecillas and Tumi comprises mainly narrow (0.3 to 1 metre) high grade (5-40g/t) pyritic and locally siliceous fault-related veins, hosted by Jurassic andesitic volcanics, sediments and Cretaceous granitoids of the Coastal Batholith. Lower grade mineralization with bulk tonnage potential also occurs within extensive fault breccia zones at both Torrecillas (Retorno) and Tumi.
Current small-scale underground mining is concentrated on the Torrecillas vein where ore grading over 30 g/t is selectively extracted from individual ore shoots generally around 20 metres in length. This vein has been mined over a vertical interval of approximately 100m and is open along strike and down-dip. A number of other mineralized vein systems have been identified and in some cases have been subjected to limited underground development. The principal veins are Adi, Cinco de Noviembre and Torrechino in the Torrecillas tenement block and the 4km-long San Francisco vein at Tumi. At Adi Norte, a cluster of sub-parallel veins exposed over an area of 900 x 800 metres may have open cut potential. Although results from limited surface sampling of the principal veins are generally of lower grade than the Torrecillas underground grades, near-surface grades at Torrecillas were significantly lower than grades below the base of oxidation, implying strong near-surface gold depletion.
The partially covered Tumi and Retorno fault breccias, the latter traceable over a 2km strike length on satellite imagery, offer potential for bulk tonnage low grade mineralization. Limited surface sampling grades are generally in the range of 0.2 to 1.0 g/t over widths of 25 to 70 metres.
Mundo Minerals´ Strategy
Mundo Minerals has a 14-month period ending 31 March 2007, to exercise its option to acquire the Torrecillas and Tumi properties. An initial 5000-6000m diamond drilling programme, coupled with detailed underground sampling at Torrecillas, will be conducted over a period of approximately 6 months, commencing immediately after the IPO. Principal targets in the Torrecillas claim block are the main Torrecillas vein system, testing both the down-dip and strike continuations of the principal vein and parallel satellite veins, the extensive Adi, Adi Norte, Cinco de Noviembre and Torrechino vein fields and the Retorno fault. At Tumi, the Tumi and Tumi Sur breccias, which could be linked, and the San Francisco vein will be drilled. All targets will be tested below the base of oxidation, initially at depths of 50-100 metres. It is envisaged that approximately 65 holes will be drilled in the initial evaluation phase, divided roughly equally between the 9 principal target areas. In addition, surface sampling and trenching will be conducted to assess other poorly exposed veins, in part covered by extensive shallow scree deposits.
In April 2007 Mundo Minerals exercised the option to acquire the Torrecillas Gold Project and the focus will be on developing along the existing mineralised veins, undertaking a full feasibility and subsequent project implementation. A key issue to be defined is the location of the future plant, which is heavily dependent on locating a suitable source of process water. The nearest identified water source to Torrecillas is the Chaparral river, approximately 14 km from the Torrecillas mine. An alternative option could be a location close to the town of Chala , where abundant groundwater and grid power are available. This may be the preferred option in the case of a low tonnage very high grade operation.
Milestones and Future Programme
November 2006: Initial project evaluation commences
March 2007: Initial project evaluation completed
April 2007: Decision to acquire 100% of Torrecillas Project
June 2007: Appointment of country manager for Peru
Quarter 3 2007: Commencement of next stage of project development
2008/09: Project Assessment and feasibility
Late 2009: Commitment to production
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Tocantins, Brazil
Geology and Mineralization
Mundo Minerals has negotiated a 24-month joint venture earn-in agreement with Rio Gameleira Prospeccao E Geologia Ltda with regard to the latter's extensive tenement holdings in the state of Tocantins, central Brazil. The properties are located 200km south of the state capital, Palmas, readily accessible from the bitumen highway which links Palmas to Brasilia via a network of all-weather roads. The tenements comprise 35 exploration licenses, totaling approximately 162,600ha, and 6 applications for exploration permits, covering 23,500ha. These concessions cover a substantial portion of the Natividade and Conceição-Almas-Dianopolis greenstone belt terrains, comprising a series of arcuate late-Achaean or Palaeoproterozoic volcano-sedimentary belts separated by Achaean basement gneisses.
The region has a history of relatively small-scale gold production dating back to the 18 th century, but has been subjected to little systematic exploration. Subsequent to its recognition as a granite-greenstone terrain in the late-1970´s, the area was held by the Goiás state mining authority Metago until 1988, when the state of Tocantins was created. CVRD established a heap-leach operation at Paiol, near Almas in the early 1990´s, extracting approximately 300,000 ounces of gold from the oxide zone. Significant garimpeiro operations have been conducted over the past 15 years at Chapada, in the small Natividade greenstone belt, and at Principe , within granitoids south-east of Natividade. Both properties are estimated to have produced around 300,000 ounces of gold at grades exceeding 20 g/t (M. Prado, pers. comm.).
Regional exploration was conducted by Anglo American and Iamgold in the 1990´s, and more recently by Rio Gameleira. A high quality data base, including geological and regolith mapping, aerial geophysics (magnetics, radiometrics and local EM) and extensive termite nest geochemistry has been built up, but drilling has been limited largely to the Chapada property. Drilling below the 60-130 metre-deep garimpeiro underground workings at Chapada failed to replicate the high grades being extracted by the garimpieros, although the mineralized structures were intersected in all holes. The southern extension of this zone remains poorly tested. Termite geochemistry has defined a number of discrete targets, from 300 to 3000 metres in strike extent, principally in the ´Y' area south of Dianopolis, where no previous drilling has been carried out. This region is riddled with active garimpieros and historic 18 th and 19 th century workings. Mineralization is generally associated with mesothermal quartz veins and extensive carbonate-sericite-chlorite alteration.
Mundo Minerals´ Strategy
The vast Tocantins property contains a number of drill-ready targets and extensive under-explored areas which require additional target generative work. Mundo Minerals´ strategy is to initially drill test the most prospective targets, particularly those in the ´Y´ area, with the objective of defining one or more viable deposits containing a combined mineable resource in excess of 600,000 ounces. The "Y" area comprises a series of garimpeiro and historic Bandeirantes (private expeditions by the Portuguese which explored the interior of Brazil during the 17 th and 18 th centuries) workings located along the eastern margin of the Conceicao-Almas greenstone belt to the south of the town of Dianopolis . The "y: structure is so named because of its shape in plan view, formed at the junction between two narrow greenstone belts, one trending northwest and the other trending northeast. This is further explained in the Snowden report in section 4 of this Prospectus.
It is Mundo Minerals´ expectation that the region will yield a number of medium to high grade deposits in the 200,000 to 700,000 ounce range, which could feed a central plant. Previous regional exploration has been conducted by major mining companies targeting only multi-million ounce deposits. A 7500 metre percussion and diamond drilling programme is planned to test the four key anomalies in the ´Y´ area, Altamira, Buzina, Lavrinha and Santa Maria , plus the extensive granite-hosted Sucupira anomaly further south, and Chapada south. Drilling will be conducted to test the mineralized structures both above and below the base of oxidation. In addition it is planned to conduct limited scout RAB drilling to test extensive areas of laterite cover present throughout the region. These totally unexplored areas which are unresponsive to the rudimentary techniques employed by garimpieros and to routine geochemistry, offer substantial blue-sky potential to the region.
Milestones and Future Programme
November 2006- February 2007: Data compilation and target assessment
Quarter One 2007: Establishment of dedicated exploration team
Quarter One 2007: Enhanced target generation and systematic exploration commenced
2007-2009: Ongoing Exploration and resource definition
2012+ : Establishment of sustainable production base in region
Note: This asset has potential to yield a number of medium sized gold resources. It is a large region with numerous targets and requires a focused and systematic approach to exploration and a dedicated strategy to ensure exploration undertaken has the best opportunity to maximize the value achievable from this asset.
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