On the last day of May, Peru’s Ministry of Energy and Mines granted Candente Copper (DNT-T) the permit it needs to complete drilling for its feasibility study on the Canariaco Norte project, a porphyry copper deposit about 700 km northwest of Lima.
The company still requires two other permits to complete its feasibility study: a water permit from the National Water Authority and surface-rights access from the local Kanaris community. (The water permit could not be applied for until Candente received its drill permit.)
If the Vancouver-based company can wrap up the surface-rights agreement within the coming months it should be able to complete the feasibility study on Canariaco Norte by the third quarter of 2013, according to Adam Low, a mining analyst at Raymond James in Toronto.
Low points out that a community vote has yet to be scheduled on the three-year surface-rights access agreement — or what he calls “the key catalyst.”
“Candente has recently made progress on securing a general assembly meeting of the local community and expects the vote to be held soon,” the analyst writes in a June 1 research note to clients. Low has a six- to 12-month target price on the stock of $2.10 per share. At presstime Candente’s shares traded at 53¢ apiece within a 52-week range of 58¢–$1.54.
Last month, Candente’s CEO and chair Joanne Freeze, was invited by members of 12 hamlets in the Kanaris area to attend a meeting with about 200 locals, and reached an agreement with community members on local employment and sustainable development initiatives, including support for agricultural projects in the high zone of the Kanaris community.
Freeze, a geologist who lived and worked in Peru with her family from 1994–1997, set up Candente Copper in 1997 with co-founder Fredy Huanqui, a Peruvian geologist with several major gold discoveries under his belt, including the Pierina mine (8.7 million oz.) and the Quicay mine (0.5 million oz.). Candente listed on the TSX Venture Exchange in 2000 and was only the third junior to list on the Lima Stock Exchange in 2007. Huanqui retired from Candente the same year.
The Canariaco Norte deposit is a single, contiguous, open-pit mineable deposit containing measured and indicated resources of 752.4 million tonnes grading 0.45% copper, 0.07 gram gold per tonne and 1.7 grams silver per tonne (0.52% copper equivalent) for 7.5 billion contained lb. copper, 1.7 million oz. gold and 45 million oz. silver. The deposit also has inferred resources of 157.7 million tonnes grading 0.41% copper for 1.4 billion contained lb. copper.
Three main zones have been recognized in the porphyry copper-gold deposit: a variable-thickness leached cap, minor supergene copper mineralization under the leached cap and hypogene copper mineralization, the main component of the deposit. A prefeasibility study progress report on the Canariaco Norte deposit was completed in March 2011.
In addition to Canariaco Norte, the company has identified two other porphyry copper-gold targets on the property called the Canariaco Sur and Quebrada Verde zones. (The drill permit the company received from the Ministry of Energy and Mines on May 31 also covers exploration drilling on Canariaco Sur and Quebrada Verde.)
Canariaco Norte, Canariaco Sur and Quebrada Verde are part of an extensive porphyry complex covering a minimum length of 5 km and an average width of 2 km. Canariaco Sur is the second copper-gold porphyry intrusive body discovered on the Canariaco property and lies 1.3 km south of the centre of Canariaco Norte. Centre to centre, Quebrada Verde sits 3 km from Canariaco Norte.
The project is 110 km northeast of the city of Chiclayo in the Western Cordillera of the Peruvian Andes in Ferrenafe province. The property is road accessible from Lima via Chiclayo on the Pan-American Highway (about an 11-hour trip). It can also be accessed by flying to Chiclayo from Lima, and making a 149-km, six-hour drive to site.
Copper was first discovered at Canariaco Norte in the 1970s, but phases of exploration and drilling in the 1970s and 1990s were sporadic until Candente Copper started exploring there in 2004 after acquiring the property in 2001. It completed a preliminary economic assessment in 2008, which showed good economics, but the project was put on hold in 2009 due to the financial crisis. Prefeasibility work was started in April 2010 and a prefeasibility study progress report was issued in early 2011, which outlined a net present value of US$912 million at a base-case copper price of US$2.25 per lb. Payback of initial capital was estimated at 4.4 years with a minimum mine life of 22 years. Based on the positive economics of the prefeasibility, Candente started its feasibility work in April 2011.
“The engineering work that has been done has shown that it is a very robust project, and copper has a bright future,” Freeze explains in a telephone interview from her Vancouver office. “It’s great for our shareholders and great for people in the area. It’s going to benefit a lot of lives.”
According to the prefeasibility progress report, the project has the potential to generate direct, full-time, life-of-mine employment for 600 people, as well as jobs for 2,000 people during its construction phase. It will also create indirect life-of-mine employment for 2,400 people.
Freeze notes that the company is pressing ahead on two fronts — community relations and sustainable development projects. Under the community relations banner the company is educating local residents about what it hopes to accomplish, what mining is all about and that a mine in their area will not contaminate their environment. On the sustainable development front management is working on several different projects, including coffee cultivation.
While the Kanaris community has been growing coffee for more than a quarter of a century, they weren’t using any fertilizer and didn’t know how to increase crop yields or even the best way to dry their beans, Freeze says. Candente is helping to educate them about the best growing methods and offering micro-finance opportunities to purchase fertilizer. More recently, the Canadian junior helped pinpoint a non-governmental organization (NGO) that has direct access to coffee buyers, which can help local farmers sell their produce directly.
In another project, Candente financed local farmers who raise guinea pigs, a local delicacy, to travel to another part of Peru where the rodents are also raised, to learn new techniques on how to produce bigger offspring. The trip produced noticeable results. “Now they raise guinea pigs that are up to a kilogram in size, which is a lot bigger and healthier than the ones they used to raise,” Freeze says.
The company is also helping the local community assess what other crops might be cultivated in the area and at what altitudes. Freeze and her team have brought several NGOs into the area for the first time, such as Save the Children and the Clinton-Giustra Sustainable Growth Initiative. The latter performs cataract surgery, while the Lions Club is providing children with free eyeglasses. Other initiatives include blueberry, strawberry and quinoa pilot projects.
Among infrastructure development plans are solar-panel systems and alternative lighting schemes with the help of GTZ, a German international co-operation agency.
Peru’s President Ollanta Humala — a former army officer who was elected a year ago this month and whom many Peruvians feared would embark on the same path of nationalization as Hugo Chavez in Venezuela — has shown a pragmatic bent. The country has the fastest-growing economy in all of Latin America, according to a recent issue of Bloomberg’s Businessweek
magazine, which also noted that the stock market is up almost 8% and that foreign investment is flooding in.
Freeze notes that Humala is keen to raise the living standards of the country’s poor and sees that it is possible to do that with the help of mining companies like Candente. “The Humala government recognized that the locals need to benefit more from mining,” she explains. “The regional governments don’t have the capacity to build roads and hospitals, so the country’s poor were not benefiting from mining projects, and hence there were protests and discontent. So he knows that he needs better laws and ways to make sure people benefit more. So we’re all working together — the central and regional governments and us — to make the lives of people better.”
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