Denarius gets Zancudo gold project OK in Colombia

Denarius Metals (Cboe CA: DMET; US-OTC: DNRSF) has received the go-ahead to begin mining at its Zancudo gold-silver project in Colombia after the local  environmental authority approved the company’s impact study.

The company expects first production from Zancudo by the end of this quarter. Zancudo hosts a high-grade deposit and includes the historic Independencia mine located in the Cauca belt, about 30 km southwest of Medellin. 

“Zancudo is expected to provide a near-term source of cash flow, ” Toronto-based Red Cloud Securities said on Thursday. “We note that initial production at two of the company’s projects – Zancudo in Colombia and Aguablanca in Spain – is expected to commence in 2025, and additional development milestones and further positive exploration results should help drive the share price in the near term.” 

Denarius Metals’ shares on the Cboe exchange in Toronto rose 13% Wednesday morning and closed at 70¢ each. The company’s market capitalization is $65.7 million. 

The project was previously held by Aris Mining (TSX: ARIS) when it was Gran Colombia Gold, and explored by Iamgold (TSX: IMG) under an option agreement. Denarius took full ownership of the project in 2022 after Iamgold decided not to proceed with its earn-in.

High return

At long-term prices of US$1,800 per oz. gold and US$22 per oz. silver, the project’s preliminary economic assessment envisions an underground operation with a 10-year mine life. It may generate an after-tax net present value at a 5% discount rate of US$206.3 million with an internal rate of return of of 287% and a payback of 1.2 years.

Based on historic drilling completed by Aris and Iamgold, the Zancudo project currently has an estimated resource of 4.1 million tonnes grading 6.5 grams gold per tonne and 107 grams silver totaling 860,000 oz. of gold and 14.1 million oz. of silver.

The mined material will initially be sold to Soma Gold (TSXV: SOMA) and processed at its El Limon mill, which has capacity of 225 tonnes per day. 

Mill work

The El Limon mill has been on care and maintenance since 2020, and the companies are currently working towards its restart. The plant is located north of Aris Mining’s Segovia operations in the department of Antioquia. It is permitted for up to 400 tonnes a day. 

“Processing of Zancudo’s material at the El Limon mill to generate high-grade gold-silver concentrates is expected to commence by the end of February,” executive chairman Serafino Iacono said in Wednesday’s release.

He also noted that the agreement with Soma will help generate cash flow for the company while it gets the new 1,000-tonne-per-day plant at Zancudo ready, which is expected in the second quarter.

Later in 2025, Denarius expects to have a second operating mine at its Aguablanca project. A formal mining licence application has been submitted for the zinc-lead-silver project, which it acquired in 2017.