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Volume 13 | Number 5 | Winter 2010 Vancouver, British Columbia www.ReportOnMining.com Planning for Profits - Report on Mining edition is published four times a year by Fusion Publishing Inc. All rights reserved. Any reproduction or duplication without prior written consent of Fusion Publishing Inc. is strictly prohibited. Published by Fusion Publishing Inc. Canadian Office Fusion Publishing Inc. #317 – 1489 Marine Dr. West Vancouver, BC Canada V7T 1B8 1.888.925.0313 (Toll Free) USA Office Fusion Publishing Inc. 145 Tyee Dr. Pt. Roberts, WA USA 98281-9602 1.888.925.0313 (Toll Free) Publisher Terry Tremaine Associate Publisher & Editor Connie Ekelund Production Manager Christie Smith
The Osisko story is a great Canadian success story. It’s seldom that the core group behind a junior mining company is able to lead that company to become a major producer. Generally, the guys behind the first few holes in the ground touting the ‘blue-sky’ are not the ones standing when the first bars of gold are produced. But with Osisko, that’s what we have! And what a job they’ve done along the way. In one of the worst market downturns ever, they were able to raise extraordinary amounts of money. Not many guys were still making substantial progress while companies like General Motors were receiving government bailouts. Further the quality of that progress is exemplary. The company has been an excellent corporate citizen while developing the mine. In today’s world, Canadian mining companies are held to a very high level when it comes to environmental standards. Osisko has responded admirably to all social issues. I suspect the locals working for Osisko are going to be inclined to boast about the company they work for. But even better they have yet to stop. They are involved in a number of other projects, all of which are likely to see good progress. As Canadians, I’d be inclined to say we should all boast about Osisko.
Contributing Editors Grant Campbell James DiGeorgia Elvis Picardo Account Managers 1.888.925.0313 Terry Tremaine Ext: 1002 Maureen O’Brien Ext: 2001 Marie Richards Ext: 3002 Publication Mail Agreement #41124091 Circulation & Distribution Canada Post Distacor Inc. Newsstand Digital Non-deliverables please return to: Fusion Publishing Inc. Report On Mining Magazine #317 - 1489 Marine Drive West Vancouver, BC Canada V7T 1B8 Subscriptions: 1 year $14.95 in Canada (+$8.00 in USA) 2 years $28.00 in Canada (+$16.00 in USA) 1.888.925.0313 x1001 info@ReportOnMining.com www.ReportOnMining.com Free Digital Subscription www.tiny.cc/rom
Cover Story 4 Osisko Mining Corporation “Quebec Takes Charge” 10 Commodities Outlook by Elvis Picardo North America 12 Solid Gold Resources 14 Amex Exploration Inc On The Move 16 Bowmore Exploration Ltd 18 Colossus Minerals Inc. 20
Today’s Gold Market by James DiGeorgia On the cover: Osisko Mining Corporation
The information in Planning for Profits - Report on Mining has been carefully compiled from sources believed to be reliable, but its accuracy is not guaranteed. www.ReportOnMining.com
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Century Mining Corporation: starting in Canada, expanding in Peru.
Winter 2010 | Planning for Profits | Report on Mining 3
Quebec Takes Charge Osisko Mining Corporation’s Canadian Malartic Gold Mine Set to Become One of Canada’s Largest Producers
O
sisko Mining Corporation is set to join company with the largest gold producers in the country. In the past five years, Osisko has moved from a virtually unknown exploration company through the discovery and development stage, to a company that will, in just a few months time, see their Quebec-based flagship Canadian Malartic gold mine become Canada’s next significant producer. In fact, it will become Canada’s single largest annual gold producer by 2012, its first full year of production. Very few junior explorers make the leap from discovery to production, and all of this has taken place in record time. Osisko’s Canadian Malartic property was first acquired in late 2004, saw its first hold drilled in March, 2005 and is scheduled to reach commercial production and pour its first gold in May, 2011. This rapid advancement, development, financing and construction of their world-class project with a nearly billion dollar construction price tag is a testament to the ability of the management at Osisko to see the end from the beginning, and to execute their business plan flawlessly along the way.
4 Planning for Profits | Report on Mining | Winter 2010
Canadian Malartic is a large scale, bulk tonnage mine that represents the largest open pit gold mine ever defined in Quebec, and is the largest gold reserve in Canada scheduled to begin production in 2011. Over the past five years, Osisko has completed a staggering 800,000 metres of drilling. The current NI 43-101 resource calculation shows the property contains a proven and probable reserve of 8.97 million ounces of gold, a measured and indicated 2.2 million ounces and 0.5 million in the inferred category. In the past three successive years, Osisko has grown the size of their resource table by approximately 2 million ounces per year through aggressive exploration and definition drilling. This year’s program includes over 80,000 metres of new drilling, and the Company again expects to add significant ounces to their overall resource, while converting additional ounces currently in the measured and indicated category to reserve.
Mining Complex
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Left: Administration building. Top right: SAG mill. Bottom right: garage and maintenance facility.
Construction in Record Time The construction phase has progressed very rapidly and is a reflection of the skill and experience of Osisko’s mine building and operations team. Osisko received final government approvals to start construction in late August 2009, and in 12 short months the Company has completed over 80% of the mine build and expects to see construction fully completed early in the new year. The truck shop, administrative and ancillary buildings are up and are fully operational, and 10 CAT 793F 240 tonne haul trucks and two 550 tonne shovels have been commissioned. The mill complex is quickly nearing completion, with the 38foot diameter SAG mill and two of the 24-foot diameter ball mills resting in their saddles. Approximately 1,000 construction workers are currently on site, along with 350 of the forecasted 465 mine production workers. The mill is expected to start commissioning early in the new year, leading to commercial production in May 2011. The Company anticipates initial ore processing at a rate of 55,000 tonnes per day producing 450,000 ounces of gold in 2011 then ramping up to full production of over 700,000 ounces of gold in 2012. The estimated average annual production over the current 12.2 year mine life is expected to be 600,000 ounces for a total production of 7.72 million ounces of gold. Osisko’s pre-production mining activity will produce 3 million tonnes of ore as a stock pile in preparation for the start up of the milling operation. With the open pit and mining fleet already commissioned, the Company has dramatically reduced the risk aspects associated with starting production as they will have worked out any bugs in those two aspects of operations before starting to commission the mill. www.ReportOnMining.com
Top: Processing area. Bottom: Canadian Malartic will create 465 permanent jobs for over 12 years.
Winter 2010 | Planning for Profits | Report on Mining 5
Mining complex
Sustainability While the Company was drill defining the mine, they were also moving a portion of the town of Malartic away from the future mine site. Osisko relocated 150 homes and built five new institutional buildings in a newly-built suburb located at the north end of the town. The relocation project was started in 2008 and is now 100% complete. The new neighbourhood, infrastructure and institutional buildings are completed elements of Osisko’s committed sustainability initiative that will benefit the town long after the mine has ceased production.
“ Besides providing the town of Malartic with new infrastructure associated with the relocation project, electrical equipment has been utilized wherever possible and practical...as opposed to a fossil fuel burning alternative.�
The new g
6 Planning for Profits | Report on Mining | Winter 2010
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Guyana
Pre-production mining activities
The Company has also taken dedicated steps towards creating a “Fresh Outlook on Mining,” by initiating a greener, more sustainable long-term view of precious metal mining. Besides providing the town of Malartic with new infrastructure associated with the relocation project, electrical equipment has been utilized wherever possible and practical (for example electrifying the mining shovels and drills) as opposed to a fossil fuel burning alternative. The Company is also employing an innovative approach to reclamation of the site by undertaking continuous rehabilitation in conjunction with mining. This approach will reduce the potential risks of leaving the site restoration until the end of the mining cycle. In another innovative green initiative, Osisko has reached a reforestation agreement with the regional county municipality to fund green elementary school the planting of 100 hectares annually for nine years. Osisko has consistently been a leader in the development of initiatives that benefit the surrounding community offering benefits in addition to the increased employment and tax base.
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The new neighbourhood at Malartic
Management Planned for Success The Canadian Malartic Mine has been able to move forward very quickly in large part due to the excellent planning initiated by management. The Company was founded by Sean Roosen, President & CEO, Robert Wares, and Executive VP & COO, and John Burzynski, VP of Corporate Development, who, along with VP Finance & CFO, Bryan Coates, have assembled a very experienced team of mine developers and operators. Osisko’s “A” Team of engineering and construction experience is led by Luc Lessard, VP Engineering & Construction who brings with him the experience gained in the building of 10 mines. Paul Johnson, General Manager – Technical Services, has over 25 years experience in open pit mining operations and was responsible for the mining plan and equipment selected. Denis Cimon, General Manager – Canadian Malartic Project, has over 20 years experience in the planning and designing of mills, commissioning 14 mines over the years. Jean-Sebastien David, VP of Sustainable Development, has valuable permitting experience which helped pave the way to the final mine permitting in less than one year after Osisko submitted their EIA. This depth of experience and expertise is common throughout the management at Osisko and has been a key reason for their success. Winter 2010 | Planning for Profits | Report on Mining 7
Growing the Company Outside of Malartic, Osisko Mining Corporation has been on the path to growth by acquisition as well as direct exploration. The August 2010 friendly takeover of Brett Resources Inc. creates the potential for the development of a second worldclass mine similar in size to the Canadian Malartic operation. The Hammond Reef property located near Atikokan, Ontario has a current NI 43-101 inferred resource of 6.7 million ounces of gold. Osisko is executing a 350,000 metre drilling program on the property in an effort to confirm the resource and move it into the proven and probable category. The exploration program is in full gear with 16 drill rigs on the property. The initial exploration results show that 97% of the mineralization occurs within 300 metres of surface suggesting that a large scale bulk-tonnage open pit operation is feasible. The Company believes that with the current drilling at Canadian Malartic and the extensive infill program underway at Hammond Reef, there is good potential to significantly increase reserve and resources over the next 18 months. Osisko is also conducting extensive exploration on the Duparquet Project which is located 75 kilometres northwest of Canadian Malartic. Late in 2009, Osisko signed a jointventure agreement with Clifton Star Resources Inc. Osisko has the right to acquire a 50% interest in the property by spending $70 million on exploration over the next four years and by extending loans to Clifton Star to fund option payments on the property of $8.5 million for 24 months and $22.5 million for 36 months. The exploration drilling program for 2010 comprised 122,500 metres of drilling over three zones (Beattie, Donchester and Duquesne). This early stage project has encountered encouraging results with significant intersections on the Beattie property of 88 metres averaging 1.9 grams per tonne, 42 metres averaging 3.78 grams per tonne and 27 metres averaging 3.38 grams per tonne gold. The addition of the Hammond Reef and Duparquet properties offers significant upside potential for Osisko as the exploration drilling continues, and as new mineralized zones are identified and reserves are added. The aggressive exploration program planned for these two properties creates the potential for a substantial increase in the number of ounces in the ground for Osisko.
Osisko Mining has been very adept at raising capital even in times of extreme turmoil as seen over the past couple of years. The Company completed one of the largest financings ever by a junior developer in February 2009; total value with the warrants exercised was $640 million. The Company raised a total of $1.05 billion in various financing efforts in 2009 — enough to fully underwrite the construction of Canadian Malartic with no senior debt or hedging. The ability to take advantage of opportunities in the market has been one of the Company’s strong points, and has shown Osisko’s knack at convincing the markets of their value. As the Canadian Malartic project moves into the gold production phase, investors should expect to see an expansion in the price to net asset value (NAV) ratio as uncertainty is reduced — assuming the ratio moves from the current 1.2 times NAV to that seen in comparable gold producing companies (1.8 to 2) — offering investors an excellent opportunity for capital appreciation over the next 12 months. For investors who are looking for a truly innovative and well-managed emerging mid-tier gold producer with substantial growth potential, Osisko Mining Corporation is an excellent choice for the precious metal portion of a growth portfolio. All photos by: Daniel Rompré
Osisko Mining Corporation 1100 Avenue des Canadiens-de-Montréal Suite 300, P.O. Box 211, Montréal QC Canada H3B 2S2 Phone: 514.735.7131 ir@osisko.com www.osisko.com TSX: OSK EWX: Deutsche Year Hi/Low: $15.85/7.01
Open house on the mining site
8 Planning for Profits | Report on Mining | Winter 2010
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Winter 2010 | Planning for Profits | Report on Mining 9
Confidence in Global Growth and Freefall in Greenback Driving Commodities Higher By Elvis Picardo, CFA
I
nvestor sentiment has staged a 180-degree turn around since my previous update on commodities in the May issue of this publication. Risk appetite is back in full force, a fact that is evident in the performance of disparate asset classes recently. At the time of writing in the first week of November, the TSX Composite and a number of major equity indexes including those in the U. S. are at two-year highs. In the commodity markets, gold is approaching a new record yet again, copper and other base metals are surging, and crude oil is within striking distance of its 18-month high of $87.15 reached in May.
Figure 1: DXY vs. Reuters-CRB and London Metal Exchange index (May – November 2010)
“Which brings us to the other major driver propelling assets higher – the freefall in the U. S. Dollar. Since August...the Federal Reserve...has driven the greenback steadily lower and commodities increasingly higher.” Renewed confidence in global growth prospects is doubtless underpinning this rally, making the travails of six months ago a distant memory. Recall that equity markets and commodity prices had plunged in late spring on spiralling concerns about global growth, as the three big economic engines of Europe, the U. S. and China all appeared to be beset by their own sets of problems. In Europe, worries about mushrooming sovereign debt in a number of E. U. member nations – led by the PIGS (Portugal, Ireland, Greece and Spain) – had threatened to pull the E. U. apart, calling into question the long-term viability of the Euro itself. In the U. S., economic growth looked like it had fallen off the proverbial cliff, leading to increasing talk of a double-dip recession. And in China, rampant real estate speculation had resulted in the authorities slamming on the monetary brakes, sending the benchmark Shanghai index down over 20% for the year by mid-May. 10 Planning for Profits | Report on Mining |Winter 2010
Source: Bloomberg
But those anxieties have since abated. The Euro has recovered as sovereign debt concerns have been pushed to the back-burner, while the Chinese economy appears to be picking up steam yet again. As for the U. S., the Federal Reserve’s seemingly limitless ability to pump liquidity into the system in a bid to keep the economy afloat has provoked a near-euphoric reaction among investors in recent months. Figure 2: FAIL® Indicator vs. S&P 500 and ReutersCRB (Nov. 2009 – Nov. 2010)
Source: Global Securities Research, Bloomberg www.ReportOnMining.com
Which brings us to the other major driver propelling assets higher – the freefall in the U. S. Dollar. Since August, when the Federal Reserve decided to halt the shrinking of its balance sheet by reinvesting maturing mortgages into new Treasuries, market anticipation about another round of quantitative easing – or QE2 – has driven the greenback steadily lower and commodities increasingly higher (Figure 1). On November 3, the Federal Reserve announced that it would buy an additional $600 billion of Treasuries through June 2011, which equates to a pace of about $75 billion per month. This is in addition to the $1.7 trillion that the Fed had already purchased since March 2009, when it commenced unleashing every weapon in its monetary arsenal to combat the financial crisis. It should come as no surprise that the prevailing sentiment among investors now seems to be bordering on complacency, in stark contrast to the dejection of six months ago. Our proprietary FAIL® indicator, which combines the VIX and TED Spread to provide a composite measure of concern about global systemic failure, is fast approaching the level of 1 that indicates a heightened sense of complacency. As I had noted in the “Global Securities Market Bulletin” of October 15, the indicator touched an 8½-year low of 0.63 on March 15 (Figure 2), about six weeks before markets peaked. The sharp reversal in risk appetite subsequently led to a near-collapse in stock and commodity prices (best exemplified by the 20% plunge in crude oil prices in just over two weeks in May). The FAIL® indicator reached a one-year high of 2.75 on June 7, indicating significant risk aversion. But it’s a different story now, with “risk-on” trades in full flow. For my part, I must confess to being a little unnerved by the speed of the recent ascent, which has led to the TSX surging past my end-2010 target of 12,500. I believe there is some evidence of “frothiness” in certain markets and commodities. However, one sector that continues to display good value, in my opinion, is the large-cap gold mining group. As Figure 3 demonstrates, although the 53-member TSX Global Gold Index has now caught up with the C$-denominated bullion price, valuations for senior producers remain attractive. At the present time, with deflation risks off the table, investors are interpreting recent developments as exceedingly positive for commodities. But it might be prudent to take a step back and look at the bigger picture in terms of the global economy. Specifically, investors need to pay attention to two major risk factors: A potential reversal in the U. S. Dollar: The greenback is being weighed down by the Fed’s stimulus measures and its commitment to leave the federal funds rate at exceptionally low levels for an extended period. www.ReportOnMining.com
Figure 3: Gold in C$ vs. TSX Global Gold Index (Nov. 2005 – Oct. 2010)
Source: Bloomberg
In contrast, the European Central Bank said on November 4 that it continues to intend withdrawing its emergency stimulus measures. This intention masks ongoing problems in the E. U., where concerns about sovereign debt may resurface in the short term (note that bonds of the PIGS are coming under pressure once again). If the U. S. economy regains traction in the months ahead, the greenback may stand to benefit at the expense of the Euro. Over-reliance on Chinese demand: Demand from the powerhouse Chinese economy has pushed commodity prices higher for most of the past decade (Figure 4). While the IMF noted in its “World Economic Outlook” report last month that China’s metal demand has now stabilized at a high level, is said that two developments are likely to restrain demand growth in the quarters ahead. Firstly, the growth pace should continue to moderate as stimulus effects wane and efforts to slow credit growth affect investment. Secondly, end users may draw down inventories that surged last year. The bottom-line is that while pockets of investment opportunity still exist, the broad advance in equities and commodities means that the risk-reward profile is not particularly compelling at this point in time. While the recent rally is certainly a welcome Figure 4 change from the uncertainty of six months ago, I believe investors would be wellserved to exercise a degree of prudence in terms of their investment strategy with regard to commodities and commodity stocks. (Elvis Picardo is Vice President – Research, and a strategist & analyst at Global Securities Corporation in Vancouver. The opinions expressed herein are his own).
Source: IMF WEO October 2010
Winter 2010 | Planning for Profits | Report on Mining 11
“W
e are on a mission to prove potential for a new mining camp on the Solid Gold Prospect and this may be the best time in history to do it,” states President Darryl Stretch. “The region we are exploring is located in the heart of one of the richest gold-producing districts in the world and we are excited about the potential to contribute to the gold supply.” Solid Gold Resources Corp. is a Toronto-based explorer. At present, the company has a 100% interest in a property comprising approximately 200 square kilometres on the south shore of Lake Abitibi and proximal to the world famous Porcupine-Destor Fault Zone in Ontario, Canada. Demand for gold has seen a significant increase over the last several years. Mines are being depleted at a higher rate than they can be replaced and new mines are not being found at a sufficient rate to keep pace.
12 Planning for Profits | Report on Mining | Winter 2010
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Over the past hundred years prospectors searching for mineralization on surface have discovered spectacular gold deposits clustered all along the trend, extending from Timmins, Ontario, to Val d’Or, Quebec. More than 110 million ounces of gold have been produced from the region and Solid Gold’s Management believes that much more gold remains to be discovered just beneath the surface. In summary, here’s why. Geology The Solid Gold Prospect was selected for its proximity to the Porcupine-Destor Fault Zone, the presence of nearby gold showings and interpretation of geophysical data, indicates the presence of structures similar to and parallel with the Porcupine Fault to the south, which in turn contains several gold producers in and near the fault plane. For example, the Holloway Gold Mine and Holt-McDermott deposits occur in Holloway Township contiguous to the southeast corner of the Solid Gold property, suggesting evidence of clustering of gold deposits in the area. These modern mines have produced 2,105,665 ounces gold with a 3,000-tonnes-per-day mill facility. Large gold camps like Timmins and Kirkland Lake are commonly associated with curvatures, flexures, and dilational jogs along major compressional fault zones. Similar features are observed within the Solid Gold property where the Company is currently focused on a 15 kilometre strike of the North Branch of the Porcupine Fault Zone.
The newly discovered Stretch Fault splays off the North Branch forming a dilational jog and trends in a northwest direction. A spectacular chevron fold exists, with its apex northward, and tops of the rock units southward, thus defining a synclinal structure. This structure truncates abruptly in the area of the North Branch of the Porcupine Fault. The fold is remarkably well-defined and shows a pronounced V-shaped outline, with the crest of the fold to the north. The South Grid geophysical survey was conducted over the area identifying several linear zones of low magnetic response and a large area of low magnetic values located in the eastern part of the south grid is interpreted to be due to an underlying felsic intrusive body. Adding to the geological and geophysical evidence, approximately 1.5 kilometres south of the South Grid target area is a series of seven holes drilled as part of an overburden-sampling program covering 600 metres laterally and parallel to the North Branch. All holes returned very significant values, up to 31.0 gpt, from the glacial till overlaying bedrock. Committed to the Core Following on the success of our recent IPO, the Company has now initiated a drill-testing program to identify the bedrock source for the gold found in the glacial till. With hard work and dedication the Company may find the sweet spot where majors will pay top dollar for such a discovery. The Solid Gold Prospect boasts highly prospective geology and world-class potential clearly exists for shareholders.
Solid Gold Resources Corp. 103 Clark Avenue East Thornhill, Ontario, Canada L3T 1T1 Richard Cohen Phone: 1.905.882.4422 info@solidgoldcorp.com www.solidGOLDcorp.com TSX.V: SLD Year Hi/Low: $0.20/0.17
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Winter 2010 | Planning for Profits | Report on Mining 13
A
MEX Exploration Inc. is a Montreal-based precious metal exploration company developing a portfolio of properties in Canada and Mexico. In Canada, the Company holds 100% interest in three properties, namely Normetal, Perron, and Cameron covering more than 10,000 hectares located in northwestern Quebec. On April 21, 2010, the Company reported a resources estimate totalling close to 70,000 ounces of gold (inferred resources on Zone 3), of its Perron gold project, this property is part of its 100% wholly-owned Normetal property. The resource is calculated over a strike length of 1,070 metres laterally and over a depth interval extending from 40 metres to 200 metres with an average thickness of 4.5 metres. The mineralized structure remains open in all directions and at depth and is one of a total of five different gold zones identified up to now. The Cameron property, comprising 13 contiguous cells covering 730.8 hectares, is underlain by volcano sedimentary rocks of the Abitibi Sub province and is strategically located at the intersection of two major regional structures in the Northern Volcanic Zone, the Chieftain corridor of the Cameron deformation zone and the Wedding fault. The Cameron deformation zone is associated with important gold mineralization, including the Discovery, Flordin and Cartwright projects to the northwest of the Cameron 2006 property. Recent follow up trenching, based on new geophysics surveys combined with compilation data from previous trenching and grab sampling done by SOQUEM in the early 90s, has led to the identification of a gold-bearing structure that returned an intersect of 1.24 g/t Au over 2.9 metres by channel sampling across the mineralized structure.
Natora Mesa Blanca
This structure is characterized by an altered sheared quartz-feldspar-pyrite-sericite unit that is oriented more or less ENE-WSW and seems to be related to the regional ‘Wedding Fault Zone’. A first phase of drilling of 1,200 metres is to be initiated this fall. In Mexico, the Company is focused on the development of the 100%-owned (recently optioned) Nueva Escondida and Natora properties which are located in the world famous Sierra Madre Occidental Gold Belt host to over 40 million ounces of gold and 2 billion ounces of silver. The properties are controlled through the wholly-owned Mexican subsidiary Minerales X-Ore S.A. de C.V. which was acquired by AMEX from Blue Note Mining Inc. in March, 2010.
Bacanora
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Natora Mesa Bl
lanca
The Nueva Escondida and Natora properties are located near existing world class mines such as Minefinder’s Dolores Mine (3.4 million ounces of gold and 156 million ounces silver) only 15 kilometres to the east, Alamos Gold’s Mulatos mine (4.1 million ounces of gold) 40 kilometres to the south, and Gammon Gold’s Ocampo Mine (5.8 million ounces of gold and 295 million ounces of silver) 80 kilometres to the south. This region has an extensive history of successful precious metal discovery and numerous mines are operating in the area currently. The Natora South (Chivas) property has been optioned recently to Bowmore Exploration Inc. which has a strategic partnership with Canadian-based Osisko Mining Corporation. The option agreement grants Bowmore the right to acquire up to 70% of the Natora South (Chivas) property. In order to acquire an initial 50%, Bowmore is required to make cash payments of $250,000, issue 150,000 common shares to AMEX and invest $1.5 million in exploration over the next 24 months. In order to move to a 70% ownership position Bowmore is required to make additional cash payments of $200,000, issue 100,000 common shares and incur a further $750,000 in exploration expenditures within 24 months of the election to increase ownership. During the earn in period, AMEX is acting as the operator. AMEX has also optioned the Nueva Escondida property to Bowmore Exploration Inc. The agreement grants Bowmore the right to acquire a 50% interest in the property by making cash payments of $200,000, issuing 150,000 common shares and investing $800,000 in exploration over the next 24 months. AMEX will again be the operator during the option period. Natora Anomaly
A recently completed airbourne survey covering 75 square kilometres combined with detailed stream survey has identified 14 high priority targets areas located within the Natrora-South (Chivas) Property. Follow-up exploration work including systematic rock sampling has demonstrated that two of these areas (Area 3 and 6) are in fact a huge massive 2.5 kilometre long, silica cap with a thickness of up to 130 metres. This important silica cap identifies an important long-lasting gold mineralized hydrothermal event in the area. In the coming weeks AMEX, with its partner Bowmore, will concentrate its exploration work efforts in this most promising area in order to better define drilling targets to be executed in the near future. The management team at AMEX Exploration Inc. has extensive experience in the exploration and development of mining projects globally. The Company’s President & CEO, Dr. Jacques Trottier, has over 20 years mining exploration experience. The former CEO of both Sulliden Exploration and Mineria Sulliden Shahuindo S.A. in Peru, Dr. Trottier is a popular lecturer and the recipient of numerous awards and academic honours. The Operation Manager, Michel Lemay, has more than 18 years experience in management of mining projects in foreign countries and in Canada. The technical team in Mexico includes Juan Manuel Morales – General Manager; Richard Simpson – Exploration Manager; Maurice Gendron - Exploration Technician; and Jacques Marchand – Geological Consultant. The team has between 20 and 30 years of mining experience, much of that acquired in Mexico. AMEX Exploration Inc. is well positioned for growth; the Company has assembled an experienced management team and has access to additional exploration expertise through the optioning of the properties to Bowmore Exploration and their strategic partner, Osisko Mining Corporation. This combination paves the way for the successful exploration and development of the company’s Mexican holdings.
Amex Exploration Inc 1155 University Street, Suite 812 Montreal, Quebec H3B 3A7 Phone: 1.514.866.8209 info@amexexploration.com www.amexexploration.com TSX.V: AMX Year Hi/Low: $0.395/0.14
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Winter 2010 | Planning for Profits | Report on Mining 15
B
owmore Exploration Ltd. (BOW-TSXV) is a Canadian emerging exploration company focused on the acquisition, exploration and development of gold mineral properties in Canada and Mexico. In mid-2009 the Company signed a strategic alliance with Osisko Mining Corporation (OSK-TSX). Osisko then acquired approximately 40% of Bowmore through a private placement and named two of their top executives, Mr. Robert Wares and Mr. Sean Roosen, to the Bowmore Board of Directors. Bowmore plans to develop underexplored properties and benefit from deal flow generated by strategic partnerships and growth opportunities. Within the last year, the Company has acquired four properties, two in Quebec and two in the State of Sonora, Mexico for a total land package of 104,986 hectares. All properties are located in well-known mineral rich districts. Exploration work was started immediately to aggressively advance these assets to near term drill ready. In early spring 2010, Bowmore signed an option agreement to acquire up to 70% interest in the Chivas property from Amex Exploration Inc. (AMX-TSXV). The Property covers 24,841 hectares and is located on the Sierra Madre gold belt, 15 kilometres to the west of the Dolores mine. The property has been the object of sampling, geological mapping, trenching and historical core drilling. A magnetic and radiometric airborne survey led to the identification of 14 targets of which three correspond to anomalous zones of intense wide silicification (lithocap) or argillization.
These areas of strong to intense epithermal alteration are typical of some of the largest Au-Ag deposits of Mexico such as El Sauzal and Mulatos. The alteration by micro-crystalline silica and the hydrothermal breccia and open-space textures observed in these zones are consistent with sinter zones found above high grade Bonanza-type low sulphidation epithermal systems. So far the character of the zones, as well as their remarkable size, mapped for over a strike length of 2.5 km and remains open laterally, is very encouraging and more field work will concentrate over these areas to establish priority drilling. The Nueva Escondida property covers over 6,100 hectares located in Sonora Mexico within the Sierra Madre foothills (Bowmore has a 50% option on the property). To date a radiometric and magnetic airborne survey has been conducted to help identify underlying major structures. Bowmore is actually conducting a program of mapping, prospecting and rock sampling combined with a heavy mineral sampling program designed to quickly evaluate this large property. The numerous gold showings are related to a granodiorite intrusion found in the region.
Bottom left: Chivas Geology; middle: Chivas Piedra Rodante zone, north view; bottom right: map, silicified area.
16 Planning for Profits | Report on Mining | Winter 2010
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Chivas Silicified breccia.
The gold zones appear on surface and cover an area of 710 metres by 960 metres open in all directions. Some of the best surface values are 3.18 g/t Au and 226 g/t Ag with high content of zinc and lead has been obtained, this program remains ongoing. In Quebec, Bowmore has been evaluating and prospecting in the southern part of the province, an area known for its gold placers. Since the fall of 2009, over 3,200 rock samples were collected and analysed leading to the discovery of broad gold anomalous zones within the St-Victor Synclinorium, an extensive belt of sedimentary rocks deformed by the Appalachian orogeny. This belt hosts vein gold deposits in the Bellechasse area as well as placer gold mining operations in the Chaudière area. Bowmore targeted the belt for nearsurface, bulk tonnage sediment hosted gold deposits similar to the Kinross Paracatu mine in Brazil with reserves of 1,430 million tonnes grading 0.4 g/t Au, for a total of 18 million ounces gold. Bowmore decisively staked the 1,183 claims now constituting the St-Victor property covering 69,160 hectares over a length of 150 kilometres along the axis of the belt. The amount of claiming done provoked a staking rush in the area surrounding Bowmore’s property. The exploration work done to date has led to the discovery of major gold anomalous zones spread within the core of the property over a strike length of 20 kilometres. These initial results are very encouraging as they confirm the potential for a low grade world class gold sediment hosted deposit. A high resolution airborne survey over the core of the belt will be completed over the property to improve the geological understanding of areas of minimal outcrops. Drill testing of the gold anomalous areas will then follow in late fall-early winter. In the Abitibi greenstone belt, the Duverny property presents an excellent potential for either a near surface, bulk-tonnage gold deposit or for an Archean shear-hosted gold deposit. The Abitibi belt is known as a well-established mining district having produced several multi-million ounce gold mines. The property consists of 4,885 hectares optioned in early August 2010 in addition to the 53 claims already acquired by Bowmore in late 2009.
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Nueva Escondida Geology
A prospecting program immediately followed the acquisition to cover the entire property. The property encompasses very large, kilometric zones of intense carbonate alteration (dominantly ankerite) with quartz stockworks and disseminated pyrite. A significant network of shear zones in proximity to felsic and intermediate intrusions are also described as mineralised. This alteration and the major structures are similar to the setting of the Larder Lake gold mining camp. Several gold deposits have been previously defined on the actual property and its immediate vicinity, including the Duvay-Obalski deposit. This deposit is situated in the northwest portion of the property, which contains previously reported, non 43-101 compliant, unclassified resources of 5,000,000 tonnes grading 2.0 g/t Au (MRNF, 1990, DV 91-01, p.42). A reverse circulation drilling program to test overburden areas is planned for the winter. The Company has approximately $2.7 million cash, 10,500,000 warrants in the money for net proceeds of $3,675,000 of which 9 million are held by insiders and its strategic partner Osisko Mining Corporation. Share structure Outstanding 45,138,283 Osisko Mining approx 39% Management approx 15%
Bowmore Exploration Ltd Paul A. Dumas, President & CEO 2140 Saint Mathieu Street Montreal, QC Canada H3H 2J4 Phone: 1.514.861.4441 Fax: 1.415.861.1333 info@bowmorexploration.com www.bowmorexploration.com TSX.V: BOW Year Hi/Low: $0.94/0.41
Winter 2010 | Planning for Profits | Report on Mining 17
Serra Pelada today
High-Grade Precious Metals Development in Brazil Colossus Minerals Inc. (TSX: CSI) is poised to be the next gold producer in Brazil
C
olossus Minerals Inc. is an exploration and development company focused on gold and platinum group metals in Brazil. The Company is currently focusing its efforts on the high grade gold-platinum-palladium Serra Pelada project in Para State, Brazil. With development plans well underway at its flagship Serra Pelada gold-platinum-palladium project Colossus is well positioned to be the next gold producer in Brazil.
In September 2010, Colossus announced the commencement of a 3,500 metre underground decline. Colossus has also completed earthworks on site infrastructure including the future plant site, camp site, maintenance facilities and offices. Ari Sussman, CEO, Colossus Minerals Inc. comments, “From a development perspective — the maturation of our Company since June 2010 has been nothing short of spectacular to oversee.
Mill site looking towards portal
18 Planning for Profits | Report on Mining | Winter 2010
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Serra Pelada.
“We are now fully permitted — with both environmental and mining licenses and we have more than 200 employees working aggressively on underground decline development, earth works and building construction at Serra Pelada. On the exploration front — it is most pleasing to see this unique high-grade orebody continue to deliver impressive results and demonstrate continuity of mineralization to the southwest of the historical pit onto the recently acquired new ground which now totals 874 hectares. As a result of this success, we have added a second deep penetration drill to speed exploration.” Overview of Project: Serra Pelada – Flagship Project Discovered in 1979, Serra Pelada was the site of the largest ever precious metals rush in Latin America. During the 1980s up to 80,000 garimpeiros (artisanal miners) produced an estimated 2 million ounces of high-grade gold plus platinum and palladium, from a 400x300x110m open pit. Garimpeiro production declined due to pit wall collapse and flooding, causing the cessation of bedrock mining in the late 1980s. Historical drill results by Vale include 43 metres @ 3,465 g/t gold, 189 g/t platinum and 1,088 g/t palladium. Serra Pelada is situated in the mineral prolific Carajás Province near the towns of Curionópolis and Parauapebas, Para State, northern Brazil. Access and infrastructure are excellent. In July 2007 COLOSSUS and COOMIGASP formed a partnership to develop the remaining bedrock mineralization at Serra Pelada. Under the terms of this joint venture, COLOSSUS will manage and operate the project, earning a 75% interest by funding exploration and development expenses through to production and paying certain royalties established by the joint venture. www.ReportOnMining.com
Decline development - portal complete
To date, the Company has completed approximately 35,000 metres of drilling. Drill results include: • SPD-072: 8.35 metres @ 53.13 g/t gold and 25 metres @ 30.19 g/t gold, 3.53 g/t platinum and 4.25 g/t palladium; • SPD-055: 52.43 metres @ 18.57 g/t gold, 8.34 g/t platinum and 11.33 g/t palladium • SPD-034: 70.70 metres @ 53.59 g/t gold, 20.77 g/t platinum and 31.30 g/t palladium (Other drill results can be found on the company’s website at www.colossusminerals.com)
Colossus Minerals Inc. Ann Candelario, VP Investor Relations One University Avenue #401 Toronto, ON, Canada M5J 2P1 Phone: 1.416.643.7655 Email: acandelario@colossusminerals.com www.colossusminerals.com TSX: CSI Year Hi/Low: $9.14/4.00
Winter 2010 | Planning for Profits | Report on Mining 19
Today’s Gold Market By James DiGeorgia
O
ver the last few weeks we’ve seen gold prices jump dramatically, falling just short of $1,400 and holding steady in the resistance area of $1,350. Many investors are focused on the comparison of 1980 and don’t understand how gold can rise in such a low inflationary environment. What they don’t consider is that the rise in the price of gold is tied to the value of the U. S. Dollar and not to the rate of inflation. In addition, governments and central banks around the world are concerned about their currencies, and they want to make sure their countries will be competitive. Some are also considering quantitative easing. This would lower the value of the dollar and could be inflationary. Currency debasement, volatility, and uncertainty have been very bullish for gold. Here are some more reasons that prove gold prices still have a long way to go:
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“...even as foreign governments and local economists alike are recognizing that America is insolvent and broke, the printing presses are being cranked up.” Massive ‘monetization’ is coming. Even as the dollar is sinking after decades of continuous inflation, even as foreign governments and local economists alike are recognizing that America is insolvent and broke, the printing presses are being cranked up.
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The world is taking notice: China is buying massive amounts of gold, Russia is buying 15-22 metric tonnes of gold per month, and Saudi Arabia recently reported that its national gold reserves had more than doubled, going from 143 tonnes to 323 tonnes. Private investors are stampeding into gold according to the World Gold Council’s latest report. In the second quarter, overall demand leapt up 36 percent by weight. By U. S. Dollar value, demand increased an astonishing 77 percent. Two years after the financial crisis devastated the U. S. financial system; our economy is still wallowing in misery. Politicians want to spend more and more, but wage-slave Americans are already being bled dry, and foreign lenders are refusing to lend to us. Governments, international funds, and even anti-gold investors are now buying tonnes of the yellow metal, vacuuming it off the market. When you look at the charts, there is no upside resistance for gold. Gold Has No Counterparty Risk In today’s global economy, most financial assets have counterparty risks. Currencies are constantly being depreciated by their governments, bonds are defaulted upon, stocks are dependent on the performance of the underlying company, and the list goes on. www.ReportOnMining.com
“Gold surges whenever trouble breaks out.” However, gold has no counterparty risk. It’s inherently valuable, and if you own it, that value is yours. It’s immune from government depreciation, corporate misbehaviour, wartime disruptions, or whatever. A few other investments have this immunity as well: real estate, for example. But even among these assets, only gold is portable, private, liquid and eagerly accepted all over the world. Trouble Around The World Pushes Gold Prices Up Gold surges whenever trouble breaks out. We saw this when gold popped up by over 71 percent from mid-1982 to early 1983, thanks to a sharp recession in the United States and trouble in the Middle East. We saw it again from 1985 to 1987, when gold rose over 59 percent. Major wars were dragging on in the Middle East (between Iran and Iraq, and the continuing Soviet invasion of Afghanistan). Meanwhile, the United States economy slowed during what was called a “soft landing,” culminating in the Black Monday crash on Wall Street. Winter 2010 | Planning for Profits | Report on Mining 21
When Saddam Hussein gathered his army on the border of Kuwait in July 1990, and then invaded in August, gold surged by 17 percent in just two months. The terrorist attacks of 9/11 forced gold up by 10 percent immediately. Unfortunately, there is still a lot of trouble in the world we live in today. We never hope that bad things are going to happen, but they do. Gold is a great way to be prepared.
“Rarely does any market see all its pricedetermining forces lined up the same way – but that’s what’s going on in gold today.” What’s Next Gold in inflation-adjusted terms of 1980 U. S. Dollars should be trading over $2,000 an ounce. Gold’s steady rise during these past ten years has been mostly about the depreciating U. S. Dollar. I believe that if the Federal Reserve goes forward with its plans of quantitative easing in the $400 Billion to $1 Trillion range, the value of the U. S. Dollar versus other world currencies and gold could drop 15%-25%. Obviously a 15% to 20% further drop in the dollar would drive gold up another 15%-25%, or even higher depending on market sentiment, which means gold would be closer to $2,000. This is what I and many economists believe is the eventual equilibrium value of gold in terms of the U. S. Dollar.
22 Planning for Profits | Report on Mining |Winter 2010
The catch, of course, is a further 15% or 25% decline in the value of the U. S. Dollar. If it comes slowly over the next five years, the rise in gold will be steady but incremental. If it comes quickly over 18 to 24 months, that sort of decline could set off a currency and bond market panic that severely disrupts the world’s financial markets and world economy. The disruption could make the fireworks we’ve seen so far look like a walk in the park. We’re in serious trouble and that’s why everyone should hold 15%-25% of their investment portfolio in physical gold. Conclusion Rarely does any market see all its price-determining forces lined up the same way – but that’s what’s going on in gold today. I believe we are going to see gold prices between $1,400 and $1,500 by the end of the year. Will the price go up in a straight line? Of course not. No market ever does that. I expect one or more corrections along the way – sharp plunges by as much as 20 or 25 percent. But these will be mere bumps along the road. In fact, savvy investors will treat them as the buying opportunities that they are. The world’s financial structure is going to change drastically over the next few years. When the dollar is crashing and gold is soaring past $5,000 per ounce, many bitter investors will berate themselves and say, “If only I had prepared.” Don’t let yourself be among them.
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Toroparu: A Gold-Copper Deposit with World-Class Potential Toroparu Project Overview
Toroparu Deposit – Optimized Pit
• Located 200 km west of Georgetown, Republic of Guyana • Politically stable, English-speaking democracy • British Common Law, well established Mining Act • History of successful gold production (eg. Omai) • Site access: Airstrip & road • Land Package: 1,000 sq km (100%-controlled) • Historic placer gold area. Exploration drilling has outlined primary gold-copper mineralization below saprolite cover.
Toroparu Deposit – Sectional View
NI 43-101 Resource Estimate • • • •
Indicated Resource of 2.62 MM oz Au + 259 MM lb Cu (1) Inferred Resource of 3.41 MM oz Au, 213 MM lbs Cu (1) 2.8:1 strip ratio Open in all directions
NI 43-101 Mineral Resource Domain AuEq Cut-Off Grade Saprolite 0.41g/t Fresh Rock 0.42g/t Total Domain AuEq Cut-Off Grade Saprolite 0.41 g/t Fresh Rock 0.42 g/t Total
Tonnes 1,395,000 97,542,000 98,937,000
Au g/t 0.57 0.83 0.83
Tonnes 7,720,000 132,334,000 140,054,000
Au g/t 0.73 0.76 0.76
Indicated Cu % Au Eq. g/t 0.08 0.71 0.12 1.04 0.12 1.04 Inferred Cu % Au Eq. g/t 0.06 0.84 0.07 0.88 0.07 0.88
Au oz Cu lbs 25,500 2,455,000 2,603,000 257,500,000 2,628,500 259,955,000 Au oz Cu lbs 181,000 10,190,000 3,234,000 203,794,000 3,415,000 213,984,000
• Majority of pit-shell drill holes bottom in grade; significant expansion potential • Opportunity for grade optimization and near surface starter pit material for rapid payback
1 Per NI 43-101 Technical Report, P&E Mining Consultants, Sept. 15, 2010 – Au US$1009/oz and Cu US$2.65/lb (2 yr trailing avg; 95% Au recovery and 90% Cu flotation plant/leach recovery)
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• Toroparu area of historic placer mining • Conventional open pit saprolite mining by Sandspring subsidiary • Road/air accessible 1 100-man camp and former 3000 tpd 21 gravity mill 32 Airstrip 43 Toroparu Saprolite Pit 54 Tailings pond 65 76
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Investor Relations: info@sandspringresources.com Phone: 807.252.7800