Infinito Gold looks to unlock Costa Rica’s mining potential

SITE VISIT

San Jose, Costa Rica — When prospector Tim Coates wanted to head up into these tropical rainforests in Costa Rica’s northeastern zone back in the early ’90s, he was told by locals that he would need a canoe to do it.

The remote area that runs just south of the San Juan River — which is also the border with Nicaragua –had no roads and, as far as prior geologists were concerned, no gold either.

Their belief was based on a model that posited the region was made up of mainly saprolite, and because known deposits in the country were found only in hard rock, they didn’t think the area was worth the trek.

But Coates reasoned that the gold trend running north from central Costa Rica and south from eastern Nicaragua would make an appearance in these remote reaches and set out with pick and shovel to prove it.

When he found gold-bearing saprolite here with gold-bearing hard rock beneath it, he proved the traditional model was wrong on both counts.

Shortly after Coates’s 1991 Crucitas discovery, Placer Dome was on the scene getting a clearer picture of what had been discovered. And while the company found good tonnage available right at surface with incredibly low strip ratios, a collapsing gold price and misguided economic policy in San Jose put what should have been a mine many years ago on the bricks.

Now Infinito Gold (IG-V, IGFFF-o) is set to realize what Coates envisioned as he schlepped through these jungle rivers some 18 years ago. Trucks are now clearing soil, generators hum and workers are busy laying the foundation for the mill and putting up new residences for the miners. Soon a 75-km power line will connect the project to the national grid, bringing power not only to the project but also to the rural communities around it for the first time. Coates would hardly recognize the place.

In all, capital costs for construction at Crucitas are estimated at US$66.3 million. But that sum will generate a tidy internal rate of return of 35.1% for Infinito shareholders and a net present value of roughly US$125 million using a 5% discount and a gold price of US$750 per oz.Netcash costs per ounce of gold are expected to average out to US$342.50 over the 13-year mine life.

With economics like that, it is hard to fathom why the project has taken so long to get into motion.

Part of the blame falls at the feet of former Costa Rican president Abel Pacheco, who signed a moratorium on open-pit mining in June 2002 — just two months after Infinito, then known as Vannessa Ventures, submitted its environmental impact study.

Pacheco’s move underlined unease over mining in a country whose economy is largely based on agriculture and tourism. Ironically, however, Pacheco’s move failed to prevent Glencairn Gold’s (now Central Sun Mining [CSM-T, SMC-x] much publicized mishap at its Bellavista gold mine — a mishap that entrenched some anti-mining proponents in the country.

An open-pit operation, Bellavista had been approved before the moratorium, clearing the way for its construction. But that construction process included building a heap-leach pad on the side of a hill — not a good idea in a tropical rainforest area. The large amounts of rain caused the pad to shift in a manner that the company couldn’t stop.

The project was shut down in the summer of 2007.

Knowing that public opinion towards mining was frayed by the experience, Infinito set out to build a solid reputation for itself and mining in general.

“The government and the communities have seen that we do what we say we’re going to do, and that helps to build trust,” says John Thomas, Infinito’s vice-president of operations.

And Thomas has had much experience doing just that. He began his career in the Zambian copper belt, then went to work for Inco and spent time building mines in Brazil and Russia before heading to Venezuela, where he was part of a team that built the former Bolivar Gold’s Choco 10 mine.

An Englishman by birth, but now a Costa Rican resident, Thomas is ensuring the company makes good on its word by building roads and bridges on time, creating jobs for locals and engaging in social projects, such as revamping a local school.

The company has also cast a careful eye towards its exploration program, which was only resurrected after a 10-year dormancy in 2007.

“The thought was that if we could show people we had some tangible operations first and were running a good show that was good for the community, exploration would be easier,” Thomas explains.

But strong community relations are only part of the story when doing business in Costa Rica.

To fit in with the country’s green reputation — it has long been considered the leader among Central American countries on environmental issues — Infinito has embarked on a reforestation program before it has even begun mining.

While its reclamation program will reforest its entire property once the mine is shut down some 15 years from now, the company is already busy replanting trees in areas cleared by ranchers in the past. Planting is currently taking place on a total of 3.8 sq. km, far overshooting the government’s tree-replacement requirement.

“We’re planting about fifty trees for every one we cut, whereas the government requires us to plant three for every one cut,” Thomas says.

With the ouster of Pacheco and the arrival of current president Oscar Arias — a Nobel Peace Prize winner during his last tenure as president from 1986-90 for his role in calming tensions in Central America — those efforts are being rewarded.

While it took Arias two years to get it done, he lifted the moratorium in April of this year, signalling the country was ready to diversify its economy and bolster its gross domestic product through mineral development.

Shortly after the moratorium ended, Infinito was granted its key exploitation licence for Crucitas. That licence followed closely on the heels of the approval of a revised environmental impact study that gave it the permission it needed to mine hard rock, as well as saprolite.

With such approvals in hand, Infinito is set to finally cut into the deposits at its feet.

The plan is to dig two open pits, known as Fortuna and Botija. Combined, the pits have an indicated resource of 28.2 tonnes grading 1.37 grams gold for 1.24 million oz. and another 29.4 million inferred tonnes grading 1.28 grams gold for 1.21 million oz.

The project has an average gold grade of 1.37 grams per tonne and a remarkably low stripping ratio of 0.6:1.

“We’ll be pulling up ore right away,” says Thomas of the near-surface and minimal waste conditions.

Infinito has already secured mining contractor Sococo to handle the mining and delivery of ore to the mill.

“While using a contractor adds fifteen per cent to operating costs, it’s two per cent better for the project’s NPV,” Thomas says. “Plus the contractor has to produce and has good, experienced people to get things done right.”

The first ore to be mined will come from the upper saprolite layer of the Botija deposit.

A softer and stickier rock, Infinito plans to mill it at a rate of 7,500 tonnes per day. The saprolite makes up roughly 30% of the resource and accounts for three years of the mine’s 13-year mine life.

After that, hard rock will be milled at a rate of 5,000 tonnes per day. In total, the project is expected to turn out a total of 940,000 oz. of saleable gold.

But Thomas says Infinito isn’t only looking at Fortuna and Botija for tonnage.

Just 15 km away lies the Conchudita deposit, which has a historical inferred resource, calculated by Placer Dome, of 3.2 million tonnes averaging 4.6 grams gold per tonne, for about 470,000 contained ounces gold.

While those numbers look promising, the cost of extraction would be higher as the site abuts the shore of the San Juan River. Both the sensitivity of the river and the existence of a national park on the Nicaragua
n side would mean an underground mine would have to be built.

But development of Conchudita is for another day.

For now, the company is focused in on closing a debt-financing deal that will be the final piece of the puzzle before it can reach production — slated for late next year.

Infinito recently raised $18 million through a private placement for convertible notes. The bulk of those notes — $12.5 million worth — were sold to Exploram Enterprises, the controlling shareholder in Infinito with a 50.6% stake in the company.

And Infinito shareholders can take faith in Exploram’s interest in Infinito. The private enterprise is owned by the Mannix family. With a net worth estimated in the neighbourhood of $2.2 billion, they are one of Canada’s most industrious and wealthy families.

Such deep pockets and a long-term commitment to the project bode well in such volatile times, bringing that potential Coates recognized all those years ago as close to fruition as it has ever been.