Costa Rican court rules to reopen Infinito Gold’s Crucitas project

After a 16-month review and public hearings, Costa Rica’s Supreme Court has ruled that Infinito Gold (IG-V) can go ahead with its open-pit gold mine despite objections from environmental groups that the Crucitas mine will destroy virgin forest.

In a 5-2 ruling the Supreme Court found that the project did not negatively affect the environment, overturning a high court order in October 2008 that suspended construction of the mine.

Environmentalists had charged that Crucitas, which will be the first major gold mine in the eco-conscious country, would wipe out forest that is the habitat of endangered species such as the great green macaw.

News of the court ruling sent Infinito shares soaring 15¢ or 57.7% to close the day at 41¢ on 1.3 million shares traded.

Infinito’s president and chief executive, John Morgan, could not be reached for comment.

A day after the court ruling, an opposition group filed an injunction with the Tribunal Contencioso Administrativo and was given three business days to present written arguments. During this period no work can be done in the mining or tailings area of the site.

But Infinito will ask the tribunal to lift the injunction and argues that once the Supreme Court has ruled on a case, no lower courts can rule again on the same matter.

The Crucitas gold deposit is in the northern central region of Costa Rica in the Provence of Alajeula, close to the San Juan River, which forms the border with Nicaragua. It is 105 km north of the capital of San José and 16 km northeast of the small town of Coopevega.

The Crucitas area is partially covered with jungle and is characterized by a series of hills surrounding several basins. The main activities in the region are logging and cattle ranching.

Since activity at the mine site was halted in late 2008, the company has continued to receive the components that it needs for the processing plant. The mill pedestals are in place and the SAG and ball mill are ready to be mounted when construction restarts.

Crucitas has the capacity to produce 85,000 oz. gold annually.

At a 0.5 gram gold cut-off, the gold deposit has an indicated resource of 28.22 million tonnes grading 1.37 grams gold per tonne for 1.24 million oz. contained gold and 3.6 grams silver per tonne for contained silver of 3.27 million oz.

In the inferred category Crucitas contains 29.42 million tonnes grading 1.28 grams gold per tonne for 1.21 million oz. gold and 3.9 grams silver for 3.69 million oz. contained silver.

A bankable feasibility study in July 2008 demonstrated that at a base case gold price of US$750 per oz., Crucitas would yield an after-tax internal rate of return (IRR) of 35%. It will also have an after-tax 5% NPV of US$124.8 million. Net cash costs over the life of the mine are estimated to be about US$342.50 per oz. gold. It will cost about US$66 million to start the mine and the payback period is forecast to be two years.

Gold cathode production, including the contained silver, will be smelted on a periodic basis and transported initially to San José with final refining by Johnson Matthey, Canada.

Initially the project was explored by Placer Dome between 1992 and 1994. Placer drilled 251 diamond holes and 90 auger holes to identify and evaluate the Fortuna, Fuentes and Botijas deposits.

In 1999, Lyon Lake Mines took over the project and completed 100 auger drill holes and commissioned a feasibility study. Infinito acquired the property from Lyon Lake Mines in May 2000.

Three gold-bearing zones have been delineated. The Fortuna zone is the biggest one and sits in the central southwestern portion of the Crucitas concession. Botijas, about one-third the size of Fortuna, lies about 500 meters to the east, while the Fuentes zone is the southwestern extension of the Fortuna zone.

Infinito’s mine configuration consists of the two adjacent pit areas of Botija and Fortuna. Mining will remove the saprolite material overlying both pits before mining the Botija pit followed by the Fortuna pit.

A detailed plan for the project includes a 165-hectare tailings dam, with a capacity of about 23 million tonnes of tailings.

Process water, for milling, will be supplied by pumping water from the tailings dam, from which treated water will also be discharged to the local river system.

The epithermal gold deposit is in the Costa Rican portion of the Tertiary Volcanic Plateau of the Central American Volcanic Arc, also referred to as the Sarapiqui volcanic belt.

The belt borders the northwest trending Nicaraguan Graben and parallels the Middle American Trench. The region lies at the boundary between the Cocos and Caribbean tectonic plates and is volcanically still active.

In April 2008 the Costa Rican government lifted the moratorium on open-pit gold mining. (The practice had been banned since 2002.)

Over the last year the Calgary-based junior has traded in a 13¢-39¢ per share range and has 123.7 million shares outstanding.