Current Situation: Mine Flooding at Cerro Bayo
On the morning of June 9, 2017, a flooding event occurred at the Mandalay Resources Corporation’s Cerro Bayo mine in Chile Chico, Chile in which the Delia 2 ramp section of the Delia NW mine was completely inundated. Two Mandalay employees, Jorge Sanchez and Enrique Ojeda were working in this section of the mine at the time of the incident. Mine rescue efforts were immediately initiated and remain ongoing, although they are impeded by the extent of the flooding.
Surface and underground operations at Cerro Bayo were suspended in a safe and orderly manner immediately after the incident occurred. Search operations are proceeding around the clock with approximately 100 to 120 people on day shift and 50 to 60 on night shift. The Company had begun constructing a containment berm across a bay of Laguna Verde in an attempt to isolate the incident zone from the larger lake and manage possible further water inflows, however as of late June 14, construction of the berm has been suspended for ground control and safety reasons.
Search efforts continue to be focused on drilling to intersect the deepest level of the mine, approximately 200 metres below surface (where the miners were working), to test the extent to which inundation of that level has occurred. The Company reports that it has drilled two separate holes that have intercepted the level in which the two miners were working. Drilling results indicated that the level was full of mud and sediment material. Two additional holes were drilled near the closest refuge chamber and found both to contain mud and sediments.
Mandalay Resources is profoundly saddened by this unexpected event and is doing everything possible to locate Jorge Sanchez and Enrique Ojeda. The Company will keep all its stakeholders informed as the situation unfolds at the mine. Mandalay’s thoughts and prayers are with the miners, their extended families, and our employees during this difficult time.
Mandalay reports that on June 16, 2017 the Government of Chile has decreed a “State of Constitutional Exception in Chile Chico”. The government declaration (click here) states after a meeting with the Minister of Mining, Minister of Public Works, Minister of Defense and the Secretary of Armed Forces, and instruction of the President of the Republic, the Chilean Government has declared Constitutional State of Exception to the community of Chile Chico. Mandalay supports and respects the State of Constitutional Exception, as it contributes to the same objective of locating Jorge and Enrique.
Mandalay regretfully reports on June 27 that efforts to search for and locate the two Mandalay employees working in the flooded Delia NW mine at the Company’s Cerro Bayo operation have been unsuccessful. The Chilean Office of Exception State has ruled out the possibility of finding the two miners, Jorge Sanchez and Enrique Ojeda, alive.
Mandalay continues to work jointly with the national and regional authorities, and a team of experts, in the response to the flooding of the Delia NW mine. Activities include: continuation of drilling at different levels of the mine to determine the current state, pumping water to lower the water level in Laguna Verde, maintaining the diversion of La Tina creek (which is a tributary of Laguna Verde), and carrying out technical evaluations of the subsidence area.
On June 30, 2017, Mandalay announced that Compañia Minera Cerro Bayo, a subsidiary of the Company, has commenced giving notice of force majeure to the primary customers, suppliers and contractors of its Cerro Bayo mine. This notice suspends Cerro Bayo’s obligations under contracts with these parties due to the flooding of the Delia NW mine. Mandalay is also initiating consultations with its unions about the potential impacts on employees during this period of suspended production.
Mandalay has initiated an independent technical investigation into the flooding of the Delia NW mine, as well as risk assessments for restarting operations of the Coyita, Delia SE, Marcela and Raul mines. The Company is reviewing several alternatives for the future of mining at Cerro Bayo and is consulting with all stakeholders in this review process, including employees, unions, and government officials.
The Company expects to be in a position to provide a more detailed update on its plans for Cerro Bayo and the impact of the suspension of operations on the Company’s 2017 production guidance in conjunction with its disclosure of second quarter 2017 financial results, which is currently expected to occur after market close on August 10, 2017.
On July 12, 2017, Sernageomin stated that from a technical-scientific point of view, all the geoscientific possibilities within their reach have been exhausted with respect to efforts to locate the bodies of Jorge Sanchez and Enrique Ojeda, or equipment. View statement here.
Please view the Company’s press releases and Spanish-language media statements below:
June 30, 2017
June 27, 2017
Nota de prensa June 27, 2017
June 20, 2017 Press Release
Nota de prensa June 19, 2017
June 14, 2017 Press Release
Nota de prensa June 14, 2017
June 9, 2017 Press Release
Nota de prensa June 12, 2017
Click on the links below to view the following:
Mandalay Resources Corp. purchased 100% of CMCB, which was on care and maintenance at the time, in August 2010. Mining was restarted in September 2010, processing was recommenced in January 2011, and the first gold-silver concentrate was shipped in February 2011. The ramp-up of Cerro Bayo ore production to 1,200 tonnes per day was achieved on time and completed in the fourth quarter of 2012, and again ramped-up to 1,400 tonnes per day in 2014.
Location, Property, and Permitting:
The Cerro Bayo district is located in southern Chile, just inside the border with Argentina approximately 130 kilometres (“km”) south of Coyhaique, the capital of Region XI. This district is part of an emerging precious metals province containing the Cerro Bayo and El Toqui mines in Chile and several mines and exploration projects extending eastward into Argentina.
The CMBC property, comprising 29,495 hectares (“ha”) of exploitation concessions and 45 ha of exploration concessions, lies east of the Andes mountain range at elevations ranging from 300 to 1,000 metres (“m”). The mine and plant, located 12 km west of the town of Chile Chico, are serviced by an all-weather road and operate year-round. The operations are fully permitted and CMCB either owns or has access agreements for surface rights where it operates.
Freeport Chilean Exploration Company (‘‘FCEC’’) identified epithermal gold and silver mineralization in the Cerro Bayo district in 1984 and explored the district until 1989, when it sold all its Chilean interests to Coeur d’Alene Mines Corporation (“Coeur”).
Coeur continued exploration, commissioned the plant in 1995, and mined from 1995 to 2000 and again from 2002 to 2008; initially from open pit operations in the Laguna Verde area and then from underground operations in the Cerro Bayo area Coeur continued exploration after the 2008 shutdown, discovering the large Delia vein in the Laguna Verde area late that year. Delia, together with the nearby, partially developed Dagny and Fabiola veins, contained most of the reserves upon which the 2010 Mandalay transaction and restart plan was based.
Ore Deposit Geology:
At Cerro Bayo, gold and silver mineralization is contained in stockwork and sheeted veins as well as silicified breccias hosted within a thick sequence of Jurassic ash-flow tuffs. Over 90 major veins have been identified to date within the property. These veins, which vary from 0.5 to 5 m in thickness, in-fill steeply dipping, pre-existing faults and fractures. These epithermal veins formed through multiple mineralizing events that produced open-space filling, banding, and brecciation typical of low-sulfidation style vein deposits. Economic mineralization within the veins typically occurs as sub-horizontal ore-shoots extending up to a kilometre or more along strike and 200 m vertically. Ore minerals comprise a complex sulfide suite, dominately pyrite, electrum and various silver sulfosalts, in a gangue of quartz with minor adularia and barite that exhibit assemblages suggesting at least three stages of precious metals deposition. Base metal sulfides are common, though not abundant, in the veins. Mandalay has noted that outcrops of the Dagny, Fabiola, Yasna, Delia NW and Delia SE veins consist of narrow, chalcedonic quartz fracture fillings just a few tens of metres above ore whereas other veins, such as Bianca, have no surface expression at all. This has led Mandalay geologists to re-evaluate a large number of similar exposures throughout the property, which are largely untested, since these structures provide abundant opportunities to discover new ore-bearing veins by drilling.
Exploration and Mineral Resources and Reserves:
Mandalay began exploration at Cerro Bayo in October 2010 with two drills, growing the program to eight drills by year-end 2011. The focus of the Company’s drilling has been expanding resources in the Laguna Verde area veins in order to increase reserves and extend the mine life as much as possible and concurrently test new target areas. Combined drilling and underground sampling post-2010 have succeeded in discovering and converting significant resources to new reserves, which at the time, doubled mine life from the initial three years to almost six years.
During 2014, Mandalay drilled in the Coyita, Yasna, Fabiola, Irene, Kasia, Esperanza, Cristal and Cerro Amarillo veins. As well, mapping and closely spaced sampling along 4,954 m of development drives in the Dagny, Dalila, Fabiola, Yasna, and Delia NW veins, 3,354 m of which were in mineralization. New reserves were added by infill drilling along extensions of the Coyita and Yasna veins under Laguna Verde, where initial high-grade intercepts were obtained in late 2013. Neither of these veins are completely drilled out and the Company expects to continue extending closely spaced drilling in these veins.
During 2015, detailed mapping was performed in the Brillantes zone. As a result, 20 new veins were defined on surface along a length of 11,500 m, and a new interpretation of the stratigraphy was completed. A magnetometer survey was performed under Laguna Verde to guide the 2016 drilling program, discover new targets, and define intrusive extensions. Also, hydrothermal pulse mapping was conducted for Coyita and Fabiola veins identifying the paragenesis in each mineralizing events and its relationship with gold and silver concentrations. Also during 2015, Mandalay completed 83 drill holes for 26,702 m, of which 83% was infill drilling, 8% was extensional definition drilling, and 2% was exploration drilling.
During 2016, Mandalay drilled 35,400 m of diamond core. In addition, the Company completed 5,400 m of underground on-vein development with face sampling, mostly in the Delia NW, Delia SE, Trinidad, and Coyita veins.
In 2016, the Company performed infill drilling in and around the Laguna Verde area, as well as target testing drilling in Laguna Verde, the Brilliantes sector and the Cerro Bayo sector.
The drilling and resource/reserve estimation process are summarized in the independent technical report completed by Roscoe Postle Associates and filed March 31, 2017 (click here to see the NI 43-101 Technical Report).
Click here for latest Cerro Bayo exploration news.
Mining is currently focused on several veins in the Laguna Verde area (see image below).
Processing and Sales:
Ore is trucked on the surface from the mine portals to the plant where it is stockpiled and blended into the crusher. The processing circuit includes: a single sag mill; secondary ball mill; rougher, scavenger, and cleaner flotation cells; optional tower mill for concentrate regrind; and filter. Concentrate is trucked to the port at Chacabuco, Chile, from which it is shipped to smelters in Asia and North America. An alternative port at Lirguen, Chile has been developed in case of disruption at Chacabuco. (Click here for quarterly production and sales statistics).
Scott Manske, Chief Cordilleran Geologist of Mandalay Resources, and an Oregon registered Professional Geologist is a “Qualified Person” as defined by NI 43-101. He has reviewed and approved the technical and scientific information on Challacollo contained on this web page.