Drilling starts at Cerro Quilish

Peru's giant Yanacocha gold mine has started drilling at the controversial Cerro Quilish deposit following receipt of an exploration permit, a spokesperson for majority owner US miner Newmont (NYSE: NEM) told BNamericas. "The permit was received recently and drilling started two weeks ago," said IR official Doug Hock from Newmont's headquarters in Denver. Yanacocha, the region's largest gold mine and world's biggest heap leach operation, has received a type C exploration permit for Cerro Quilish which allows more than 20 drill pads and more than 10ha of ground disturbance or, in other words, unlimited. The managing director of Newmont South America, Carlos Santa Cruz, told BNamericas in May that about 200 exploration drillholes were planned at Cerro Quilish to a depth of not more than 200m. The aim is to firm up proven and probable reserves of 3.7Moz and start work on an environmental impact study (EIS). Cerro Quilish's development has attracted a lot of resistance from members of the local community who fear that mining the deposit, east of Yanacocha's current operational base, could pollute the water supplies of regional capital Cajamarca about 30km south. In May 2003, Peru's constitutional tribunal ruled that Yanacocha could continue to explore and develop Cerro Quilish provided an EIS is carried out and approved, overruling a decision by the local Cajamarca municipal government which declared the area off-limits to mining activity. Cerro Quilish represents more than 10% of Yanacocha's total current reserves of 32.6Moz. If given the green light, it is scheduled to go into production in 2008. YANACOCHA OUTLOOK Production at Yanaococha slipped in the second quarter of 2004 by 8% to 317,700oz year-on-year but is expected to bounce back in the second half, Hock said. Lower output was primarily related to current construction of pads but also to lower grades and increased stripping at La Quinua and Yanacocha pits as these two operations get larger. Nevertheless, Newmont forecasts production of 1.54Moz equity gold, or almost 3Moz in total, at US$135/oz from Yanacocha this year, higher than 2003 when the mine produced a total 2.86Moz, Hock confirmed. Open-pit Yanacocha is located in northern Peru's Cajamarca department. Newmont holds 51.35% of Yanacocha, Lima-based precious metals miner Buenaventura (NYSE: BVN) 43.65% and the World Bank's IFC the remaining 5%.