TORONTO (miningweekly.com) – TSX-listed Dynacor Gold is planning another expansion at its mill in Peru, and could start work on the project later this year or early in 2012, CEO Jean Martineau said.

The company is exploring early-stage properties in Peru, including a skarn deposit in the same neighbourhood as Xstrata's Las Bambas project, but differs from most of its rivals because it generates cash flow from the custom-milling plant, where it buys and processes ore from small producers and mining companies around the country.

Dynacor recently expanded capacity at the mill from 150 t/d to 180 t/d, and is going through a permitting process to get permission for a further expansion.

“Our intention is to go as soon as possible to 250 t/d, and maybe even to 300 t/d,” Martineau said in an interview.

The firm will likely start work on the next expansion phase later this year or early 2012, depending on when permits are received.

The expansion will cost between $1-million and $2-million and will be funded internally.

Gold production from the mill rose to 10 478 oz in the fourth quarter of last year, and the company expects to sell about 45 000 oz in 2011.

Martineau said Dynacor does not expect any negative effects from the Peruvian government's efforts to control informal miners.

Dynacor already requires anyone wanting to sell ore to demonstrate where the ore was mined and that they either own the property or have a contract with the owner, he said.

SKARN DISCOVERY

On the exploration front, meanwhile Dynacor is hoping that a copper/gold skarn discovery on a property in southern Peru will turn out to be in the same league as other large projects nearby.

The company originally bought the Tumipampa property in 2000 for gold-veins that had been identified, and conducted drilling programmes in 2002, 2003 and 2008.

But after a large skarn structure was identified in 2008, the focus has shifted to the new discovery and a 16 000-m drilling programme began in January this year, aimed at getting a better idea of the skarn deposit, Martineau said.

“We are now concentrating on the skarn, which is a huge structure. Based on what we know today, it's 4,2 km long by 1,5 km wide,” he said.

More than 900 surface samples taken to date have indicated that the copper content is similar to other skarn structures in the area, but that the gold content is actually higher, possibly because of the gold veins on the property, he said.

The project is on the same fault and flanked by two big projects, Xstrata's Las Bambas project and Southern Copper's Los Chancas.

“We think that we have a similar skarn as these other skarns surrounding us, and these are huge structures,” Martineau said.

Dynacor would likely end up selling the project if the skarn deposit turns out to be economic and comparable with other large projects in the area, he said.

Otherwise, the company could develop the gold vein mineralisation itself.

“But it's too early to talk about that, we are just right at the early stage of driling the skarn,” Martineau said.