Mining, Developing & Exploring
Manantial Espejo is Pan American’s first mine in Argentina. The property consists of two open pit operations and two underground operations, which produce silver-gold doré bars in a 2,000 tpd processing facility. The Company’s involvement in the property began in 2002, when Manantial Espejo was an advanced-exploration project and Pan American acquired a 50% ownership of the project from Silver Standard Resources. Pan American subsequently purchased the remaining 50% interest in Manantial Espejo in 2006, thus becoming the sole owner of the property.
The Manantial Espejo mine is located in the province of Santa Cruz, in the mineral-rich Patagonia region of southern Argentina. The silver-gold property consists of 17 mineral concessions covering over 25,000 hectares, in an area extending 36 by 19 kilometres. Nearby mining operations include AngloGold’s Cerro Vanguardia gold mine and Coeur d’Alene’s Martha silver mine.
The closest major city is Puerto San Julian, located 160 kilometres east, on the Atlantic coast, and the nearest population is the town of Gobernador Gregores, which is located approximately 50 kilometres east of the mine. The property’s main access is via the provincial route 25, a wide gravel secondary road that connects the project with Puerto San Julian, and by a 8-kilometre gravel road off Route 25.
The property is in a remote and sparsely populated area, which increases the challenge of finding experienced personnel. Pan American has been able to attract and retain employees based on competitive benefits and rates, community involvement and by developing housing facilities for employees and contractors.
Preliminary examination of the Manantial Espejo property was first carried out in the 1970s by the Argentinean government. Ownership then passed through several individuals and corporations that included St. Joe Minerals, Lac Minerals, and Barrick Gold through its subsidiary Barrick Exploraciones Argentina S.A.
In 1996, Triton Mining Corporation signed an option agreement with Barrick to acquire an 80% interest in the project and assigned its interest to its Argentinean Subsidiary Minera Triton Argentina. In 1998, MTA was designated operator of the project and Barrick and MTA incorporated Compañía Minera Alto Valle, with MTA holding an 80% and Barrick holding a 20% of the shares of Alto Valle. Later that year, Blackhawk Mining purchased all of the issued shares of Triton.
Also in 1998, Silver Standard Resources (SSR) entered into an option agreement with Triton to acquire a 50% interest in MTA. Three years later, SSR acquired Barrick’s interest in Alto Valle and sold half of that interest to Blackhawk. In 2002, SSR acquired Triton’s remaining 50% interest as well as Blackhawk’s interest in MTA.
Pan American first became involved in the project in 2002, when SSR agreed to sell Pan American 50% of the shares of MTA and half of its shares in Alto Valle. As part of the purchase, Pan American agreed to pay the first $3 million of joint-venture expenditures following the issuance of a production notice. In March 2006, Pan American Silver entered into a purchase agreement with SSR to acquire the latter’s 50% interest in MTA and Alto Valle, effectively consolidating Pan American’s 100% interest in the property.
In March 2006, Pan American completed the Manantial Technical Report and the Company’s board of directors approved a $130 million project to construct and initiate operations of the Manantial Espejo mine. Mine development activities were initiated in April 2006, after detailed design and site preparation had been completed. Ausenco International Pty Ltd. provided engineering, procurement and construction management services during the construction phase, which extended until year-end 2008.
The commissioning of the Manantial Espejo plant began with dry commissioning activities in August 2008. The mills, leach circuits, counter-current-decantation ("CCD"), Merrill Crowe and refinery were commissioned and commenced operations in mid-December 2008. Final completion and commissioning of the primary crusher, recycle pebble crusher and concentrate circuits were underway by mid-January 2009.
Manantial Espejo’s first doré bars were poured in mid-December 2008 and after a near-perfect ramp up, the mine commenced commercial production in January 2009. The Company celebrated the official inauguration of the Manantial Espejo gold and silver mine on March 16, 2009 with the presence of the Governor of Santa Cruz and several provincial and federal authorities. The mine quickly achieved design capacities and produced 3.8 million ounces of silver and 72,000 ounces of gold during 2009. In 2010, Manantial Espejo produced approximately 4.0 million ounces of silver and 63,000 ounces of gold.
Silver and base metal mineralization in the Manantial Espejo district is spatially and genetically related to a large bimodal igneous province, the Deseado Massif, which is dominated by acid volcanics and their resedimented products of the Chon Aike and La Matilde Formations (Upper Jurassic), and andesites of the Bajo Pobre Formation (Middle Jurassic). The older volcanics form the basement unit and are locally mineralized. The Chon Aike and La Matilde Formations host mineralization, which occurs at the faulted contacts of volcanic facies as well as at contacts of volcanic stages.
The ore deposits at the Manantial Espejo project are predominantly veins having short strike slip and larger down dip displacements. Styles of mineralization include massive quartz veins, vein breccias, sheeted and stockwork veining and minor dissemination. Quartz is the main infill mineral, displaying distinctive textures indicating the overprinting of hydrothermal events which occurred in the area.
Mineralization is interpreted as occurring at the intersection of west-northwest trending fault zones and arcuate structures that could be related to a possible volcanic center. Gold occurs mainly as electrum in pyrite, while the silver occurs in a number of forms including argentiferous galena and silver sulphosalts. Sulfides account for up to 3 to 5% of the rock mass as veinlets and disseminations.
Mineralization at Manantial Espejo is hosted in four main veins: the Maria Vein, Karina/Union Vein, Melissa Vein and Concepcion Vein. The majority of the mineralization outlined to date is in the Maria Vein, which is a thick multiphase silica vein exposed on surface for more than 1.0 kilometre and has been intersected at a depth of up to 275 metres. This vein averages 7.8 metres in true width ranging from 0.63 metres to 20 metres. The vein is open to the east and at depth.
Silver occurs as electrum along with minor amounts of argentite, acanthite, sulfosalts, and proustite-pyrargyrite. Gold occurs as electrum inclusions contained in pyrite. Very minor visible gold in the 200-micron size has been observed in drill core along goethite-coated fractures.
The Karina/Union Vein is exposed on surface for a distance of 850 metres and has been drilled to a depth of 150 metres. The host rocks, alteration, and mineralogy of the vein are similar to the Maria Vein. Several interconnected high grade silver-gold epithermal veins produce drill intersections in excess of 20 metre true widths.
The Melissa Vein has a faint surface expression that rarely outcrops. The trend of the 1.5 to 2.5 metre-wide high-grade silver-gold epithermal Melissa system has an 80 degree strike with a steep northerly dip. The mineralization and host geology is very similar to that encountered at the Maria Vein. Structurally, Melissa is thought to be the extensional component to the Maria shear system. The Melissa Vein has been defined by drill holes along a 300 metre strike length and 200 metres down dip.
The Concepción Vein is a single quartz vein. Mineralization occurs over a strike length of 600 metres and is open at depth and at both ends. The host rocks, mineralogy and alteration are similar to the other veins on the property.
The Maria Vein has been exposed by underground development and by open pit mining, the Karina/Union Vein by open pit mining and the Melissa Vein by underground development. To date, there has not been enough ore mining to conduct a meaningful reconciliation; however, the results to date support the geological interpretation and assumptions used for the Mineral Reserve estimation.
Ore from the Manantial Espejo mine is treated in a 2,000 tonnes-per-day plant that utilizes conventional cyanide leaching to produce silver and gold doré bars, which are refined at arm’s length refineries prior to the sale of refined silver and gold bullion to bankers and traders. The Company has multi-year refining contracts with refineries in Europe and the USA to treat the mine’s doré.
Manantial Espejo’s ore is extracted through a combination of surface mining (open pit) and underground mining methods. The surface mining method is conventional open pit mining using 54-tonne off-road trucks and a mix of front-end rubber-tired loaders and track loading equipment.
A number of different underground mining methods are utilized to maximize the profitability and recovery of the mine’s Mineral Reserves. Underground mining operations consist of either long-hole, cut and fill, or shrinkage methods to accommodate the geometry and accessibility of the different mineralized zones. Underground mining equipment includes 20-tonne capacity, low profile haul trucks, 1.5 to 4.6 cubic metre capacity scoop trams, development face and long hole drill jumbos, and service equipment including personnel transport, scissor lift and shotcrete machine.
In some areas, the open pits will also be used for underground access via in-pit portals. Open pits are mined using 5-metre high, horizontal benches in ore and where possible 10-metre high benches in waste. Ore and waste is transported out of the pits by truck haulage via ramps built into the walls of the pits. Truck haulage will continue from the open pit ramp exit points on surface roads leading to waste dumps or the primary crusher ore feed stockpile. Open pits have been constructed for portions of the Maria, Karina-Union, and Concepción deposits. In 2010, a total of 6.6 million tonnes of non-mineralized material and 590,000 tonnes of ore were mined and removed from the open pits, and a total of 138,000 tonnes were mined from the underground mines.
A total of four portals and associated declines will be required to access all of the underground Mineral Reserves. Two portals (Maria West and Maria East) are required for the Maria main structure. One portal each are required for the Concepción area, and for the Melissa Vein. The Maria West and Melissa underground mines are now in full production. The underground mining at Manantial Espejo has been designed, developed and is being managed using modern underground mining techniques and for the most part mechanised equipment.
In 2011, Pan American plans to implement an accelerated surface mining program, which would increase the open mining rate to 1,000,000 tpm starting in July. The program will provide access to higher grade ore sooner and provide higher-grade ore to the mill, while stockpiling significant medium-grade ore to process during the later years of the mine’s life. In addition, accelerated open pit mining will provide greater flexibility to control mill feed grades in response to metal price fluctuations, reduce the amount of ore extracted by higher cost underground mining and reduce open pit unit operating costs.
Reconnaissance exploration of Manantial Espejo was first done by the Argentine government during the 1970s. In 1996, Barrick completed 9,653 metres of diamond drilling on the Maria Vein and in 1997, an additional 6,795 metres of diamond drilling were completed and Kilborn Engineering was retained to prepare a pre-feasibility study for the construction of an open pit mine and cyanidation mill processing facility.
Drilling on the Manantial Espejo mine has been accomplished using diamond core, reverse circulation and wagon-mounted percussion drilling. At May 2011, drilling on the entire property totals approximately 145,000 metres. The typical core sampling procedure is to half-saw the HQ core after descriptive geological and geotechnical logging. Half of the core is submitted for analysis, while the remaining half is stored on site. Diamond drill holes are located and oriented by geologists in the field to obtain drill spacing in the 25 to 50 metre range on vein, with closer spacing in the higher grade zones.
In 2005, MTA completed 20,832 metres (187 holes) of additional diamond core and RC drilling to infill selected areas of known resources, to investigate the potential for economic mineralization outside of the current resource area, to continue the water exploration program, and to improve the geotechnical database for the feasibility tailings design.
In 2006, a further 1,525 metres of diamond drilling were completed with 800 metres of that total for exploration and condemnation drilling and the remainder for geotechnical holes. RC drilling was conducted for water supply wells and for the mine dewatering both as part of the construction program.
Due to the construction and development activities at the site, there was no additional exploration drilling conducted in 2007 or 2008 but exploration was reactivated in 2009 with a total of 11,625 metres of diamond drilling. Exploration activities have been expanded in 2010 including 24,384 metres of surface and underground diamond drilling. Manantial Espejo drilling data are used for metals exploration, resource modeling, geotechnical studies, metallurgical studies, and hydrological exploration/studies.
In 2011, Pan American initiated an extensive green and brown fields exploration program on all of the property. The Company expects to invest approximately $3.7 million on exploration activities and to complete over 10,000 meters of diamond drilling on brown field targets. In addition, the Company expects to invest approximately $2.5 million on green field exploration activities on targets within the property but further away from current production zones and in other nearby prospective areas.
1 Prices used to calculate Mineral Reserves for 2012 were Ag $25.00 per ounce, Au $1,350 per ounce, Pb $1,850 per tonne, Zn $1,750 per tonne and Cu $8,500
1 Mineral Reserves and Resources are as defined by Canadian Institute of Mining Guidelines.
2 Mineral Resources do not have demonstrated economic viability.
3 This table illustrates Pan American Silver Corp’s share of Mneral Reserves and Resources Propertiies in which Pan American Silver has less than 100% interes are noted next to the property name.
* Net of by-product credits
For purposes of estimating 2012′s cash costs, the Company assumed the following price levels for its by-product
production: Zn $ 1,900/tonne; Pb $2,000/tonne; Cu $7,300/tonne; Au $1,600/oz.