Atico looks to repeat Fortuna’s success

Recently listed Atico Mining (ATY-V) has joined the rush of companies exploring for gold in Colombia, but the company plans to set itself apart with its unique management team and strategy.

The team includes many of the people behind the success of ­Fortuna Silver Mines (FVI-T, FSM-N), which has operated mines in Peru and Mexico. Fernando E. Ganoza — who helped Fortuna revive old mines as project and country manager — now leads Atico as CEO. Jorge R. Ganoza has been vice-president of operations for six years at Fortuna and has over 40 years in the industry, and now serves as president of Atico. Keeping an eye on things as chairman is Jorge D. Ganoza, co-founder and president of Fortuna, while Luis D. Ganoza, chief financial officer of Fortuna, joins Atico as a director.

In addition to the above Ganoza family members — all of whom hold either geological engineering or bachelor of engineering degrees — Atico boasts as senior exploration manager Joseph Salas, who also has a geological engineering degree and for the past three years has been an exploration country manager in Colombia for Barrick Gold (ABX-T, ABX-N). Watching Atico’s books is chief financial officer Christina Cepeliauskas, with over 15 years of experience as the current CFO of Eurasian Minerals (EMX-V) and Reservoir Capital (REO-V).

The wealth of engineering and mine-building experience at the top is no accident. Atico has been built to replicate Fortuna’s model of taking current or past producers and significantly increasing productivity and margins.

But while Fortuna focused on silver in Latin America, Atico will instead concentrate on copper and gold. To that end, Atico has signed a two-year option deal in central Colombia on the El Roble mine, which is the country’s only actively mined copper-gold volcanogenic massive sulphide (VMS) deposit.

The El Roble property is a three-hour drive southwest of Medellin, at between 1,600 and 2,700 metres elevation.

The El Roble mine is operating at a few hundred tonnes per day, which is similar to Fortuna’s  Caylloma polymetallic mine in Peru and San Jose silver-gold mine. As Fortuna did, Atico wants to ramp up El Roble’s daily throughput to the thousands of tonnes, targeting a mine with a capacity between 2,000 and 3,000 tonnes per day.

The company wants to establish an 8-million-tonne resource, and it has a few years to achieve that.

The option agreement has Atico paying US$2.25 million over two years and  a lump-sum payment of US$14 million at the end of the two years. It can extend the deadline one more year by paying US$1.2 million, which gives Atico two or three years to decide whether the property meets its size expectations before committing to the full payment.

Atico signed the option agreement in January, listed in March and wasted little time starting to explore the 83.6-sq.-km property package around El Roble. The company has launched a US$3.6-million exploration program that includes 11,000 metres of surface and underground drilling, plus geophysics and sampling.

Previous work on the property identified 12 geochemical anomalies along a 10-km strike, but as with many tightly owned private mines, the ­previous owners had not bothered to do much regional exploration.

In the early 1980s, Kennecott and Nittetsu completed 10,000 metres of drilling around the El Roble mine and established a historic resource of 1.2 million tonnes grading 4.8% copper and 3.2 grams gold per tonne.

Between 1998 and 2009 privately held Minera El Roble carried out 16,000 metres of drilling around the mine and 2,000 metres at Santa Anita several kilometres south. Only three of the 12 regional targets have been drill-tested so far.

As VMS deposits generally occur in clusters, Atico is confident it canmake more discoveries in the area. The company has reinterpreted induced-polarization data to generate three resistivity targets and eight changeability targets, while ground-magnetic surveys have generated 42 more exploration targets.

Between 1990 and 2011 the El Roble mine produced an estimated 1.5 million tonnes at 2.53% copper and 2.54 grams gold, though production has steadily dropped since opening.

The El Roble property provides an immediate focus for the new company, but Atico does not plan to limit itself to Colombia. Management intends to use its connections in Latin America’s mining community to find other depressed copper-gold assets that could become highly productive mines.

Atico listed at 50¢ in mid-March and shares have kept around that price, besides a spike to 75¢. The company had $8.3 million in cash at the end of April and 40 million shares outstanding, 34% of which are held by the founding group.