Mining, Developing & Exploring
The Morococha underground mine is located in the district of Morococha, in the department of Junin, Peru, on the east side of the continental divide just below the Ticlio summit, approximately 38 kilometres west of the city of La Oroya and 137 kilometres east of Lima. Pan American's Huaron mine lies approximately 50 kilometres southeast of Morococha.
Access to the mine is via Peru's paved central highway, by travelling approximately 137 kilometres east of Peru's capital city of Lima, then 1.7 kilometres south via a public, all-weather gravel road. Rail service from Lima is also available via a national rail line that passes adjacent to the operations.
The Morococha mine is currently owned and operated by Argentum, a Peruvian private company in which Pan American, through its subsidiary Pan American Peru, has a 92.01% voting interest (the remaining interest is held by Alejandro Gubbins and Compañía Minera Casapalca S.A.).
Mining around the Morococha mine began before the 1500s, and production has been continuous since the late 1800s. Between 1915 and 1924 much of the district was operated by the Cerro de Pasco Mining Company. Between 1929 and 1934, Cerro de Pasco excavated the 11.5 kilometre Kingsmill Tunnel, successfully dewatering all of the Morococha district mine workings above the 4,020 metre elevation. The Kingsmill Tunnel is still in use and is a vital feature of the Morococha mining district.
In the 1940s, the Gubbins family began operating mines in the area through a series of Companies, which were consolidated into SMC in the 1990s. Cerro de Pasco also continued to operate in other areas around the Morococha district until 1974, when its mines were nationalized by the Peruvian government. Production from the Cerro de Pasco mines in the district continued under the Peruvian national mining company, Centromin, until 2003, when SMC acquired these operations from Centromin. In 2004, Pan American purchased 92.014% of the voting shares of Argentum.
The structures that account for most of the vein mineralization in the Morococha district trend predominantly northeast to east-northeast. Mineralization includes epi-mesothermal silver-lead-copper-zinc veins and bedded silver-base metal replacements or mantos (which together account for the majority of the past and present economic mineralization at the Morococha property), intrusive-sediment contact skarns, and the quartz porphyry-hosted Toromocho disseminated copper system.
The size and geometry of individual ore shoots in the veins can range up to 400 metres in length and more than 800 metres down plunge. Undiluted district vein width averages are on the order of 1.2 metres. Mantos can have a significant strike extent where the veins are closely spaced, and can range from less than one metre in width up to 12 metres.
Ore and gangue mineralogy is similar in veins and mantos but it varies considerably across the property. Sphalerite, galena, and chalcopyrite are the most important primary minerals for zinc, lead and copper and silver is generally present as freibergite (silver-tetrahedrite) or argentiferous galena. Gangue generally consists of quartz, calcite, barite and rhodochrosite, the latter having a strong correlation with higher silver grades.
As with most large Peruvian polymetallic deposits, Morococha exhibits a distinct lateral and vertical metal zonation. A central copper zone centered on the Toromocho copper deposit grades outward through a lead-zinc-minor silver zone and then into an outermost zone that is richer in silver but still containing significant lead-zinc contents. There is also a distinct trend for higher silver grades at higher elevations on the west side of the Morococha mine.
Individual silver assays of over 2,200 g/t are not uncommon at elevations above 4,800 metres in certain areas, and greater than 300 g/t silver ore grades also are common in the outer silver-lead-zinc zone above the 4,400 metre elevation in certain areas. In veins that have been mined over significant vertical extents (such as those in Manuelita), silver grades tend to decrease as zinc grades increase with depth. However, several of the major veins currently being mined on the 4,020 metre Kingsmill Tunnel level still contain silver grades in the 200 g/t to 250 g/t range. The hydrothermal alteration present at Morococha is typical for central Peruvian zoned polymetallic deposits.
The Morococha operation utilizes conventional selective flotation to produce copper, lead, and zinc concentrates, which are then shipped to third party smelters for final refining.
Underground mining operations at Morococha consist primarily of typical overhand cut and fill, shrinkage and mechanized room and pillar methods using classified tailings or waste rock for backfill where needed. Holes are drilled in the mining face using jacklegs or jumbo drills (in Codiciada) which are loaded with explosives and blasted twice per day. Slushers are used in the cut and fill and shrink stopes and scoop trams are used in the room and pillar stopes and some of the wider cut and fill stopes to transport the broken rock to chutes that report to levels with track haulage. Locomotives transport the ore from the chutes to one of three shafts for hoisting. Highway dump trucks then haul the ore from shaft coarse ore bins to mill stock piles.
The Yauli (also referred to as the Manuelita), Maria and Central production shafts provide access down to the Kingsmill drainage tunnel level at an elevation of 4,020 metres. The three shafts have a combined capacity to support production schedules in excess of 700,000 tonnes per year. In addition, some ore is also transported from certain sectors of the mine to stockpiles using LHD's (scoop trams).
Pan American continues to develop and explore the Morococha mine in accordance with its long term mine plan. During 2008, the Sierra Nevada ramp was completed to the Manto Italia area and a new rail haulage tunnel was started on the 400 level to develop from the Codiciada / Alapampa area in the north to access the high silver grade veins in the Yacumina zone. The development will also allow the exploration of a large area to the west of the Toromocho property. During 2010, the development of the 400 level haulage drift continued towards Yacumina and was connected with Sierra Nevada - Manto Italia via a new ramp.
Exploration potential is considered to be excellent throughout the district due to the significant vertical extent (over 800 meters) of economic veins and the prevalence of multiple carbonate units favourable for replacement mineralization. Shortly after acquiring the Morococha operation in 2004, Pan American Silver started aggressive exploration programs based on underground and surface diamond drilling. From late 2004 to September 2007, 743 underground diamond drill holes and 110 surface diamond drill holes were completed for a total of 146,402 metres of diamond drilling. During 2008, 32,111 metres were drilled, 16,744 were drilled in 2009 and 36,171 meters in 2010.
* 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.
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.