Colossus falls on delay at Serra Pelada

Colossus Minerals’ (TSX: CSI; US-OTC: COLUF) shares fell hard after the company announced that it needs more dewatering capacity at its Serra Pelada polymetallic development project in Brazil.

Colossus had been pushing to get the underground mine into production by September, but when it dug into the Central Mineralized Zone (CMZ), its dewatering wells and pumps failed to do the job.

The bad news for shareholders is that the company cannot mine the zone until more capacity is in place, which could delay the production schedule. 

Colossus says that initial production will be delayed until late 2013.

And while the company isn’t sure about how the delay will affect the bottom line, the market thought the worst, as news of the delay on July 15 sent the company’s shares down to 84¢ from $1.60. At press time they’d hit 60¢.

While it waits for more pumps, the company will have to shift its focus to other aspects of development and construction at Serra Pelada. It still plans on processing 1,000 tonnes per day during next year’s first quarter. 

But Colossus says that its red and gray siltstone underground development is going better than expected. It’s working on a main decline, a ventilation expansion and an access to northern mineralization at the zone. 

By year-end Colossus plans to have five access drifts ready to enter the CMZ, which could set it up for an initial 500 tonnes per day. 

Sandstorm Metals & Energy (TSXV: SND; US-OTC: STTYF) says the delay in gold production at Serra Pelada is “not currently anticipated to affect the development timeline for the platinum-palladium flotation circuit, which is expected to be processing material in late 2014.”

Sandstorm has a palladium-stream agreement with Colossus to buy 35% of the palladium produced from Serra Pelada at US$100 per oz. 

Serra Pelada is located in Brazil’s Carajas region, near the town of Curionopolis in Para state. 

Mineralization was first discovered at the site in 1979, which hosted the biggest gold rush in Latin America by the early 1980s, with some 2 million oz. produced by artisanal miners.