Projects
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El Dorado, El Salvador
The following information is provided for Pacific Rim's El Dorado gold project. Click on a link to go directly to that section:Synopsis
- Located in El Salvador, approximately 65 km east of capital San Salvador
- Advance-stage exploration project with resources of 1.4 million gold-equivalent ounces and abundant blue sky potential for additional resource discovery
- Arbitration claim under CAFTA in process while environmental and mining permits being sought
Ownership
The El Dorado project is 100% owned by Pacific Rim through its wholly-owned subsidiaries Pac Rim Cayman LLC ("Pac Rim"), a Nevada corporation, and its Salvadoran enterprises Pacific Rim El Salvador, S.A. de C.V. ("PRES"), and Dorado Exploraciones, S.A. de C.V., inclusive ("DOREX").
All references to "Pacific Rim" or "the Company" encompass the Canadian corporation, Pacific Rim Mining Corp, and its U.S. and Salvadoran subsidiaries Pac Rim, PRES and DOREX inclusive.
Overview
The El Dorado gold project is Pacific Rim's flagship advanced-stage exploration property.
The El Dorado project comprises a 144 square kilometre area covered by three exploration licences with nominal expiry dates of September 28, 2013 (one licence) and September 29, 2013 (two licences) and a 12.75 square kilometre area pending conversion to an exploitation concession, which underlying exploration licence has a nominal expiry date of January 1, 2005. In accordance with Salvadoran Law, PRES presented a request for the conversion of this 12.75 square kilometre portion of the El Dorado exploration licences to an exploitation concession in December 2004. The conversion process is currently pending ministerial acceptance of PRES's Environmental Impact Study and issuance of the environmental permits. Salvadoran administrative laws and procedures give PRES exclusive rights to the exploitation concession area while the permitting process is underway.
El Dorado is subject to a royalty of 3% of net smelter returns in favour of a previous property owner. Pacific Rim has the right to buy back the royalty for $1 million for the first 1.5% and $3 million for the second 1.5%, provided that at least one half of the royalty is acquired within six months of the commencement of commercial production.
Current Status
In July 2008 Pacific Rim made the difficult decision to suspend all drilling activity at the El Dorado project. This decision was made in order to preserve capital and substantially reduce Pacific Rim's El Salvador investment activity while the El Dorado permitting issue remains unresolved (see below). Since July 2008 the Company has restricted its activities at El Dorado to low-cost surface exploration work, minor community and environmental initiatives, security, and non-recurring expenditures related to reductions in activity, and has not conduced any significant exploration work to further advance the El Dorado project. The Company does not intend to resume significant exploration work at the El Dorado project until such time as the environmental permit is received and the exploitation concession is granted, but does intend in the meantime to make expenditures required to keep the El Dorado property in good standing.
Permitting
El Salvador's current mining law, which was enacted in 1996 and last amended in 2001, governs the provisions for granting of exploration licences and exploitation concessions. By granting an exploitation concession, the El Salvadoran Ministry of Economy's Department of Hydrocarbons and Mines confers upon the applicant the right to produce and sell valuable commodities recovered from the natural resources within the area of the concession. To be granted an exploitation concession, which is a necessary step to commencing mining extraction activities, an environmental permit based on an Environmental Impact Study ("EIS") must first be approved by the Salvadoran Ministry of Environment and Natural Resources ("MARN"). The applicant must also satisfy a number of other conditions. Once granted, the concession requires that development activities commence within 12 months of the date of the final concession agreement and that the mine and associated facilities be built and operated in accordance with the conditions of the environmental permit.
In September 2004, PRES submitted an EIS to MARN for a 750 tonne per day operation based on producing precious metals from the Minita deposit alone. In September 2005, the finalized EIS, which incorporated initial comments from MARN, was resubmitted to MARN. MARN then conveyed its technical approval of the EIS, and instructed PRES to submit the EIS for public comment, which was carried out in October 2005. In March 2006, PRES received from MARN a list of issues raised during the public comment period and was asked to amend the EIS to address these and a number of other issues. In October 2006, the amended EIS, which included the requested clarification on a number of items, was resubmitted to MARN. Finally, in December 2006, PRES submitted a proposal for a water treatment plan in response to additional comments by MARN.
Despite being in receipt of the El Dorado EIS, in its final form, since October 2006, MARN has failed to take action on approval of the EIS. This in turn is preventing a resolution to PRES's exploitation concession application.
Arbitration Action
In April 2009 Pac Rim filed international arbitration proceedings against the Government of El Salvador (the "Government") under the Dominican Republic-Central America Free Trade Agreement ("CAFTA") and the Investment Law of El Salvador in its own name and on behalf of PRES and DOREX (collectively the "Enterprises"). A Notice of Intent to commence international arbitration proceedings had previously been filed by Pac Rim in December 2008. Pac Rim has retained the Washington, DC-based international law firm of Crowell & Moring, LLP to represent it in the arbitration and is seeking award of damages in the hundreds of millions of dollars from the Government for its multiple breaches of international and Salvadoran law.
Since 2002, PRES and later DOREX have been exploring, discovering, and delineating gold deposits in El Salvador. As a result of these efforts and at the initial invitation and encouragement of the Government, Pac Rim and the Enterprises have developed precious metal assets and acquired rights that are significantly higher in value than the to-date investment that has already been made in El Salvador. Pac Rim and the Enterprises have operated in full compliance with Salvadoran law, including the country's environmental, mining and foreign investment laws, and have met or exceeded all applicable standards while conducting business in El Salvador. Ample evidence, however, demonstrates that the Government has failed to fulfill its obligations vis-à-vis Pac Rim and the Enterprises.
Pac Rim's arbitration claims are based on the Government's breaches of international and Salvadoran law, arising out of the Government's improper failure to finalize the permitting process as it is required to do and to respect Pac Rim's and the Enterprises' legal rights to develop mining activities in El Salvador. This conduct by the Government has resulted in a significant loss to Pac Rim, the Enterprises, and the local communities, and has unnecessarily delayed normal development of these valuable deposits.
Pacific Rim's mandate to its shareholders is to build a gold mining company that explores and develops gold deposits in an environmentally responsible manner. In meeting its responsibilities, a mine design for PRES's El Dorado gold project located in the department of Cabañas, was submitted to the Government in its final form more than two and a half years ago. Despite strong local support and the inclusion of carefully engineered and reliable environmental protections for the proposed El Dorado Mine, the Government has not met its responsibility to issue PRES the permits necessary to advance the project to the final step of full production.
With its filing on April 30, 2009, Pac Rim formally commenced arbitration against the Government of El Salvador under CAFTA and the Investment Law of El Salvador. The arbitration will be administered under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States and the Rules of Procedure for Arbitration Proceedings of the International Centre for Settlement of Investment Disputes ("ICSID"). ICSID is an affiliate of the World Bank and is headquartered in Washington, D.C.
Project Location, Access and Services
El Dorado project area
The El Dorado project is located in the Central American country of El Salvador, 65 km east of the capital city San Salvador. The project totals approximately 144 square kilometers in four separate claims.
The project is accessible by a paved highway that crosses the property. The travel time from the project site to downtown San Salvador is approximately 1 hour. The area has a large rural population and Sensuntepeque is a moderate sized town. Unskilled labor and persons with general business and technical skills are readily available. El Salvador does not have an indigenous mining industry, so personnel with exploration and mining skills need to be trained or come from elsewhere.
The usual public utilities are available in Sensuntepeque. The communication infrastructure, including telephone and internet, is serviceable. The existing buildings on the project site are connected to the national electrical grid, but the power supply as currently configured is not considered reliable enough to service a mine.
The terrain in the El Dorado area is one of moderate relief surrounded by higher hills to the north, east, and west. Elevations range between 200 m and 800 m above sea level. A tropical climate prevails, with a pronounced wet season from May to October and a dry season the remainder of the year. The project area contains shallow topsoils and volcanic subsoils that are cultivated for seasonal crops. Five perennial streams or rivers traverse the El Dorado project area. Water levels vary with the seasons with good flows being maintained during the wet season.
Project History
Corn crop growing on tailings from 1950's El Dorado operation.
The colonial Spanish discovered gold in the district in the early 1500's, and there was sporadic, largely unrecorded small-scale production until the late 1800's. The New York and El Salvador Mining Company (a subsidiary of Rosario Mining) operated an underground mine on the El Dorado property from 1948 to 1953, producing approximately 270,000 tonnes of ore yielding about 72,500 troy ounces (2,250 kilograms) of gold at an average grade of 9.7 g/t from workings centered on the Minita vein system (one of a large number of gold-bearing veins and vein systems identified on the El Dorado project). Gold was recovered in a simple cyanide mill and recoveries in excess of 90% were achieved.
From 1993 through 2002, the project was explored by Mirage Resources and its affiliates and later, Dayton Mining Corporation (a predecessor company of Pacific Rim Mining Corp.), who drilled a total of 202, mainly shallow drill holes on selected veins throughout the project area. This work led to the definition of a small, high-grade resource on the Minita vein. Pacific Rim Mining acquired the El Dorado project in 2002 through its merger with Dayton Mining. Approximately US $77 million has been invested in the El Dorado project since 1993 by Pacific Rim and its predecessor companies.
Geology and Mineralization
Intersection in drill core of the Minita vein, El Dorado project
The El Dorado project hosts a very large (roughly 12 km by 4 km) adularia-sericite (or "low-sulfidation") epithermal gold system, in which gold and silver are hosted in steeply-dipping veins that occupy a series of fault structures. The known gold and silver bearing veins of the El Dorado district occur over an area exceeding 50 square kilometers. This is comparatively a very large epithermal system. Vein mineralization is dominated by quartz and calcite and the veins themselves range in width between 1 m and 15 m in surface exposures.
In epithermal systems, precious metals are carried by fluids, and precipitate out of solution under certain pressure and temperature conditions known as the 'boiling zone' or 'productive interval'. Typical of similar epithermal systems worldwide, including the Midas and Sleeper Mines in Nevada, the El Penon Mine in Chile and the Hishikari Mine in Japan, high grade gold mineralization occurs in distinct zones within the productive interval, which at El Dorado generally occurs at an elevation of between 0 and 350 meters above sea level, which based on local topography, is anywhere from surface to approximately 500 meters below surface.
To date, 670 holes (totaling 224,786 meters) have been drilled at El Dorado. A list of drill results from the El Dorado project generated by Pacific Rim (from hole no. 203 onward) is available here. Gold and silver concentrations have been discovered in most of the El Dorado veins drill tested to date and 3 distinct deposits (Minita, South Minita and Balsamo) have been discovered as a result.
Resources
Drilling core at the El Dorado project
Since acquiring the El Dorado project in 2002, Pacific Rim has conducted several resource estimates as the project has evolved and new deposits were discovered. At its acquisition by Pacific Rim, the El Dorado project was known to host one primary deposit (Minita) and two smaller deposits (Coyotera and Nueva Esperanza). With continued drill testing between 2002 and the present, the Company discovered the South Minita, Nance Dulce and Balsamo deposits.
The most recent resource estimate for the El Dorado project was announced on January 17, 2008. This resource estimate tabulated 1.4 million gold equivalent ounces in the Measured and Indicated resource categories combined and a further 0.3 million gold equivalent ounces in the Inferred category. Full details of the January 2008 El Dorado resource estimate, by deposit and resource category, are presented below and a full technical report supporting these results, as per the requirements of National Instrument 43-101, is available by clicking on the Technical Reports page or on SEDAR at www.sedar.com.
| El Dorado Project Resources (as of January 17, 2008) | ||||||||
| Deposit | Resource Category | Tonnes | Gold Grade (g Au/t) |
Gold Ounces | Silver Grade (g Ag/t) |
Silver Ounces | Gold Equivalent Grade (g AuEq/t) |
Gold Equivalent Ounces |
| Balsamo | Indicated | 566,700 | 9.86 | 179,600 | 112.95 | 2,058,000 | 11.47 | 209,000 |
| Inferred | 281,200 | 7.71 | 69,700 | 76.29 | 690,000 | 8.80 | 79,600 | |
| Minita | Measured | 614,100 | 12.23 | 241,500 | 80.59 | 1,591,200 | 13.39 | 264,300 |
| Indicated | 1,175,100 | 9.65 | 364,400 | 58.16 | 2,197,300 | 10.47 | 395,700 | |
| Total M&I | 1,789,200 | 10.53 | 605,900 | 65.86 | 3,788,500 | 11.47 | 660,000 | |
| Inferred | 78,400 | 10.39 | 26,200 | 67.44 | 170,000 | 11.39 | 28,700 | |
| South Minita | Indicated | 1,070,900 | 9.25 | 318,400 | 63.99 | 2,203,000 | 10.16 | 349,900 |
| Inferred | 302,800 | 7.20 | 70,100 | 48.23 | 470,000 | 7.89 | 76,800 | |
| Nance Dulce | Inferred | 128,900 | 19.56 | 81,100 | 121.98 | 506,000 | 21.30 | 88,300 |
| Coyotera | Measured | 166,000 | 7.86 | 42,100 | 57.79 | 309,000 | 8.69 | 46,500 |
| Indicated | 501,000 | 7.15 | 115,200 | 58.68 | 945,000 | 7.99 | 128,700 | |
| Total M&I | 667,000 | 7.34 | 157,300 | 58.48 | 1,254,000 | 8.17 | 175,200 | |
| Inferred | 19,000 | 5.83 | 3,600 | 72.12 | 44,000 | 6.86 | 4,200 | |
| Nueva Esperanza | Indicated | 183,000 | 5.77 | 33,900 | 30.47 | 179,000 | 6.20 | 36,400 |
| Inferred | 29,000 | 4.67 | 4,300 | 35.49 | 33,000 | 5.17 | 4,800 | |
| TOTAL MEASURED ALL DEPOSITS | 780,100 | 11.31 | 283,600 | 75.76 | 1,900,200 | 12.39 | 310,800 | |
| TOTAL INDICATED ALL DEPOSITS | 3,496,700 | 9.00 | 1,011,500 | 67.45 | 7,582,300 | 9.96 | 1,119,700 | |
| TOTAL MEASURED & INDICATED ALL DEPOSITS | 4,276,800 | 9.42 | 1,295,100 | 68.96 | 9,482,500 | 10.40 | 1,430,500 | |
| TOTAL INFERRED ALL DEPOSITS | 839,300 | 9.45 | 255,000 | 70.89 | 1,913,000 | 10.47 | 282,400 | |
Notes:
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The mineral resource estimates presented above have been calculated in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities, which differ from standards of the U.S. Securities and Exchange Commission ("SEC"). The resource estimates contained in this discussion would not be permitted in reports of U.S. Companies filed with the SEC.The resources were estimated by interpreting drill intercepts in cross section, coding samples, capping assays, compositing to vein thicknesses, and estimating grades and thicknesses of each of the veins into three dimensional grade thickness models. Each of the three veins comprising the Minita resource, ten veins comprising the South Minita resource, and five veins comprising the Balsamo resource were estimated separately. The 4.0 g/t cut-off grade (wherein gold equivalents are based on a silver to gold ratio of 70:1 and greater than a grade-times-thickness of 4 (g AuEq/t x meters)) is predicated on estimated operating costs of $49.68 per tonne, estimated gold recovery of 90% and a gold price of $400 per ounce. These parameters stem from the Company's 2005 El Dorado prefeasibility study, the results of which are based on various input estimates related to costs and commodity prices that were current at the time of its publication.
Economic Studies
A feasibility study for the El Dorado project to develop a mine plan and economic analysis of the Minita, South Minita and Balsamo deposits was initiated in 2006 and put on hiatus between March 2007 and July 2008 while the basis of the study was expanded due to the discovery of the Balsamo deposit. In February 2009 the Company decided to defer completion of the feasibility study again due to: unpredictability in capital costs as changes in commodity prices due to recent economic volatility become reflected in the prices for capital items; the Company's focus on saving cash until these inputs have stabilized and the study can accurately reflect changed economic realities; and, uncertainty in the timing of the El Dorado permitting process. Pacific Rim intends to complete the feasibility study when the El Dorado permit issue is clarified and capital costs stabilize.
2005 El Dorado pre-feasibility study
Pacific Rim has completed one economic study of the El Dorado project (a pre-feasibility study issued in January 2005, based on mining the Minita deposit alone), the results of which are presented below. However, readers are cautioned that significant changes have occurred in commodity values and capital costs associated with of a number of the key inputs used in this study since its publication in January 2005 and are urged to evaluate these results accordingly.
The 2005 El Dorado pre-feasibility study outlined a proposed underground mining operation at the El Dorado project based on the Minita deposit only (neither the South Minita nor Balsamo deposits having been discovered at the time), including an underground mine plan, metallurgy and processing, tailings impoundment, environmental matters, and capital and operating costs. It furthermore converted a portion of the Minita resources to reserves and outlined the economics of these reserves according to the mine plan and input commodity and capital costs valid at the time. The 2005 El Dorado pre-feasibility study does not include other resources defined at the time.
The El Dorado pre-feasibility study defined reserves (that portion of resources that have proven economic viability) at the Minita deposit alone. It is expected that these reserves will increase when an updated economic analysis of the El Dorado project is completed, as a portion of the South Minita and Balsamo resources are expected to be added to the reserve category.
| El Dorado Project Proven & Probable Reserves (as of January 21, 2005) | |||||||
| Tonnes | Grade | Ounces | Grade | Ounces | Grade | Ounces | |
| (g Au/t) | (Au) | (g Ag/t) | (Ag) | (g AuEq/t) | (AuEq) | ||
| Proven | 711,949 | 10.09 | 230,908 | 68.30 | 1,563,425 | 11.06 | 253,242 |
| Probable | 892,934 | 9.05 | 259,850 | 54.85 | 1,574,591 | 9.84 | 344 |
| Total | 1,604,883 | 9.51 | 490,758 | 60.82 | 3,138,016 | 10.38 | 535,586 |
Notes:
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The definition of reserves at the Minita deposit in the 2005 El Dorado pre-feasibility study was based on the stope outlines and dimensions for resources at or above a diluted 5 g/t equivalent gold cut-off grade, where dilution was calculated on a block by block basis to account for the variability associated with variations in the vein thickness. The Minita reserve estimate eliminated those resources contained within the unrecoverable portions of the crown and sill pillars and incorporates planned dilution, unplanned dilution, backfill dilution and production losses. The total proven and probable reserve for the Minita deposit is 1,604,883 tonnes at an average grade of 9.51 g/t gold and 60.82 g/t silver for a total of 490,758 ounces of gold and 3,138,016 ounces of silver, or 535,586 gold equivalent ounces.
The following table presents mining parameters and an economic analysis of the proposed El Dorado operation as described in the 2005 pre-feasibility study, again, based on mining the Minita deposit alone. All monetary values in US dollars:
| PRODUCTION SUMMARY | |
| Mining and Processing Rate | 750 tonnes per day |
| Run of Mine Ore to Mill | 1,630,889 tonnes at 9.5 g/t gold and 60.3 g/t silver |
| Metal to Mill | 497,101 ounces gold, 3.2 million ounces silver |
| Recovery | 92% gold, 88.3% silver |
| Average Production | 80,497 gold equivalent ounces |
| Peak Production | 98,576 gold equivalent ounces |
| Mine Life (production) | 6.2 years |
| Gross Revenue (at $400 gold and $6.00 silver) | $199.3 million |
| Net Smelter Return | $197.8 million |
| Royalties (2% government, 1.5% underlying owner) | $6.3 million |
| Gross Income from Mining | $191.5 million |
| OPERATING COSTS | |
| Mining | $44.3 million |
| Processing | $22.8 million |
| Administrative | $13.9 million |
| Total | $81.0 million |
| Average Cash Cost per gold equivalent ounce | $163 |
| CAPITAL COSTS | |
| Equipment | $30.5 million |
| Capitalized costs | $36.4 million |
| Total | $66.9 million |
| Pre-production portion | $47.9 million |
| On-going portion | $19.0 million |
| FINANCIAL ANALYSIS | |
| Payback (from start of milling) | 3.5 years |
| Net Present Value @ 0% | $43.6 million |
| Internal Rate of Return | 18.1% |
A National Instrument 43-101 technical report supporting the 2005 pre-feasibility study is available on the Technical Reports page or on SEDAR at SEDAR www.sedar.com.
Readers are urged to visit the National Instrument 43-101 Information page for important details regarding both the 2008 El Dorado resource estimate and the 2005 El Dorado pre-feasibility study.
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