Southwestern’s travails at Boka

Vancouver — The day after Southwestern Resources (SWG-T, SWGGF-O) announced a 6-month delay for the Boka gold project prefeasibility study in mid-June, the company’s co-founder, president and CEO John Paterson resigned, citing personal reasons.

On June 18, Southwestern revealed that additional metallurgical test work is required to complete the prefeasibility study for its 90%-owned Boka project in China, a study that had been expected to be finished this month.

The Boka orebody contains both oxide and sulphide portions. For the oxide portion, Southwestern’s consulting engineers are satisfied with the test results for a conventional milling, gravity circuit, and carbon-in-leach process. They were not, however, satisfied with sulphide ore test results: the company was considering a flotation process for the sulphide portion, but initial flotation tests did not reduce the carbon content sufficiently.

Engineering consultants will now conduct additional flotation tests and evaluate other possible processing techniques to improve recoveries from the sulphide portion, such as bio-oxidation or pressure oxidation. The prefeasibility report is now expected by the end of the year.

Then, on June 19th, the company announced that Paterson had resigned his president and CEO positions effective immediately. Paterson was one of the founders of Southwestern in 1990.

Raymond James mining analyst Bart Jaworski is “quite happy” with Paterson’s departure.

“This is definitely something that a lot of shareholders were pushing for — some kind of change in management,” Jaworski says. “The company’s recent track record has been quite poor in terms of the frequency of news flow and the transparency of their work in Peru.

“The six-month delay because of metallurgical issues — those should have been identified long ago,” he continues. “No one was ever really satisfied with the pace of exploration at Boka.”

Southwestern discovered significant mineralization at Boka in late 2002 and has been drilling the property for the past four years. The main deposit, Boka 1, has measured and indicated resources of 31.2 million tonnes grading 3.05 grams gold per tonne, as well as 8.9 million inferred tonnes grading 2.66 grams gold. A second gold zone, Boka 19, is also being explored.

The Boka project is a joint venture between Southwestern and Team 209 of the Yunnan nuclear industry of Yunnan province. It’s made up of three mining permits and three exploration permits covering an area of 157 sq. km in northern Yunnan province.

“Unlocking the full value of Boka, to the north and to the south, that needs to be a focus of the company and it really hasn’t been a focus in recent months,” Jaworski says. “They’ve got a lot of stuff going on right now.”

Southwestern holds exploration projects in China and Peru. In western Yunnan province, the company is evaluating a 62,000-sq.-km area of interest with its joint-venture partner Newmont Overseas Exploration, a wholly owned subsidiary of Newmont Mining (NMC-T, NEM-N). In Peru, Southwestern’s Liam project is a joint venture with Newmont Peru that covers 3,650 sq. km, the largest single exploration block in the country. The company holds six other exploration projects in Peru, four of which are joint ventures.

Southwestern’s share price fell 77 to $6.07 on the Boka announcement. News of Paterson’s resignation came after trading close on June 19th; the next day, the price rebounded 10.