Colombian Mines’ Nevada acquisition sends shares soaring

Robert Carrington has spent a good part of his career in Nevada and has helped find a number of deposits that became producing mines, including Twin Creek, now owned by Newmont Mining (NYSE: NEM), and the Lucerne and Billie the Kid deposits, owned by Comstock Mining (NYSE-MKT: LODE).

The geologist also happens to be a fourth-generation Nevadan. His family has been involved in mining for many more generations than that and his degree, not surprisingly, comes from the University of Nevada’s Mackay School of Mines, in Reno.

So it’s no wonder that the co-founder, president and CEO of Colombian Mines (TSXV: CMJ; US-OTC: CMBPF) — a prospect generator he co-founded in the South American country in 2006, and took public in 2008 — has always kept his eye out for interesting properties back home.

This year the stars aligned and Carrington closed Colombian’s first deal in Nevada — an option agreement with a private party for Pamlico, a gold project in the famous Walker Lane trend, 20 km southeast of Hawthorne and 86 km from Yerington, a district known for at least four copper porphyry deposits.

“The private seller was a friend of my father’s, and an old classmate of mine from university was one of the seller’s consultants,” Carrington says. “His lifelong dream was to turn it into a gold-producing property. He poured US$3 million into it and did a 650-metre decline — almost to the ore zone — and then his health started failing.”

A sample from one of the two new zones discovered while building a decline at Colombian Mines’ Pamlico gold property in Nevada. Credit: Colombian Mines.

Under the new option agreement, Colombian can acquire 100% of Pamlico for US$4 million in cash, including advance minimum royalties and production royalties (a 4% net smelter return royalty [NSR]) within four years, or by paying US$7.5 million in cash, including advance minimum royalties and production royalties, so long as annual payments are equal to or exceed US$250,000. The 4% NSR can be brought down to 1% by paying the seller US$1 million for each percentage point.

In addition to the 29 historic holes drilled by the seller between 2010 and 2013, two previous owners of the property completed 74 holes, bringing the total to 103 for 8,900 metres. Highlights of the seller’s drill holes included 6 metres grading 33.49 grams gold per tonne; 2.3 metres of 165.49 grams gold; 3 metres of 21.28 grams; 5.3 metres of 36.85 grams; and 7.6 metres of 21.76 grams.

“Pamlico is the rare situation where it’s not quite like finding gold bars on the ground, but it’s pretty darn close,” Carrington says. “The fact that you can walk down the decline and see visible gold — it’s pretty difficult to find those projects in Nevada today, particularly with the exploration upside that this project has.”

One of the interesting things, he adds, is that the vendor discovered two gold-bearing zones as he  drove the decline, and neither of them were intersected in previous drilling, “so there are additional gold-bearing structures in there that could potentially be economic.”

The zones contain coarse visible gold in brecciated vein material with abundant iron oxides, and will be a priority for independent sampling. “Neither of the two zones discovered in the decline had been found with drilling, so there is a lot of potential for more discoveries on the property,” he says.

Drillers at Colombia Mines’ Pamlico gold project in Nevada. Credit: Colombia Mines.

The volcanic rocks at Pamlico are juxtaposed against sedimentary rocks in complex structural settings, with numerous low-angle and high-angle faults mapped on the property. A series of high-angle faults host the majority of the better gold mineralization identified so far.

The property hasn’t seen any deep drilling and the vertical extent of oxidation is unknown, although Carrington and his team say that a nearby water well suggests that favourable oxidized mineralization could extend at least 244 metres below surface.

“Pamlico is known as a high-grade district, and around 1886 there were newspaper stories of Pamlico producing ore that ran over 4,000 grams gold a tonne,” Carrington says. “It wasn’t huge tonnage, but at those kinds of grades, it doesn’t take a lot of tonnes.”

Carrington says there are two semi-parallel veins at the project that dip towards each other at a steep angle and both veins are known to contain high-grade gold, and should intersect at depth.

In the bigger picture, he says, “a lot of mineralization that you see in the Pamlico district indicates a porphyry system at depth,” and “there’s a very good possibility that there is a gold or copper porphyry on the property.

“Pamlico is to the southeast along strike of Walker Lane and Walker Lane is a large structural lineament — it’s actually a structural corridor,” he says. “It’s several miles wide, and depending on how far you want to push it, there are some workers in the industry who feel Walker Lane extends from Texas into northern California and Oregon. It is certainly one of Nevada’s largest gold lineaments, and almost by default one of the world’s largest.”

The next steps for Colombian Mines are to do large-diameter core drilling, basic engineering (“to make sure the decline is where it needs to be relative to the orebody”) and a bulk sample. The seller was about to start a fully permitted, 1,000-tonne bulk sample, before his health deteriorated and permitting bogged him down. If all goes according to plan, a bulk sample could start later this year. (Carrington says that “we need to make sure the permits are spot perfect.”)

A drill program could be partly funded by selling one of the company’s non-core assets in Colombia — Anori. The sale is in the works already and should bring in US$800,000. “That wouldn’t necessarily be enough to complete a diamond drill program,” Carrington says, “but it would be a big chunk of it, because the holes are only going to be between 80 metres and 90 metres deep.”

“It’s not quite like finding gold bars on the ground, but it’s pretty darn close. You can walk down the decline and see visible gold — it’s pretty difficult to find those kinds of projects in Nevada today.”
Robert Carrington
President and CEO, Colombian Mines

Meanwhile in Colombia — “in a perfect world and assuming we have sufficient financing this year” — the company will initiate a drill campaign at its Mercedes gold-silver-copper project, undertake more drilling at its El Dovio gold-silver-copper project and complete a resource estimate and a preliminary economic assessment of its Yarumalito gold-copper project.

“We’re no less committed to advancing the Colombia projects,” he says. “It was just that Pamlico was something that — assuming we complete all the regulatory acrobatics we have to do — we can potentially see production there in a relatively short time line, much faster than you would reasonably expect to build El Dovio or Mercedes.”

Carrington has worked in Colombia since 1992.

“I had a geologist working for my consulting company who got me interested, so we formed a private company that I funded, and we charged off into Colombia,” Carrington recalls.

“We were working on a 2 million oz. placer project he had the data for, and the last time we saw the property, the pilot was yanking up on the controls and saying: ‘They’re shooting at us’ … living proof that God takes care of fools and idiots.”

By that point, Carrington says, he had figured out that the country’s geological potential was immense and under-explored, so he looked for large lode projects in safer areas.

A joint venture with Placer Dome lasted until 1995, when it cut back globally on exploration. His partner then dropped out, and Carrington sold the company later that year to what became Conquistador Mines, a Vancouver-based junior.

“Conquistador went from 30¢ to over $9 on the Colombian assets they acquired,” says Carrington, who stayed on as a manager until 1996.

Conquistador joint-ventured with AngloGold Ashanti (NYSE: AU) and Mineros de Antioquia (now Mineros), Colombia’s largest gold producer.

“In 2000, when gold hit its low, Anglo pulled the plug on the joint venture and Conquistador evaporated in a puff of smoke,” Carrington remembers. Anglo stuck around, however, and by 2006 had made discoveries at La Colosa, Gramalote, Quinchia and La Mina, some of which Carrington claims had been Conquistador properties.

“The only one they could not get was Yarumalito,” he adds. “I actually started negotiating for the Yarumalito property in November 2005, as we knew we were going to put a company together … Yarumalito was Colombian Mines’ first acquisition in Colombia, and is still considered a core asset.”

Yarumalito may be one of the company’s core assets, but the market cheered its Pamlico option deal announced on July 19, driving up its shares 57% to 22¢.

The company’s 53 million common shares are tightly held, with the 17 largest shareholders owning 70% of the stock.

Its institutional investors include European funds, and its largest corporate shareholder is Teck Resources (TSX: TCK.B; NYSE: TCK), which Carrington says holds 2.2 million shares.