Bucaramanga, Colombia — After a few very tough years at its multi-million-ounce Angostura gold project in Colombia, a resurgent gold price and a dramatically improved security situation have combined to allow Vancouver-based
The Angostura project is in Colombia’s Santander department, 35 km northeast of the regional centre of Bucaramanga (pop. 1 million), about 30 km from the Venezuelan border and 370 km northeast of the capital Bogota. Several small communities, including the mining town of California, are nearby.
Angostura lies in the rugged, mountainous, western branch of the Eastern Cordillera at an elevation of 2,400-3,300 metres, where temperatures and rainfall are moderate.
Greystar personnel can reach the property by either a quick helicopter ride from Bucaramanga or a more arduous, 2.5-hour trip by vehicle over 60 km of steep gravel roads.
The property consists of 12 wholly owned individual licences, and in December 2002, Greystar applied to integrate the key part of the holdings into a single concession, in line with the provisions of a new mining code enacted in 2001. There are also 10% net profit royalties outstanding to the original owners on two of the 12 licences, though Greystar is considering buying them out.
Greystar’s land holdings in the area total 66 sq. km, but the company is focused on a 1-sq-km area covering a flexure zone, where it has drilled into 60 gold-bearing, heavily altered, vein-like structures. These are grouped into three major systems that together make up the Angostura deposit.
The wider region has been subjected to periodic artisanal mining since pre-Columbian times, and, today, streams southwest of Angostura play host to a couple dozen small-scale stamp mills.
In 1994, with long-time Greystar President David Rovig at the helm, the company entered the region looking for gold and struck a deal to earn a 100% interest in two key Angostura exploration permits by paying US$700,000 and spending US$1.8 million on exploration by 1998.
Greystar carried out a substantial amount of exploration through 1999, sinking 181 diamond drill holes totalling 52,000 metres and taking a 600-kg sample of sulphide material for bottle-roll and column-leach tests.
At the time,
Strathcona
For an independent view, Greystar hired Toronto-based Strathcona Mineral Services to review Kinross’s work. Strathcona submitted its own report confirming Kinross’s conclusions in June 2000, and followed up with similar, revised reports in May 2002 and September 2003. (One unusual gap in Strathcona’s work has been that none of its personnel have visited the site, owing to security concerns. To compensate, a Kinross geologist who did visit the site co-authored Strathcona’s later reports.)
Based on drilling up to 1999, Strathcona confirmed Kinross’s assertion that Angostura is an epithermal, high-sulphidation type deposit that hosts 4.9 million contained ounces gold and 17.9 million oz. silver in 44 million tonnes of indicated material grading 1.7 grams gold and 6.1 grams silver per tonne, plus 52 million inferred tonnes of 1.5 grams gold and 5.5 grams silver (using a cutoff grade of 0.5 gram gold).
Raising the cutoff to 3 grams gold (applicable for underground mining) causes the resource to shrink to 4.6 million indicated tonnes of 6.2 grams gold and 10.5 grams silver, plus 4.7 million inferred tonnes of 5.9 grams gold and 12.3 grams silver (or 1.8 million and 3.4 million contained ounces gold and silver, respectively).
About 80% of the gold is found in veins, whereas the rest is disseminated. The veins are near-vertical structures that strike east-west, range in thickness from 2 to 50 metres, and average 7 metres in thickness. The oxide zone extends roughly 150 metres from surface.
“We believe it will evolve into an open pit, but I don’t have an engineered design to show anyone,” Rovig told The Northern Miner during a visit to the property. “Certainly the [rising] price of gold makes it more likely every day that it will be entirely a pit operation early on.”
Ore will probably be heap-leached in a nearby valley rather than be milled, said Rovig, adding: “Preliminary metallurgical results suggest it is quite leachable.”
Three phases
Greystar has divided its current exploration campaign into three phases:
— Phase 1 — The half-completed, US$4.3-million, first phase of work aims to collar 20,000 metres of mostly infill drilling and target high-grade pockets by drilling, trenching and geological mapping.
Also, the company will soon gain access to deeper ore by tunneling on the 2,800-metre level, and has hired a Peruvian mining engineer to oversee the work.
So far from Phase 1, Greystar has released results from 21 holes totalling 5,800 metres, and reported that the weighted average grade of 163 intercepts within 29 previously defined veins and six new veins was 1.69 grams gold and 7.3 grams silver over an average width of 9.75 metres.
The most-recent set of assays featured one hole, DM03-07, that intersected veins 27, 28 and 29 and yielded 48 metres (from 199 metres) grading 4.72 grams gold and 1.5 grams silver, plus 20 metres (from 262 metres) of 4.17 grams gold and 3.2 grams silver.
— Phase 2 — In the second phase, due to begin in the second quarter of 2004, Greystar will spend US$7.3-million on 42,000 metres of definition drilling designed to upgrade resources into the reserve category. There will also be further underground work to provide more samples for metallurgical studies.
With the deposit open in all directions, Greystar is hopeful the first two phases will fill in the large gaps between holes, extend the deposit significantly at depth, and define many of the “vein-vein” intersections, where high-grade ore shoots are being formed.
“These vein-vein intersections are actually quite massive, as big as forty metres along strike and three to four hundred metres deep,” said Greystar Vice President Frederick Felder. “We believe we can increase our grade by tapping into these things and understanding them.”
— Phase 3 — The third phase will consist of a US$3.2-million feasibility study, to begin toward the end of 2004.
Indeed, as drilling proceeds and data are compiled over the next couple of years, there is every reason to believe that several million ounces can be added to the resource base — a feat that would propel Angostura to the ranks of the world’s top 10 undeveloped gold deposits.
Beyond the Angostura deposit, on the rest of Greystar’s land package, the company has several interesting grassroots targets. Many of these were discovered by geologists from the Anaconda Company, who mapped Angostura and the surrounding area in the 1940s.
“They mapped Angostura, and it has turned out to be just about the way they saw it,” said Rovig. “They also indicated that down the La Baja Creek [to the southwest], there were a couple of look-a-like structures, and we will, in due course, get down there.”
As well, even farther to the southwest is a sizable copper-molybdenum anomaly that was mapped by the U.S. Geological Survey and its Colombian counterpart INGEOMINAS.
The general geology of the region is characterized by the Santander Massif, which consists of Precambrian gneisses and schists of the Guyana shield. Intermediate intrusives of the Santander plutonic group were emplaced during a period of Triassic-Jurassic era uplift, while younger porphyries common in the immediate area of mineralization at Angostura are Tertiary in age.
Structurally, regional faulting is parallel to the topography, and more-local, northeasterly faulting may have guided the intrusive rocks and the subsequent alteration and mineralization.
On the financial front, following the conversion of various warrants over the last four months, Greystar now has about C$8 million in net cash and is looking to carry out a major financing early in the new year so that it can complete phases 2 and 3.
Toward this end, at Greystar’s extraordinary general meeting in mid-December 2003, shareholders gave their approval to any financing over the next year that might exceed 25% (but not more than 100%) of the outstanding shares of the company. They also gave the thumbs-up to a standard shareholder rights protection plan.
Greystar now has 18.9 million shares outstanding (21 million fully diluted), and recently traded at C$2.70, for a market capitalization of C$57 million.
Asked if he was finding financiers more receptive to the Greystar story, compared with a year ago, Rovig replied: “I can’t keep them away. The Street is hungry for mining deals now.”
Kidnapping
Things weren’t always so rosy for Greystar. In 1998, the company made headline news when a Canadian drill foreman working at Angostura for Canadian contractor Terramundo Drilling was kidnapped. The twist was that his boss in Canada negotiated to trade places with his employee, allowing the employee to return home. The boss was later released.
Greystar briefly switched to another Canadian drilling company, Major Drilling, and then wrapped up all drilling activity in 1999.
“But that’s in the past, and we’ve learned our lessons,” said Rovig, adding that the kidnapping made management realize Angostura had reached a level of success where the company could no longer maintain a low profile in Colombia, and so it needed to re-evaluate and restructure its security measures.
Felder joined Greystar in 1999, and it became his task to improve the security situation on the ground with the assistance of an experienced Colombian security firm that has co-operated well with the Colombian military.
However, from 2000 to 2002, the macro-environment took a decided turn for the worse for Greystar — both economically, with the fall in gold prices, and politically, with guerilla groups around Angostura flexing their muscles.
The rise of guerilla activity throughout Colombia during this period — by members of FARC (Revolutionary Armed Forces of Colombia, the dominant group in Colombia), the ELN (National Liberation Army), the second-largest group), and smaller “leftist” groups — can be directly traced to a failed policy of appeasement by Colombia’s past president, Andre Pastrana, who came to power in 1998. (Colombia’s presidents are elected to 4-year terms and cannot seek re-election.)
Beginning in 1999, as a goodwill gesture during negotiations with the guerillas, Pastrana’s government withdrew its presence and services from 500 communities across the country, essentially giving up control over an area the size of Switzerland within the Colombian territory.
The guerilla groups, whose members still number about 40,000 in this nation of 44 million, used these so-called “safe havens” to re-arm, prepare attacks, and conduct their illicit drug trade.
The havens were maintained until February 2002, when the hijacking of a commercial aircraft served as the last straw for the government, and three years of tortuous peace talks ended.
Pastrana, however, did succeed in 2000 in developing “Plan Colombia” — a security agreement with the U.S. — and in obtaining more than US$1 billion in U.S. aid, mostly in the form of military training and equipment, such as helicopters.
For Greystar, Pastrana’s policies meant its access to the Angostura property slipped away from mid-2000 to early 2003, and the company retreated to its offices in Bucaramanga, bringing along all its drill core and exploration data.
Some 175 illegal miners came onto Greystar’s property, and roughly 200 guerillas extorted the local miners and used the mountain ridges as a major transport corridor northwards into Venezuela.
Commented Eduardo Baer, Greystar’s manager of investor relations: “We went quiet, but we never left Colombia. We had our office in Bucaramanga and we continued to employ Colombians.”
Greystar used those quiet years to prepare for the current phase of exploration, completing resource analyses and metallurgical studies that showed positive recovery rates for both gold and silver.
“This work led us to believe that Angostura was certainly worthy of pursuing at a later date, when gold prices would turn around, or when the political situation changed, which has now happened,” said Baer.
Kinross was not so patient and allowed its stake in Greystar to shrink below 5% as the major unloaded shares into the market and declined participation in a series of financings.
“Kinross had their own swamp to drain, and they told anybody who’d listen they had other priorities to deal with during those tough times,” said Rovig. “Today Kinross is not a factor in our planning.”
During this period, Greystar also participated in many security-related discussions with various levels of the Colombian, Canadian and U.S. governments, especially during the past 15 months.
In May 2002, tired of appeasement, Colombians elected as president the former Medellin mayor, Antioquia governor and senator Alvaro Uribe, giving him the go-ahead to fulfil his promise to crack down hard on both leftist guerillas and right-wing paramilitaries alike.
The crime statistics since Uribe took office are impressive: kidnappings are down 40%; homicides have fallen 20%; major attacks on communities are down 90%; and attacks on oil pipelines are down about 60%.
Strong support
Although a package of austerity measures and political reforms proposed by Uribe was rejected by voters in an October 2003 referendum, support for him remains strong, and recent polls show his approval ratings exceeding 70%.
“Colombia is now under Colombian [government] control, and that hasn’t happened for a long time,” said Rovig, who credits Uribe with instituting several military reforms, the foremost of which was making the armed forces professional rather than conscripted. (In the past, anyone with a high-school education or better was exempted from the draft, which resulted in lower-quality soldiers.)
“In addition to that, Uribe looked at the overall problem and recognized that the guerillas were recruiting from impoverished rural areas where the youngsters had no future at all,” said Rovig.
Uribe turned the tables on the guerillas by going into all the villages nationwide and recruiting about 40 locals from each who would be given proper training to organize local militias in close partnership with the national armed forces.
In the Angostura area, the new security initiatives resulted in many hundreds of government troops returning this year and locally manned militias being set up in 17 nearby communities. In September, a large contingent of police also returned.
And finally, in a strong statement, the government has built a battalion-size military base in the mountains, just 8 km from Angostura, and is building two more bases 20 km away.
Troops at these bases will serve multiple roles: protecting the surrounding villages from the guerillas; denying key transport routes to the guerillas; ensuring the viability of Angostura; and paving the way for proposed infrastructure developments, such as a road to Venezuela and new power lines.
“Security will always be an issue, but it’s manageable,” said Rovig. “The arrangements that are in place to take care of us are no different than they are for other industrial activities in the country — we don’t have any special deals worked out.”
Uribe’s biggest challenge now is to create jobs (unemployment levels were 15.7% in 2002) and boost the country’s economy.
“President Uribe, when we talked to him, recognized the value of opening up mineral exploration and development in his country,” said Rovig.
Added Baer: “Things are now turning around in Colombia, and there’s a lot of American investment and interest, certainly in oil and gas, and in coal, which will surpass coffee for the first time ever this year as Colombia’s number one export.”
Other mining projects in Colombia demonstrate that large-scale developments in the country are viable here. Coal mining is carried out in the northeastern departments of Guajira and Cesar and highlighted by El Cerrejon Norte — the world’s largest open-pit coal mine. It is co-owned by privately held,
Also in the north, in the department of Cordoba, is
However, the Canadian embassy in Bogota cautions that the cost of doing business in Colombia will be increased by 10% or more to cover the cost of enhanced security.
The embassy concludes: “Colombia is both a country of considerable commercial opportunity and one of the most violence-prone societies in the world. The challenge is to balance the commercial opportunities with an intelligent approach to personal security.”
Before Greystar geologists returned to the Angostura property in May 2003 and drillers started their work in July, the company, in partnership with the military and the departing illegal miners, had to start finding and disposing of more than 100 landmines laid by the guerillas in December 2001 — a process that is ongoing.
“It is an issue, but we take a lot of precautions,” said Felder. “We’ve never had any kind of incident . . . [and] we think that in the past six months, we’ve dealt with it well.
“We have a comprehensive security program which has taken us more than three and a half years to put in place,” said Felder. “It’s quite exceptional and we’ve been fortunate to have support from all levels of government — all the ministries have helped us, and that goes all the way up to the president.”
Colombian employees
Today, Greystar has 130 employees in Colombia, almost all of whom are Colombian, including 25 professionals, of which seven are geologists. In an unusual move for a junior, Greystar’s payroll includes a psychologist and a sociologist, who handle the sometimes complex issues that can arise locally as the population readapts to living under government rather than guerilla control.
Concluded Felder: “We’ve stuck it out in Colombia for nine years, so I think we’ve got a lot of credibility in the area.”
To ensure good community relations, Greystar tries to hire local employees and suppliers where possible, and the company has contracted Medellin-based drillers, who are able to maintain a lower profile than their North American counterparts.
Four drill rigs are now in operation, and Greystar is thinking of adding a fifth one underground. The surface drillers are averaging 600 metres per machine per month.
Apart from the exploration efforts, Greystar has spent time cutting drill stations, cleaning up roads, erecting buildings and generally re-establishing its presence in the project area. About US$18 million has been spent on the property to date.
“We’re making our presence felt in this economically deprived area by employing people and adding to the economy of the area,” said Baer. “We’re actually noticing that the work is quite good and people are receptive to our presence here.”
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