Atico completes El Roble resource

When it comes to pedigree in South America’s mining industry, it doesn’t get much better than the storied Ganoza family of Peru, which has owned and operated underground gold, silver and base metal mines in both their homeland and in Panama for more than four generations.

Jorge Ganoza — president and director of Atico Mining (ATY-V) — is a mining engineer who has followed in the footsteps of his father, who also a mining engineer.

Ganoza’s three sons are all steeped in the business too, including Jorge, a geological engineer and a co-founder in 2004 of Fortuna Silver Mines (FVI-T, FSM-N), along with Simon Ridgway and Mario Szotlender. Jorge is also chairman of the board at Atico, where his brother Fernando, a mining engineer with an MBA, serves as chief executive.

The third brother, Luis, is Fortuna’s chief financial officer and has a degree in mining engineering, a masters in accounting and finance from the London School of Economics, and is also an Atico board member.

Fortuna Silver was the family’s first foray into the world of public mining companies, and they have taken part in the company’s growth from a market capitalization of
$40 million in 2005, to one of $800 million at its peak near the end of 2011. (Today it sits at around US$375 million.)

In 2010, the Ganoza family looked beyond silver and started Atico so that it could acquire
gold and copper-rich exploration  projects and producing mines. In January 2011 it signed an option agreement on its flagship El Roble copper-gold mine, which is carved from the side of El Roble mountain
in Colombia, 145 km east of
Medellin.

Under the option agreement, it has the right to buy 90% of the mine, along with 66.8 sq. km of surrounding concessions for US$14 million before next January.

Over the last 22 years, the underground mine has churned out 1.5 million tonnes of ore grading 2.5% copper and 2.5 grams gold per tonne.

“The grades are high, so it will be a profitable operation even in a low price environment,” Fernando, Atico’s chief executive, explains in a telephone interview from Colombia. “We’re focused on high-grade, mid-sized assets that have potential for high-margin operations.”

Annual production figures are not available because the mine is privately owned by Colombia’s Gaviria family, but it is operating at a throughput rate of 330 tonnes per day, or 75,000 tonnes annually, Fernando says.

The mining executive plans to expand the operation threefold, taking it to 200,000 tonnes per year within the first 12 months after the company exercises the option agreement in 2014. 

Metallurgical studies have also shown that current gold recoveries of 55–60% can be ratcheted up to about 75%, he says.

Atico launched a number of other technical and engineering studies in this year’s first quarter to better understand the operation and look for ways to optimize its design and expand its tailings dam. Having been a private company for so many years, Atico is also taking a second look at its environmental practices to see if improvements are necessary.

As part of the review, the company has validated the location and upgraded the design of a new adit at the 1,886 level, which is 114 metres below the mine workings. With this adit, Atico can access new resources and build an underground drill platform where diamond drilling are able to intercept massive sulphide bodies perpendicular to their strike direction, which the company says is necessary to better estimate measured and indicated resources, and eventually reserves.

Exploration work below the 2,000-level has demonstrated the continuity of the volcanic massive sulphide (VMS) lens and showed that the deposit remains open at depth, as well as southeast and northeast.

“We see a lot of potential here, and our first project actually reminds me a lot of Fortuna’s Cay-lloma silver-lead-zinc mine in Peru,” Fernando says. “It’s going to have the same effect in catapulting us to a producing company generating cash flow that will put us in a good position to keep looking for other assets.”

The company has released an inferred resource estimate for an area stretching from below the mine’s current operations at 2,000 metres above sea level down to 1,700 metres above sea level. The result is an inferred resource of 1.6 million tonnes grading 4.45% copper and 3.17 grams gold per tonne using a copper-equivalent cut-off grade of 0.72%.

Now the company is focusing on underground drilling and further defining the interpreted boundaries of two massive sulphide bodies — Maximus and
Goliath — that are considered primary targets for mining operations below the 2000 level, given their closeness to the mine workings. An underground drill program will continue at the south end of the known mineralized strike length and below the 2,000 level to find more massive sulphide bodies.

El Roble is located in the Choco Department near the border with the Antioquia Department in an area of the country where many companies are advancing projects. These include Continental Gold’s (CNL-T) Buritica project, which is 249 km north; Seafield Resources’ (SFF-V) Quinchia project, 270 km south; and the
Gramalote project, jointly held by B2Gold (BTO-T, BTG-N) and AngloGold Ashanti (AU-N),
233 km east.

VMS mineralization at the project is mafic-type (i.e., magnesium and iron-rich), and because VMS deposits tend to occur in clusters, Atico says, management believes there may be others on the El Roble concession block, which covers a 10 km strike length of prospective ground.

The mine’s geology and nearby VMS mineral occurrences include basalt flows, black-to-grey chert and overlying pelagic sedimentary rocks, and sandstone-shale turbidites. These rock units belong to the Cretaceous Canasgordas Group, which can be traced for more than 800 km
along Colombia’s Western
Cordillera.

The El Roble deposit was discovered by two Colombian prospectors in the early 1970s. They  found artisanal mining in the area, and some years later signed an option agreement with Kennecott, and defined an historical resource of 1.2 million tonnes grading 4.8% copper and 3.2 grams gold per tonne.

But it was too small to interest Kennecott. 

A Japanese company named Nittetsu entered the scene in the 1980s and built the mine, a mill and a processing facility. 

But four or five years after production began, a Japanese executive at Toyota Motor Corp. was murdered in Bogota, and Nittetsu sold its interest back to the Gaviria family, which has mined it to this day.

The Gaviria family is one of Colombia’s many well-connected families, and includes Anibal Gaviria Correa, a member of the Colombian Liberal Party who was elected mayor of Medellin last year. Before his mayoral race he served as governor of the Antioquia Department from 2004–2007.

Atico has $5 million in its
treasury and a burn rate of US$500,000 per month. 

That burn rate is likely to increase when Atico takes over some parts of the operation, but Fernando is confident the company will have the financial wherewithal to exercise its option, likely through debt and equity.

Fernando says the decades his family has spent in the mining industry gives Atico the advantage of having local knowledge and a network of contacts. 

“It’s a key
part of our strategy,” he says. “We’re looking for either advanced exploration projects and small-scale operations that have potential for growth in Latin and South America, and usually they’re privately owned.”

At press time in Toronto Atico was trading at 56¢ within a 52-week trading range of 40¢ to $1.13 per share. The junior has 52 million shares, fully diluted.