Bolivian mining potential lures Canadian companies

Ross Beaty, former president of Equinox Resources, is back in action with a new junior company, Da Capo Resources (VSE), focused exclusively on Bolivia.

“This is a country with strong mining traditions, good projects and good geology,” Beaty told The Northern Miner. “We have acquired two gold-antimony producers and already see potential for about 1 million oz. gold on each property.”

Da Capo is joining a number of other companies active in the South American country, including Battle Mountain Gold (NYSE), which operates the largest gold mine and has become a strong exploration force in the area. The Kori Kollo mine has outperformed expectations and is poised to become Battle Mountain’s flagship operation. Cash production costs for the first quarter of this year were US$143 per oz., well below original projections in the US$175-per-oz. range.

An expansion program, now under way, should increase production by 40% to 350,000 oz. gold annually (308,000 net to Battle Mountain). This program will involve throughput enhancements and circuit modifications expected to improve recovery rates to at least 75% from the current 68%.

Of the other companies active in the country, many are Canadian-based. The list includes Orvana Minerals (TSE), which teamed up with a local partner to acquire a land package with potential for large, bulk-minable gold deposits. The most advanced of these is the joint-ventured Pederson project, where work is focused on delineating a large gold system centered on the former San Bernardino antimony-gold mine.

Hecla Mining (NYSE) also has projects in Bolivia, resulting from its amalgamation with Equinox earlier this year. The former took over the latter’s Bolivian projects with no strings attached prohibiting Beaty from pursuing his own venture in the country.

Da Capo’s first two projects are in the middle of the country, within a historic mining belt that includes the world’s largest tin mine and plenty of evidence of past mining activity. “The Capa Circa and Amayapampa properties are both vein mines with almost identical geology,” Beaty said. “But we view them as bulk-minable targets.”

Da Capo can earn 70% of Amayapampa by spending $6 million over two years, and it can acquire all of Capa Circa by spending $5 million over two years. It plans to spend $1 million exploring each property this year. Beaty says the options are pricey by his standards, although they are modest in relation to some of the hefty sums being paid for grassroots projects in Venezuela.

“This is the most expensive deal I’ve done, but the quality of the properties is such that it will be a safe investment and bring more value to the company,” Beaty said.

A recent $10.5-million financing is being used to acquire and explore the company’s Bolivian projectsTeck (TSE) bought $1.25 million of this financing and has a first right of refusal on future financings; it is also entitled to become involved in projects at the feasibility stage.

“Teck helped us get started in Bolivia (with Equinox) and I felt we should recognize that support,” Beaty said. “We are not giving anything away, as ultimately we will need a senior partner.”

Amayapampa is a 120-tonne-per-day operation producing 10,000 oz. gold annually. Its series of high-grade quartz veins has been mined since the early 1700s. This activity generated 50 adits, which allows for underground sampling of the vein swarms. An extensive sampling campaign is nearing completion and has returned encouraging results, according to Beaty. Drilling will begin in July in an effort to test known mineralization and possible extensions.

“We want to bulk-mine the whole thing and see potential for 10 million tonnes of over 2 grams gold per tonne,” Beaty said. “We essentially see the same potential at Capa Circa.”

A 1,200-metre underground program (budgeted at US$300,000) began on Capa Circa in late May. The objective is to test the lateral and vertical continuity of gold mineralization being mined at a small scale (15 tonnes per day) from a zone (both underground and on surface) measuring more than 500 metres long, 150 metres deep and 50-100 metres wide. The program will last several months and is also aimed at outlining a large, bulk-minable deposit. Assuming positive results, the company will upgrade the existing mills, which would have both gravity and conventional flotation circuits. The coarse free gold would be recovered by a front-end gravity circuit (accounting for about 80% of production), with the remainder in a pyrite concentrate. “It is easy to work in Bolivia and get competitive rates for drills and other mining services,” Beaty explained. “The country has a wonderful mining fraternity, although it is dominated by underground mining. They don’t tend to think open pit.”

Bolivia is also seen as attractive because of its mining laws and because it has adopted reforms that encourage new investment. Moreover, groups active there maintain that corruption is less of a problem than in other South American countries.

On the other hand, companies are noticing that competition for projects has increased in recent months. Orvana Vice-president Thomas Beattie said his company recently tripled the size of its joint-venture area, based on a reconnaissance program to select prospective areas “ahead of the competition.” Orvana plans to spend $3.5 million this year, about $1.5 million of which will come from its own coffers. The company has interests (from 35% to 43.5%) in seven properties, four of which are advanced, in both the Altiplano and Cordillera areas.

Trenching and sampling are being carried out on the four advanced properties in an attempt to outline drill targets. A bulldozer will then be moved to the even-more-advanced Pederson project, where additional drilling is planned this year.

Previous work has confirmed the extensive distribution of disseminated gold within a large mineralized system. The next step is to outline an area of potentially economic mineralization amenable to open-pit mining. Other juniors active in Bolivia include:

* Takla Star Resources (ASE), which acquired a Bolivian company that controls 10 properties with potential for bulk-tonnage gold-polymetallic deposits; * Rio Amarillo Mining (VSE), which recently optioned five concessions in Bolivia;

* Corriente Resources (VSE), which has tied up a past-producing mineral district complete with mine, townsite and mill (the Tasna project has potential for bulk-tonnage gold and gold-copper deposits, as well as the more traditional bismuth-tin-tungsten-gold targets); and

* VSE-listed partners Shorewood Explorations and Broadlands Resources, which are exploring a land package covering about 14,663 hectares in the Western Cordillera near the Chilean border.