The budget for the project is about $132 million of which approximately $10 million is in contingency. The project coordinator reported that about $90 million has been spent or locked in by contracts securing delivery and alleviating potential price escalation. This covers most all critical items including heavy equipment and construction materials. The remaining balance is primarily working capital or other available supplies and materials. The company is working to complete the project in advance of heavy seasonal rains in July and August. They are scheduled to begin stripping the deposit and stockpiling ore in mid-March. The company anticipates being fully operational by the end of the summer with its first pour scheduled for September followed by a grand opening in October of 2007.
The photo below is an aerial view of the Dolores Project looking west. The mill site and heap leach pad construction at the lower left is substantially underway. Above the mill site in the foothills is the town of Dolores which is situated on the southern end of the proposed open pit. The pit will extend from the town of Dolores to the north (and to the right) covering the hillside in the middle of the photo. Initial mining will focus on oxide material from the north end of the property. The project’s camp now under construction is located outside the upper right hand side of the photo.
We flew to the project from the Chihuahua airport in a single engine aircraft and landed at a rugged airstrip near the permanent camp under construction. While the company is considering extending the runway it has not proved necessary over the course of development or construction. Operational access to the property will be by land.
An important part of the project was the completion of a 92 km road which required upgrading an existing road and completion of about 15 km of new road. The road follows rugged terrain providing access for supplies and material within hours from Chihuahua. As seen in the center-left of the photo a semi-truck is on route to the project. Power will be provided by diesel generators. A power line is expected to coincide with additional mill construction in about three years.
Construction of the project’s camp is progressing. Several buildings are complete and functional including the mine office. Other community buildings and camp residences are substantially complete and materials for construction are clearly visible on site. The construction sites appear well organized and attended. The company reports that most construction materials are available locally except for concrete which is trucked in. They source and crush their own aggregate on site. When complete the camp will support 200 to 300 mine employees.
There are approximately 250 contract employees currently employed and 100 more to be added in the next few weeks in preparing the mine for operation. Contractors provide housing for their employees. The contractor camp is within the proposed pit area and will be removed upon completion of construction.
The photographs of the heap leach pad area and upper mill site (above) and terraces for mill operation (below) are seen as from the west above the town of Dolores looking to the east and southeast. The project design including the mill operation to the south and below the pit appears to be logical and well orchestrated for construction and operation.
The Earthworks are substantially complete. The Merrill-Crowe pad, primary crusher pad, and tertiary crusher pad sites have been prepared. Concrete contractors were found pouring concrete and preparing forms.
The company reports that 75% of the Merrill Crowe Plant and Smelter components have been purchased and have been delivered to the laydown site including building, filter presses, pumps and furnace. Also six 1.8 MW generators have been purchased and shipped to Mexico City in addition to seven smaller generators now available on site. The company reported in their recent press announcement (dated January 18, 2007) a litany of heavy equipment necessary for operation in route or staged for delivery to the site. We noted no unanswered concerns raised by analysts at the project briefing. The project manager did list concerns regarding adequate personnel but it appears to us that this is always an appropriate area of focus following successful scheduling and delivery of equipment.
The project has more than adequate availability to water. They have two operating wells each with capacity of about 200 g/m and are currently drilling a third well. The company has also purchased annual water rights of 2.2 million cubic meters per year.
The town of Dolores seen in the photo below consists of numerous small single room homes located on the hillside to the west of the mill operation and at the south end of the proposed pit. The village lacks access to power which is generated by burning fuel or solar power. Homes lack running water and indoor plumbing.
Management reports good success in working with the citizens of Dolores in securing ownership of surface rights for operation. The company is providing compensation of $8,000 per family which is approximately five years of wages in the neighboring city of Madera. Many inhabitants are expected to use the funds to relocate. The company will provide new housing (seen below) in a preferred location near Dolores for those who wish to remain, many of whom are anticipated to seek employment at the mine when under operation. In addition, the company is building a new school and medical clinic.
We were genuinely impressed with the potential for improved living conditions and employment for the people of Dolores. From a personal perspective the availability of a potable water supply with indoor plumbing and electricity may not be underestimated.
We were also quite surprised as were a number of analysts on the trip who had not recently visited nearby Chihuahua. The city of over a million inhabitants is showing signs of growth in the local economy as beneficiaries of NAFTA. In addition to MacDonalds, a number of staple regional chains have come to Chihuahua including Home Depot and Walmart. Of particular note of the “Americanization” of Chihuahua was the presence of an Applebee’s, your Neighborhood Grill & Bar, next to our hotel. It is apparent that Chihuahua (south of Phoenix and west of the southern tip of Texas) and the Dolores project are not too distant from US markets.
Disclosure: The author is long MFN, all photos in this article were taken by the author.