The Summit Mine achieved commercial production in 2012 and plans to ramp up production and to target 28,000 - 30,000 of gold and gold equivalent ounces per annum for the next five years as the main high grade ore body (8 g/t average gold equivalent head grade) is accessed in 2014. Potential also exists to increase production rates with processing improvements and further developments and exploration.
Santa Fe determined to temporarily suspend mining activities in November 2013 following disappointing financial performance in the September 2013 quarter. Sales were adversely affected by various equipment issues related to undercapitalization of the Summit mine, which caused a decrease in production output. The Company is attempting to finalize negotiations with a strategic party who shares Santa Fe’s objective to adequately capitalize operations and bring Summit into full production. As such, the suspension of mining activities is anticipated to be temporary.
SUMMIT MINE LONG SECTION
Santa Fe Gold acquired the Summit gold-silver project in May 2006. The project includes the underground Summit Mine and related property consisting of 3.5km2 (857 acres) of patented and unpatented mining claims in southwestern New Mexico;
The ore produced from the Summit Mine is processed at the 100% Santa Fe owned and operated Banner Mill, located approximately 57 miles south of the Summit Mine near the town of Lordsburg, New Mexico. The mill can be readily expanded to handle 225,000 tonnes per annum (250,000 tons per annum), and includes mineral processing equipment consisting of a crushing and screening plant, a ball mill and a flotation plant, and related property consisting of approximately 6.1 km2 (1,500 acres) of wholly owned and leased patented and unpatented mining claims.
The Banner Mill produces a high value gold-silver concentrate that averages around 10 ounces per tonne gold and 500 ounces per tonne silver. In 2013 Santa Fe marketed this concentrate under sales contracts to German and South Korean smelters. Santa Fe also produces siliceous flux material, involving crushing and screening of Summit ore, and then direct shipping of the resulting beneficiated product to two Arizona copper smelters for use as smelter converter flux. Sales of siliceous flux material are in addition to sales of concentrate produced at the Banner Mill.
The Summit silver-gold mine is located in a rugged and isolated setting in Grant County, southwestern New Mexico, near the Arizona state line. The property lies within the Steeple Rock Mining District, which has recorded notable historical production of gold, silver, base metals and fluorspar from several mines, currently inoperative, including Carlisle, East Camp and Norman King.
The property is accessible by paved and gravel road approximately 24 Kilometers (15 miles) northeast from Arizona State Highway 75 N and the town of Duncan, Arizona. Electric power is not available on or near the property and is generated on-site in connection with the mining operation. Water for limited usage is available on and near the property.
The terrain of the property is rugged, with steep canyons and ridges. Elevations range from1,370 m to 1,890 m (4,500 ft to 6,200 ft) above sea level. The Summit siliceous mineralized structure forms a prominent north-westerly trending ridge.
The Banner Mill is situated 92 kilometers (57 miles) drive to the south of the Summit Mine near the town of Lordsburg, Hidalgo County, New Mexico. Lordsburg is connected to Duncan, Arizona via US Highway 70. The Banner Mill is accessible from Lordsburg by a 4-mile paved road. Utilities on site include water and electric power. The Lordsburg area is well supported by transportation services including trucking and rail services, and by a wide range of fabrication, construction and other support services. The labor force required for the plant operation is sourced locally.
Santa Fe’s holdings at the Summit gold-silver property in Grant County, New Mexico consist of 10 patented federal mining claims totaling approximately 0.5km2 (117 acres) and 62 unpatented federal mining claims totaling approximately 3km2 (740 acres). Santa Fe’s holdings at and adjacent to the Banner Mill in Hidalgo County, New Mexico consist of 86 wholly-owned patented federal mining claims, 5 wholly-owned unpatented mining claims, 17 leased patented mining claims and 6 leased unpatented mining claims, aggregating approximately 6 km2 (1,500 acres). All wholly-owned claims for the Summit Mine and Banner Mill are held in the name of Lordsburg Mining Company, a wholly owned subsidiary of Santa Fe Gold Corp. The unpatented mining claims are located on public land and held pursuant to the General Mining Law of 1872.
Santa Fe is required to pay annual property taxes on its patented mining claims in Grant and Hidalgo Counties. It also is required to pay annual assessment fees to the Bureau of Land Management in order to maintain its unpatented claims in good standing.
The Summit property is subject to underlying net smelter return royalties capped at US$4,000,000 and to a net-proceeds interest on sales of un-beneficiated mineralized rock with an end price of US$2,400,000.
The Summit gold-silver property lies within the Steeple Rock Mining District, which is one of the historic mining districts in the southwest United States. The former mines produced gold, silver and base metals from underground mining of epithermal vein systems. Prospecting activity dates back to before 1860. The first recorded production was from the Carlisle property, which operated from 1880-1897. A number of other mines including the Norman King and Billali also opened up during the 1880’s but ceased operation by the turn of the century. Following this early production, the district was largely dormant until the 1930’s-mid 1940’s when several mines operated. Subsequently sporadic small-scale operations continued until the 1990’s on various deposits including the Summit, Center, Mount Royal and Carlisle deposits.
The US Bureau of Mines estimated that between 1880 and 1986 the Steeple Rock district produced at least 148,000 ounces of gold, 3.3 million ounces of silver, 1.2 million pounds of copper, and 5 million pounds of lead and 4 million pounds of zinc. In addition, there was unrecorded precious and base metal production as part of silica flux shipments. Some 6,500 tons of fluorspar also were produced.
In the late 1970’s, Summit Minerals Inc. is reported to have shipped about 27,200 t (30,000 st) of mineralized material from the Summit property to ASARCO’s El Paso smelter as direct shipping silica flux grading 3.50 grams per tonne (0.102 ounces per ton) gold and 170 grams per tonne (4.95 ounces per ton) silver.
Exploration work estimated to have cost in excess of US$8.0 million was carried out on the Summit gold-silver property from 1984-1992. This work included drilling totaling 31,900 meters (104,700 feet) on the Summit vein and adjacent structures, of which 23,800 meters (78,000 feet) was directed to the Summit structure. In 1984-85, Inspiration Mines Inc. reportedly spent about US$1.5 million conducting underground development, shallow core drilling, and sampling and mapping. In 1988-89, Novagold Resources Inc. reportedly expended approximately US$2.0 million in surface and airborne geophysical surveys, underground mapping and sampling, and core drilling. Novagold’s drilling identified a significant block of mineralized material in the Summit vein. From 1989-1992, Biron Bay Resources Ltd., in joint venture with Novagold, conducted extensive exploration, drilled 88 core holes, and reportedly spent over US$5.0 million extending and improving the level of confidence in the mineralized material at the Summit vein and in defining exploration potential in adjacent and outlying vein structures.
In April 2007, Santa Fe received results of an engineering study that concluded the Summit deposit would form the basis of an economically viable underground mining operation. Santa Fe began construction activities during 2008, including development of the Summit Mine and construction of the Banner Mill. Ore generated in the process of developing the mine was stockpiled for later processing. Construction of the Banner Mill was completed in mid-2009 and construction of the tailings disposal impoundment was completed in early 2010.
Santa Fe commenced processing operations at the Banner mill in April 2010. Trial sales of ore as silica flux material commenced in the second quarter of 2010 and trial sales of precious metals flotation concentrate began in the third quarter of 2010. The Summit mine achieved commercial production in Q2 of calendar 2012. However operations were suspended due to undercapitalization in November 2013.
The Steeple Rock Mining District contains numerous structurally controlled epithermal vein systems. The veins are controlled by conjugate fault systems that cut a thick pile of Tertiary volcanic rocks of intermediate composition. The deposits are localized along structurally controlled, hydrothermally altered zones cutting the volcanic host rocks. The dominant structures trend north-westerly and dip steeply. Secondary veins trend easterly and north-north-westerly. The veins can be traced for distances of up to several miles along strike and have widths that range up to 30 meters (100 feet) or more.
The epithermal veins have formed as open-space filling by a mixture of quartz, carbonate minerals and wallrock fragments and show evidence of multiple episodes of brecciation and re-cementation. Gold occurs in pyrite, or as fine free grains or combined with silver in electrum. Silver is found as argentite or in sulfosalts. Base metal sulphides in small quantities, including chalcopyrite, sphalerite and galena are common in certain deposits but rare in others. Gangue minerals usually consist of quartz, pyrite, calcite, barite and fluorite. Alteration of the volcanic country rocks adjacent to the veins commonly consists of sericitization, argillization and silicification.
The principal vein structure on the Summit gold-silver property is the Summit structure, which can be traced for over 900 meters (3,000 feet) from southeast to northwest. The Billali structure forms a farther 600 metre (2,000 foot) continuation of the Summit structure in a northwesterly direction across an east-west fault. The Summit and Billali structures dip steeply to the northeast. These structures form segments of the East Camp Fault, which constitutes the main ore control in this part of the Steeple Rock district. The core drilling carried out from 1984-1992 tested both the Summit and Billali vein structures. Of the two, results from the Summit structure were the more promising with respect to vein continuity and economic potential.
The Summit mineralized vein occurs within a wide, structurally controlled zone of hydrothermally altered volcanic rocks. Silver and gold mineralization is epithermal in style and consists of silver sulfides and electrum or native gold along with lesser pyrite, sphalerite and chalcopyrite. Precious metals contents, which are relatively low at the surface, increase significantly with depth for several hundred feet, apparently a reflection of vertical mineral zoning within the deposit. Below 300-457m (1,000-1,500 feet), the precious metals contents appear to decrease although little deeper drilling has been carried out. The main block of mineralized material, which occurs along the footwall of the structure, is shown by extensive drilling to trend north-westerly 610 meters (2,000 feet) in strike length and to extend 300 meters (1,000 feet) down dip. The true width of mineralization across the footwall mineralized zone ranges from 1.8 meters (6 feet) to over 15 meters (50 feet) and averages 3-5 meters (10-15 feet) wide.