Going for gold in Colombia

Santiago, Chile — Gold exploration in Colombia will top US$30 million this year as the country shapes up to be a key prospect over the next decade for miners looking to this forgotten part of the world in their quest to replace reserves.

Ian Park, a private investor behind gold junior Minera de Caldas has no doubt about Colombia’s future.

“The potential is enormous; Colombia has the highest gold potential in all Latin America,” he says.

Fifty years of armed conflict mean that 40% of the country has not even been geologically mapped. With three belts of Andean cordillera that have not been tackled with modern exploration equipment, the widespread belief is that it is “very probable that there exist large undiscovered reserves,” says international gold consultant and trader Archak Bedrossian.

Colombia’s ministry of mines and energy has identified six districts with high gold potential including epithermal, porphyry, alluvial, placer and vein deposits. Much of the potential is in the western and central cordilleras in Antioquia, Cauca, Valle de Cauca, Choco and Caldas departments.

In Antioquia alone, 24 projects were presented to international investors at a November mining show, including nine mines, six inactive mines and properties totalling over 12,200 hectares.

So convinced is South Africa’s AngloGold Ashanti (au-n) about Colombia’s golden future that it relocated its regional headquarters from Peru to Bogota.

Through subsidiary Sociedad Kedahda, the company has a team of 48 geologists systematically performing basic exploration throughout the country to identify and secure deposits with the potential to contain at least 5 million oz. gold before the rest of the industry wakes up.

With US$12 million spent in Colombia between 1999 and 2005, the company will spend another US$25 million between 2006 and 2008 — $9.6 million of that this year, says exploration manager Chris Lodder.

A blitzkrieg staking program from 2002 to 2004 saw the company amass a “huge land package,” says Lodder, without elaborating.

Industry observers think AngloGold’s efforts alone could uncover up to 30 significant prospects. So far, the company has eight projects ready to be drilled and will drill throughout 2006.

“Our objective is to have a project at prefeasibility status by the end of 2008,” Lodder says.

Greystar

Leading the Colombian charge, however, is Canadian junior Greystar Resources (GSL-T, GYSLF-O) with its 10-million-oz. Angostura gold property near Bucaramanga, in Santander department.

“We have identified over 120 veins in the deposit and an important percentage of the contained gold occurs in sixty higher-grade shoots where veins intersect,” says Frederick Felder, Greystar’s executive vice-president.

Greystar will spend at least US$12 million on the project this year and hopes to start a feasibility study for a 300,000-oz.-per-year mine before year-end, despite not having defined the exterior limits of the deposit.

“Although this is a good problem to have, it does create a bit of a dilemma, when trying to decide where to stop the exploration work,” Felder says.

Ian Park’s Minera de Caldas is probably the third-largest investor in Colombia, as it looks to develop its Marmato and Caramanta projects.

“Marmato is the most revered historic mining district in the country and has been in production for the last five-hundred years,” Park says.

Marmato has an inferred resource of about 2 million oz. gold with a potential for more, Park says, but its long history means that the mountain is speckled with 267 small-scale mining operations, which have scared away larger mining houses.

Park hopes to consolidate the Marmato land position this year and begin a prefeasibility study.

Vancouver-based Colombian Goldfields (CGDF-O) will spend US$7 million this year on exploration as it seeks to earn a 75% stake in the project.

Park thinks there is similar potential at Caramanta to the north, which is characterized by dacitic porphyry rocks that host gold and silver mineralization similar to that found at Marmato.

Frontino

In Antioquia department, Caldas also has the right of first refusal to buy a 70% interest in Frontino, Colombia’s biggest gold mine. Frontino produces about 50,000 oz. gold per year and hosts proven and probable reserves of 500,000 oz. gold.

However, Frontino is in liquidation, having been in bankruptcy for 27 years. Caldas is completing due diligence and performing an evaluation to arrive at a purchase price for the stake.

Meanwhile, Colombia’s small miners are also attracting interest from foreign investors.

London-based junior Cambridge Mineral Resources (CMR-L) signed options on two gold properties in Antioquia department with more to come. CMR holds majority interests in the small-scale Quintana and El Cinco mines and expects to complete acquisitions of at least two more operations in the Frontino gold belt within the next three months.

“The geology of Frontino repeats itself in other locations in Antioquia department, so we are looking at that,” says CMR managing director Colin Andrew.

CMR will spend US$2 million in 2006 and introduce modern mining equipment to develop and explore the vein systems.

“The terrain is covered, so you have to drill or get underground, and if you are driving on a vein underground, you are essentially mining,” he says.

The veins being exploited typically average 2 metres in width and contain 15 to 20 grams gold per tonne, with bonanza grades above 1,000 grams locally, Andrew says.

At Quintana, CMR aims to have completed 1,400 metres of underground development to block out about 250,000 tonnes of vein material by the second half of this year.

Following an assessment, CNR will build a mill and start mining.

“This simple strategy is then applied at El Cinco and other projects on a rolling start basis to attain one production start every nine months,” he says, adding that CMR sees annual production exceeding 50,000 oz. gold per year in 2009.

Even without modern practices, Colombia produces about 50 tonnes per year of gold, according to the mining ministry.

“This fifty tonnes implies gigantic potential to develop gold mining activity,” says Eduardo Chaparro, a mining analyst at Eclac, the United Nations Economic Commission for Latin America and the Caribbean.

Peru produced a similar amount 20 years ago and is now the continent’s largest producer at over 210 tonnes per year.

Park thinks Peru will pale in comparison to Colombia in the future.

“There is more gold in Colombia than there ever was in Peru,” he says.

Canadian majors such as Toronto-based Barrick Gold (abx-t, abx-n) and Vancouver-based Bema Gold (BGO-T, BGO-X, BAU-L) have visited Colombia but have yet to act.

“We are not ready for Colombia. It is the kind of place where the larger companies look to juniors to go in and see what’s there,” says Vince Borg, Barrick’s vice-president of corporate communications.

Peter Baxter, exploration manager of Bema Gold, expects AngloGold Ashanti’s bullish entry will create opportunities for other miners who can obtain the projects that don’t meet the major’s investment criteria.

“With Anglo looking for specific size targets on such a large land tenure, they may pass on opportunities that do not have significant impact on their balance sheet and farm them out to smaller companies,” Baxter says.

— The author is a freelance journalist based in Santiago, Chile.