Chapter 1: Introduction
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Chapter 1 – Introduction CHAPTER 1: INTRODUCTION 1.1 INTRODUCTION This research documents the Sepon Mineral District (SMD) gold and copper deposits that occur in the Sepon Basin, along the southern boundary of the NW-trending Truong Son fold belt in south-central Laos. The central section of the SMD is located at longitude 105o59’E and latitude 16o58’N and is 40 km north of the town of Sepon and 130 km east of the provincial centre of Savannakhet in Savannakhet Province (Fig. 1.1). Mining of and exploration for gold and copper resources in the SMD occurs in a 1250 km2 Mineral Exploration and Production Agreement area (MEPA) referred to as the Sepon Project that is 100% operated by Lane Xang Minerals Limited (LXML), a local subsidiary formerly owned by OZ Minerals Limited (Manini et al., 2001; Manini and Albert, 2003; Smith et al., 2005; Cannell and Smith, 2008; Fig. 1.1). The SMD was purchased from OZ Minerals Limited in June 2009 by the Metals and Mining Group (MMG) owned by China Minmetals Non-ferrous Co. Ltd, a division of the China Minmetals Corporation. The known SMD gold and copper deposits and prospects occur in an E-W trending corridor, approximately 40 km long by 10 km wide. At least three broad mineralisation styles are recognised in the SMD: sedimentary rock-hosted Au (SHGD); Cu-Au skarn, and quartz stockwork porphyry Cu-Mo (Loader 1999; Manini et al., 2001; Cromie et al., 2004a, b; Cromie et al., 2006a, b; Smith et al., 2005; Olberg et al., 2006; Cannell and Smith, 2008). Fig.1.1. Location of the Sepon Project area in south-central Laos (adapted from Smith et al., 2005) 1 Chapter 1 – Introduction 1.2 GEOGRAPHY AND ACCESS Laos is located in central Indochina and has a population of 6.2 million people in a landlocked country 236,800 km2 in area that shares borders with Thailand, Myanmar, China, Vietnam and Cambodia (Vilaihongs et al., 1997). Vientiane is the capital city of Laos and the main government administrative centre (Fig. 1.1). Daily international flights are available to Vientiane from Thailand, China and Vietnam. The Mekong River forms most of the eastern boarder of Laos and is a transportation route along the length of the country (Fig. 1.1). The Sepon district is at an elevation of 250 m above sea level in moderately undulating topography near the border of Vietnam (Fig. 1.1). The geographic setting of the SMD is shown in Fig. 1.2A-E. Some patches of primary rain forest remain in areas dominated by secondary forest mainly along ridges, and rice paddy fields occupy the valleys. Slash and burn agricultural methods are used in a district, mostly to support rice and cotton farming (Fig. 1.2A-E). The average annual rainfall in the Sepon District is 2200mm, associated with a monsoonal climate with three main seasons: a cool, dry period from October to February; a hot, humid period from March to June; and monsoonal rains from July to September (Smith et al., 2005). The LXML SMD mining operations and exploration base in the Sepon District are accessed either by a direct 90 minute company charter flight from Vientiane 6-times per week, or by road transport starting from the provincial town of Savannakhet requiring a 2-hour drive east along a sealed highway to the town of Sepon followed by a 1-hour drive north to site on an unsealed all-weather public access road (Fig. 1.1). Access to the Sepon district can be difficult during the monsoonal months of July to September, when roads are subject to flooding and charter flights are scheduled during the mornings to avoid afternoon thunderstorms (Smith et al., 2005; Ekins 2005). Accommodation during this study was provided at the permanent Padan campsite where LXML also have their exploration office and drill core farm (Fig. 1.2D). The historically infamous southern section of the Ho Chi Minh Trail travelled through the Sepon District and was used as a major North Vietnamese supply route into southern Vietnam during the Vietnam War, from 1964 to 1975. Consequently, heavy aerial bombardments by US forces during this period primarily targeted the flow of North Vietnamese forces and equipment into southern Vietnam, scarring the landscape along this supply route during the war. Remnant ordinance from this campaign still contaminates areas within the SMD (Fig. 1.2E). Effective safety systems have been developed by LXML for the clearance of ordinance well ahead of operating areas on a daily basis (Smith et al., 2005). 2 Chapter 1 – Introduction A B C D E Fig.1.2. Photos showing the geographic setting of the Sepon Mineral District, Lao PDR. (A) View of the copper and gold processing operation at the Sepon mine site (foreground), operated by LXML (MMG), showing haul roads to the satellite gold deposits (right), and the hills of Thengkham (horizon). (B) Discovery outcrops of silicified calcareous shale containing >3.6 g/t Au that were identified by CRA (Rio Tinto) during 1990 along the Namkok River, adjacent to the present day Discovery Colluvial gold deposit. (C) An example of resource drilling in the Sepon mining area at Vang Ggang using a reverse circulation (RC) drill rig. (D) Accommodation units at the Padan campsite in Sepon mining area. (E) Aerial view of rice farming and forestry areas in the Sepon Mineral District, near the Sepon mine area. The small rounded dams in this picture are remnants of aerial bombardment that scared the landscape along the Ho Chi Min Trail during the Vietnam War. 3 Chapter 1 – Introduction 1.3 SMD EXPLORATION HISTORY AND MINING DEVELOPMENT The discovery history of gold and copper resources in the SMD was documented by Loader (1999), Manini et al. (2001), Manini and Albert (2003) and Smith et al. (2005). Towards the end of the cold war during the late 1980s, Laos began seeking foreign investment, which in turn enabled CRA Exploration to undertake reconnaissance visits during 1990 to assess the technical and commercial opportunities in Laos. During October 1990, a CRA literature study of the mineral resources of Laos, using United Nations Development Programs (UNDP) information and data archived at the Department of Geology and Mines (DGM) in Vientiane, identified the Sepon District as one of three high priority gold reconnaissance areas selected for follow-up (Manini et al., 2001; Manini and Albert, 2003). Before the 1990s, sporadic artisanal gold panning by local people occurred along numerous river valleys in the Sepon area, with records at the DGM also describing alluvial gold mining operations supported by Russia in the Sepon District from 1983 to 1985. Russian geologists during the 1980s observed gold mineralisation in silicified and sericite altered rocks within metasomatic contact zones of sub-volcanic intrusive complexes near the Namkok River, north of Nongkadeng Village in the Sepon District. However, no serious evaluation of the hard- rock potential was undertaken by the Russian geologists (Manini et al., 2001). A reconnaissance visit by CRA geologists to the Namkok River north of Nongkadeng Village during December 1990 (Gregory 1991) confirmed earlier observations of stockwork quartz veining and altered porphyry intrusions reported by Russian geologists. CRA obtained encouraging results during this visit, with 18 rock samples collected from silicified stringer veined sedimentary rocks reporting between 3.6 and 55.9 g/t Au (Figs. 1.2B and 1.3; Manini et al., 2001). The district-scale potential of the Sepon area, recognised by CRA after this first visit, was compelling, with the district containing encouraging gold assay results from extensive gold occurrences, the presence of kilometre-scale alteration and the association with porphyritic intrusions (Manini et al., 2001; Manini and Albert 2003; Smith et al. 2005). Subsequently, two years of pioneering negotiations with the Lao Government secured mineral rights for CRA Exploration over the Sepon Project area under a 5000 km2 MEPA (Fig. 1.1). CRA conducted intensive exploration programs in the SMD from 1993 to 1999 resulting in the initial discovery of 3.5 million ounces of gold in six separate gold deposits and 1.2 million tones of contained copper metal in the Khanong deposit (Fig. 1.3; Loader 1999; Manini et al., 2001). In 1993, regional exploration programs in the MEPA commenced and consisted of airborne radiometric surveys, aerial photograph and LANDSAT interpretation, detailed regional stream sediment and rock geochemical surveys and geological mapping. 4 Chapter 1 – Introduction During 1994, a district-scale, high-order multi-element geochemical signature was identified by stream sediment geochemistry along an E-W trending zone that became known as the SMD and subsequently became the main focus area for exploration (Fig. 1.4; Smith et al., 2005). Although several exploration techniques and technologies were implemented in the SMD, a strong geological focus during field programs resulted in discovery, mostly using basic prospecting of anomalies, follow-up geological mapping of priority prospects, and drill testing of highly prospective targets (Manini et al., 2001; Smith et al., 2005). Oxiana Limited acquired an 80% share in the Sepon Project during 2000, with the vendor Rio Tinto retaining a 20% shareholding. Oxiana immediately commenced geological resource feasibility, environmental and social impact studies for a two stage development of the Sepon gold and copper deposits (Fig. 1.3). The Sepon mine poured the first gold in late December 2002 and produced 165,255 oz in the first twelve months of operation. During 2004, the remaining 20% shareholding of the Sepon project held by RioTinto was purchased by Oxiana Limited to increase its ownership to 100% (Manini et al., 2001; Manini and Albert, 2003). Mining of copper ores from the Khanong copper deposit commenced in late 2004 and production of solution extraction electrowinning (SX-EW) copper cathode was commissioned in 2005, with 30,000 tonnes of copper metal produced from the SMD in 2005 (Fig.