Ocampo
Gammon Gold has a 100% interest in the Ocampo Gold-Silver Project located in Chihuahua, Mexico, and has been actively exploring the Ocampo Mining District since 1999.
The Ocampo Project is located at approximately 28”12.5’ latitude and 108”25’ longitude. It is approximately 235-kilometres southwest of the state capital Chihuahua, within the Ocampo Municipio, in the State of Chihuahua, Mexico. The project area ranges from 1,600-metres to 2,200-metres in elevation.
Geological Setting
The Ocampo Project is located in the Sierra Madre Occidental (“SMO”). SMO is an extensive physiographic province that is composed largely of volcanic rocks that have been intruded by plutonic rocks, which overlie a Precambrian through Jurassic basement. The basement rocks are rarely exposed and poorly known. This province extends from the center of Mexico to the border of the United States.
Volcanic stratigraphy in the SMO has been broken into two main groups consisting of the Lower Volcanic Group (“LVG”) and the Upper Volcanic Group (“UVG”). LVG rocks dominate the project area and consist of massive andesitic flows and tuffs. Localized beds of volcanoclastic sediments are also present. Toward the top of this group, the volcanics become more felsic. This group of rocks is host to the majority of the silver and gold deposits exploited thus far in the SMO. UVG rocks are comprised of felsic ignimbrites, tuffs, flows and volcanoclastics. Overall, there is a northwest trending structural fabric best evidenced by the alignment of the numerous mining districts found in the SMO.
In general, Ocampo can be broken into two major structural areas, the Northeast area (“Northeast Area”) and the Plaza de Gallos Refugio trend (“PGR Trend”) that extends from Alta Gracia in the southeast to beyond La Estrella in the west.
Mineralization
The Ocampo Mine consists of an open pit project area centered on the PGR Trend, and an underground project area located in the Northeast Area. The property is characterized by mountainous terrain that is shot through with very high-grade ore shoots, often of bonanza grade.
Mining Operations
The Ocampo Project consists of an underground mine which uses standard underground mining equipment and an open pit mine.
The Open Pit Mine
Open pit mining at Ocampo utilizes multiple benching in select ore areas. The mining operation currently consists of five open pits mined in sequence. The ore is crushed then stacked on the heap leach pad. Ore on the heap is leached with barren cyanide solution, and pregnant heap solution is pumped back to the mill for processing in the recovery plant, which uses the Merrill Crowe process from extracting the gold and silver from the leach solution.
The Underground Mine
The Corporation is utilizing a combination of long hole, cut and fill and shrinkage stoping mining methods at the Ocampo underground mine. Engineering and design at a feasibility study level was completed for a 550,000 tonne per year (1,500 tonnes per day) conventional Merrill Crowe precious metals recovery plant, including two stage crushing and screening, fine ore storage, rod and ball mill grinding, thickening, leaching and recovery systems, and tailings impoundment. Gold and silver concentrate recovered from the recovery plant are poured into dore bars. Bars are cooled, cleaned, and then moved to a storage vault pending sale and shipment to a third party refiner.
Ocampo 2008 Capital Project Update
During the first half of 2008, $30.2 million, or 67-76%, of Ocampo’s $40 to $45 million capital expansion program has been completed including the arrival of 6 pieces of primary production equipment for the underground operations. All major capital projects remain on schedule and on budget for 2008.
20 Megawatt Grid Power
In partnership with Agnico-Eagle on a 50-50% cost sharing basis, Gammon is contributing $7 million to the construction of a 25 km, 115 Kv power line to bring in full grid power for its Ocampo operations. Contracts have been awarded for power line and substation construction and negotiations for power line right-of-way are nearly completed. Gammon expects to be on-line by the end of the second half of 2009. When the project is completed, lower cost grid power will further reduce production costs by up to $24 per gold equivalent ounce.
Mill Upgrades
Milling of ore in Ocampo uses a dry-stack tailings disposal system utilizing two existing plate-filter lines. As part of a larger project to raise mill production by upwards of 65-78%, a third filter line is being added. The project is currently 50% complete with the filter frame already installed. Commissioning is expected by the fourth quarter of 2008. In order to support an increase in mill production requirements, Gammon is installing additional cyclones, pumps and an oxygen injection plant.
Heap Leach Pad Expansion
As of the end of June Gammon has completed a lined leach pad expansion on-time and on-budget which will allow for an additional 5 million tonnes of ore to be stacked and leached. A design for additional pad space is underway and construction is anticipated to commence in late 2008.
Ocampo Exploration
The Company has committed $7.5 - $8.5 million in exploration at Ocampo during 2008 and 2009 to be funded from operating cash flow. The primary focus of the exploration strategy at is a four stage design:
• 10,000 metres of drilling is planned for 2008 at the advanced exploration Santa Eduviges underground target, which is located beneath the open pits, and which has the potential to become a third long-term source of mill feed. The Company has targeted to complete the development of 300,000 tonnes of reserves during 2008.
• A 54,000 metre diamond drilling program in the underground mine to further delineate five new vein targets and to identify down dip extensions on seven veins.
• A significant increase to 14,000 metres in exploration development in the Ocampo underground mine, aimed at expanding the original 7 veins to the targeted 21 veins.
• Greenfield follow-up exploration on the 10,000 hectare land position, targeting several known anomalies
