Mining, Developing & Exploring
La Colorada, Pan American Silver's purest silver mine, consists of six contiguous blocks of exploration permits and exploitation claims totaling approximately 2,864 hectares. It is located approximately midway between the cities of Zacatecas and Durango in the Chalchihuites district in the State of Zacatecas and 99 kilometers south of the city of Durango. The mine is accessed primarily from the city of Durango by a continuously maintained 120 kilometre all-weather, paved, two-lane highway (Highway 45) and a 23 kilometre public, all weather, gravel road. The mine is also accessible from the city of Zacatecas by similar types of roads.
Production in the Chalchihuites district began during pre-colonial times when natives produced silver and malachite. During the 16th century Spanish colonization, the village of Chalchihuites was founded and intermittent exploitation of the mineral deposits in the area commenced. By the 19th century, the Spanish mines were operating continuously and important silver production was recorded. The War of Independence curtailed production from this and many other silver producing areas between 1910 and 1920.
In 1929, the Dorado family operated mines at two locations on the La Colorada property and since then, mining operations have been conducted on the property by several mining companies. Pan American Silver acquired La Colorada in 1998.
La Colorada lies within a geologic belt known as the "Faja de Plata" (silver belt) that extends for approximately 800 kilometres along the Sierra Madre Occidental Mountains. It is defined by major silver deposits that make Mexico one of the two largest silver producing countries in the world. La Colorada contains mineralization styles of both the Fresnillo mine (the world's second largest primary silver mine) and the San Martin/Sabinas mine complex, also a significant silver and base metal producer.
La Colorada represents a typical epithermal silver/gold deposit, with a transition in the lower reaches of the deposit to a more base metal predominant system. There are indications of what might be skarn style mineralization in the deepest holes on the property.
There are four dominant styles of mineralization at La Colorada: (i) breccia pipes; (ii) vein-hosted mineralization; (iii) replacement mantos within limestone; and (iv) deeper seated transitional mineralization (transition zone). Mineralization in the breccia pipes generally has lower silver values and elevated base metal values. Mineralization is associated with intense silicification and occurs as disseminated galena and sphalerite with minor chalcopyrite and bornite. The current Mineral Resource and Mineral Reserve contains vein and manto hosted mineralization.
La Colorada is a polymetalic underground mine. Oxide and sulphide ore is mined by mechanized cut and fill from the vein systems in the Candelaria, Amolillo, and Recompensa mines, using waste rock as back fill. Split sets are used for ground support with the addition of mesh, cemented split sets, and shotcrete depending on ground support requirements in specific areas.
The mine's mechanized equipment includes 3.75 cubic metre, 2 cubic metre and 1.5 cubic metre capacity scoop trams, low profile 9 to 12 tonne capacity trucks for haulage in ramps, jack-legs and 1 boom electric hydraulic jumbos for drilling. Dump trucks are used for the haulage of ore from the shaft bin in the case of the Candelaria mine and from dumps near the mine portals in the case of the Amolillo and Recompensa mines to the crusher dump pocket. In June 2004, La Colorada stopped producing sulphides when the sulphide resource was exhausted above the dewatered level of the mine.
A dewatering study was conducted and new higher capacity pumping stations were built, which allowed the production of sulphides to recommence in July, 2006. The dewatering system is expanded each year as mining activities reach deeper portions of the veins.
Sulphide and oxide ore are processed separately in the processing plant within the Candelaria Mine. Ore that is favourable to flotation produces a lead/silver and zinc concentrates. Other ore (mostly highly oxidized but includes transitional and sulphide ore) is processed through a separate cyanide leach plant (the oxide plant) and produces doré bars.
During 2010, the oxide mill processed an average of 453 tpd whereas the sulphide mill processed an average of 494 tpd. This trend, where the proportion of sulphides in the total production increases, is expected to continue as the ore body in general contains less oxidized mineralization at depth.
.The La Colorada mine plan is based on providing 540 tpd of ore to the oxide circuit (maximum capacity 650 tpd) that was commissioned in 2004 and a further 450 tonnes per day ("tpd") of ore to the sulphide circuit. All of the sulphide production is scheduled to be mined from the Candelaria Mine at a rate of 400 tpd.
*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.
The bulk of Pan American Silver's exploration of the La Colorada property has been conducted through diamond drilling (surface and underground, and underground drifting on veins and mineralized zones. Annually, mine operation completes over 3,500 meters of drifting along structures. Drifting allows detailed mapping and structural interpretation of the ore zones, as well as provides key grade information.
Prior to Pan American Silver's involvement at La Colorada, previous operators had drilled 131 holes for a total of 8,665 metres. Pan American only found and assayed core from four of these holes, which were included in the resource calculation.
In 2009, Pan American discovered an extension of the NC2 vein, the mine's main source of sulphide ore, remains open at depth and to the east. The Company also discovered the NC3 vein and several high-grade mantos. In 2010, a total of 23,621 meters were drilled, targeting various areas throughout the property. Positive exploration results increased Proven and Probable Reserves of over 12.1 million ounces of silver. Since 2009, the mine has added over 28 million ounces of Proven and Probable silver Reserves.
Exploration potential at La Colorada remains high and the recent success has extended the life of mine considerably. Pan American currently anticipates that the mine will operate beyond 2019.
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.