Coronet Metals Secures Advance-Stage Project in Barrick Gold Territory and Sets Out on the Path to Production
December 9, 2011 by Gold Editor
Author: Claire O’Connor and Nathan Pearson
In its quest to secure and develop advance-stage gold and silver projects in South America, Coronet Metals (TSX-V: CRF) has acquired the 224 hectare Yanamina Gold project in Ancash province, Peru. The company recently completed an amended share purchase agreement with Latin Gold Ltd. (ASX: LAT), which reduced Coronet’s purchase price from US$14 million to US$12.75, and is now preparing for a 10,000 metre drill program expected to commence next year. With an ambitious yet completely plausible view to initiating production on Yanamina by Q1 2014, Coronet recognises the challenge ahead and is rising up to meet it.
Located 175 kilometres northeast of Lima, in the Department of Ancash in Peru, the Yanamina project is situated only 40 kilometres north of Barrick Gold’s (TSX-V: ABX) Pierina Mine and 120 kilometres south of Barrick’s Alto Chicama/Laguna Norte mines.
Just to drive home what neighbouring the world’s largest gold producer means for Coronet; the company’s Pierina mine has produced over 7.5 million ounces of gold during the lifetime of the mine. The Lagunas Norte mine produced 808,000 ounces of gold in 2010 and has proven and probable gold reserves of 6.6 million ounces. Location, as every good explorer and exploration investor will confirm, is everything when it comes to digging for gold, and Coronet have most certainly hit that nail on the head with Yanamina.
The other keyword with Yanamina is potential. Significant exploration potential. The aim for Coronet is to commence production on the project by early 2014, but until then the company believes it can double or even triple the existing resource through infill and step-out drilling, focusing on the target at depth, along strike and to each side of the existing resource.
The existing NI 43-101 compliant epithermal resource on Yanamina, of 86,000 ounces of gold indicated and 124,000 ounces of gold inferred, is based on an estimation completed in 1994 and 1996 by former owner Latin Gold. A study then undertaken by Barrick Mines in 2000 determined that the known mineralisation at Yanamina has a global resource potential of 2,390,000 ounces at a grade of 1.1 g/t. The study also suggested that the grade had the potential to be higher than 1.1 g/t with better drill sample recovery.
The property has over 100 small artisanal pits and short tunnels up to 15 metres in length distributed over the prospect area. Local knowledge suggests that much of this artisanal work began with Portuguese miners in the 1600s and continued to the late 1890s, although no production records are available. Production, however, is assumed to have been small and was concentrated on the exploitation of high grade pockets of gold mineralization.
In relatively recent years, Yanamina was explored by Compania Acuarios Minera y Exploradora who completed regional and prospect sampling, reopened some of the historical adits, developed 3 new adits and completed 62 diamond drill holes between 1994 and 1996. There has been limited regional exploration in the vicinity of the project however, and Coronet believes this presents an excellent opportunity for a substantial increase in resources through the discovery of both primary and structural repetitions to the existing mineralization.
Also lending credence to the production potential of Yanamina are the results of a preliminary economic assessment completed in February 2011 which suggested the following:
* A minimum 5 year mine life.
* An estimated capital cost of US$28 million.
* Initial average annual production of 50,000 ounces Au and 75,000 ounces Ag.
* A waste to ore ratio of 1: 1.
* Projected first gold pour within 24 - 36 months.
* Significant exploration potential downdip, at depth and along strike.
Now that the purchase terms have been renegotiated, and bearing in mind the work completed by Latin Gold, Coronet has hired an experienced team of Peruvian social specialists to engage with the local community to obtain the approvals and permits necessary to move the Yanamina project towards production.
An application for a recommended 43-101 exploration program has been submitted and is being reviewed while discussions with the regulators have been proactive. The political ground work for the development permit is also under way and the application will be submitted on completion of the feasibility study. All in all, Coronet’s production plans for Yanamina, a project envisioned to be an open pit, heap leach gold operation, are well and truly underway.
With an ever-vigilant eye on advanced stage projects that meet its criteria in South America, Coronet signed an agreement on November 16th 2011 to re-process gold tailings. The company’s wholly owned subsidiary, Coronet Metals Peru S.A.C., entered into a non-binding agreement with Compania Minera California S.A. to evaluate re-processing up to 950,000 tonnes of vat leach gold tailings in Peru.
Located 16 kilometres below the Yanamina project in the Rio Santo Valley, the tailings project would give Coronet the opportunity to demonstrate social, environmental and employment practices in the area.
"This low-capital project could move Coronet into gold and silver production with the objective of generating sufficient free cash flow to cover the company’s over head," comments Coronet CEO and Director Joel Dumaresq. "The contractors are already permitted and completion of due diligence is targeted for Q1 2012. The personnel operating out of Coronet’s Peru office have the technical and metallurgical expertise to develop the project."
Mining in Peru
Widely regarded as one of the major mining countries in the world, Peru holds the title of world’s largest producer of silver, its second largest producer of copper and zinc and its sixth largest producer of gold. According to the Banco Central de Reserva del Peru, the country’s average GDP growth from 2006 to 2010 was 7.2% and is expected to grow 6% annually through 2011 to 2013. In fact, the country has progressed at such at rate, that Standard and Poor’s upgraded Peru’s foreign long-term credit rating to investment grade BBB, essentially confirming that Coronet has most definitely done its research and chosen wisely when it came to strategic property selection.
With a top class project in a world class mining jurisdiction, Coronet is of course guided by a top of the range management team. The company’s Board of Directors has raised hundreds of millions of dollars for mining projects around the world, while its team includes members who have extensive experience working with governmental, non-governmental and community groups in Peru.
CEO Joel Dumaresq has a background in finance and investment banking and spent a number of years working with private equity and merchant banking firm Matrix Partners inc. and RBC Dominion Securities, a division of the Royal Bank of Canada.
Coronet President, Director and COO Stephen Stine P.E. is a co-founder and former Director of Alamos Gold where he served as COO in charge of exploration and production. He also worked as a consultant to Newmont Mining at their Yanacocha gold mine in Peru. Most recently, Stine acted as Director and COO of Etruscan Resources where he was responsible for turning around the Youga Gold Mine in Burkina Faso, West Africa. During that time, the mine doubled production and the cost of production was reduced by 50%.