Colombia’s untapped gold potential lures wary miners

VANCOUVER — Since 1997, the Fraser Institute has ranked the policy attractiveness of more than 60 mining jurisdictions based on a composite index with a maximum possible score of 100.

Co l o m b i a wasn’t initially ranked at all because it was perceived as “too unstable and dangerous”

to attract the interest of mining companies, but was added to the 2006-07 survey based on government progress in improving security and subduing armed guerillas. While the country’s score was 25 out of a possible 100, it was far ahead of Bolivia and Venezuela, and not far behind Peru and Ecuador, which both had scores of 30.

Improved security, strong economic growth and new mining legislation modelled after the Canadian system aren’t the only positive factors attracting companies to the South American nation. Another lure is its untapped mineral potential, particularly for gold. Colombia was once a leading gold producer, with historic production of more than 120 million oz., yet it currently has no large-scale operating gold mines.

Greystar Resources (GSL-T, GYSLF-O) was one of the first juniors to venture into Colombia, and will likely be the first to develop a large modern mine at its flagship Angostura gold-silver project (see story, Page C1). But the once-tiny list of juniors active in Colombia has grown, particularly since Venezuela and other South American nations have curtailed or prohibited foreign involvement in their resource sectors.

In 2007, Colombia’s gold potential garnered global attention when government officials hinted that a senior company was poised to develop “one of the top ten gold deposits in the world” in the central state of Tolima. News reports suggested that the porphyry gold project, dubbed La Colosa, was owned by AngloGold Ashanti (AU-N, AGD-L), which holds extensive ground in Colombia. Anglo- Gold described the new reports as “premature,” but did confirm that Colombia represents “a new gold frontier” for the company.

Eduardo Baer, a mining analyst from Octagon Capital, lived for years in Peru, yet believes Colombia was the “El Dorado” that built the Incan Empire. “Colombia’s (historic) camps represent a prime hunting ground for bulk-tonnage gold deposits because they’re unexplored by modern methods. This is where the next big wave of gold exploration will be.”

As an example, Baer points to the exploration efforts of Colombia Goldfields (GOL-T, CGDF-O) in the Marmato gold district, known locally as Colombia’s “Golden Mountain.” The junior company’s Marmato and Caramanta projects are situated in the heart of Colombia’s most important historical gold-producing region, in the Departments (states) of Caldas and Antioquia. Records suggest that Simon Bolivar, with help from the British, used gold from this district as collateral to finance South America’s War of Independence from Spain.

Small-scale gold production from the district has continued for 500 years, but modern-day exploration was sporadic and limited by decades of civil unrest. As a result, Baer believes that the Marmato project (and district) is underestimated and poorly understood by the market.

“This is a very attractive gold project with geological similarities to the Fort Knox gold deposit in Alaska, and the Kori Kollo gold deposit in Bolivia,” he adds.

Mineralization at the Marmato and Carmanta projects is of the epithermal intermediate sulphidation type, and is related to the emplacement of large porphyry stocks. The gold-silver mineralization is hosted by a sheeted pyrite veinlet system with regional structural control. Gold is associated with sulphides, but is mostly free gold.

Early this year, Colombia Goldfields was selected as the winning bidder for Mineros Nacionales, which owns Zona Baja, an underground gold-producing property (about 25,000 oz. annually) directly below the company’s core holdings on Marmato Mountain. The $35- million transaction, expected to close this spring, achieves the company’s goal of consolidating the Marmato gold district into a significant asset.

B2Gold (BTO-V) is the highest profile newcomer to Colombia, in part because of President Clive Johnson’s successful track record as a company-builder and mine developer. In late 2007, the company completed a $100-million initial public offering and will use some of the net proceeds to explore a growing portfolio of gold properties in Colombia.

B2Gold’s work programs are focused on properties acquired through agreements with Anglo- Gold Ashanti. The parties recently amended their original joint-venture agreement such that B2Gold will acquire additional properties not included in the initial joint-venture agreement, including a copper-molybdenum deposit in southern Colombia, and increase its interests in or expand the size of certain properties.

In return, B2Gold agreed to issue additional shares and warrants to AngloGold Ashanti. Closing of these transactions would result in AngloGold Ashanti owning about 15.9% of B2Gold’s issued and outstanding shares, rising to about 26% if all warrants are exercised.

B2Gold recently launched a 5,500-metre drilling program on the Quebradona gold property situated in the Department of Antioquia, and within a 60-km-long belt of rocks known to host “porphyry style” gold occurrences as well as historic vein deposits.

The 2008 program will test five gold-bearing systems, with emphasis on the Aurora zone, where at least 3,000 metres of drilling are planned. The company holds rights to acquire 51% of the project.

B2Gold’s wholly owned Miralores property covers a gold-bearing breccia body where recent drilling returned up to 124 metres at 1.3 grams gold and 204 metres at 1.2 grams gold. The project is situated about 190 km from Bogota, and was extensively explored by previous operators as a low-grade, medium-tonnage gold target.

B2Gold holds rights to a 51% interest in the Gramalote project, with AngloGold Ashanti retaining the balance. The company will op- erate the newly expanded project situated 80 km northeast of Medellin, and be responsible for completing a feasibility study by mid-2010.

Previous drilling at Gramalote (about 11,000 metres in 38 holes) had outlined widespread, structurally controlled, intrusive-hosted gold mineralization over a 1-sq.-km area where drilling returned up to 172 metres of 3.5 grams gold per tonne. About 25,000 metres of drilling is planned for this year, including infill drilling of the main zone and satellite drilling of outlying targets over a 5 by 5-km area.

B2Gold holds other gold assets, notably interests in various gold projects in western and Far East Russia.

–The author is a freelance writer based in Vancouver, and a former editor of The Northern Miner.