Alturas looks to Peru for revival of its fortunes

 When Miguel Cardozo, Paul Pearson and Augusto Baerti got together to form Alturas Minerals (ALT-V) their collective vision was to enhance Peru’s mining reputation with some big finds.

 The three men have an impressive resume in South America with over 70 years of experience between them. Cardozo in particular, a Peruvian national, headed the exploration team that discovered Yanacocha and the Galeno copper gold deposit.

Despite such heavyweight credentials, the next big find proved elusive to the team in the early days of Alturas.

While the company listed on Toronto’s venture exchange in 2006 and followed that up a  year later with a listing in Lima, the money from those IPOs failed to prove up any projects rich enough to develop. Both projects drilled in those early years have since been dropped.  

More obstacles awaited the company in the form of the financial crisis of 2008.

Alturas still had a stable of prospective projects in Peru, but lacked the funds to drill them. With credit for juniors drying up through latter 2008 and through 2009, Alturas was in a holding pattern as it share price continued to drop – all the way from the 70¢ level it trade at in late 2007 to just 2.5¢ in late 2008.

But with markets now rebounding, and the appetite for commodities like gold and copper as strong as they have ever been, Alturas is banking on its own revival.

“We are now focusing on two projects, Chapi Chapi-Utupara and Sombrero” Cardozo says. “Both of these projects sit in one of the most prospective areas of Peru, and really, only Xstrata has more projects than us in this area.”

The area Cardozo speaks of is the Apurimac Belt in south-central Peru. The Belt is an extension of the famous Chilean porphyry belt, only in Peru it has the geological distinction of hosting mineralized skarns which generally sit on top of the porphyries and often contain higher grade mineralization.

The Apurimac boasts an array of significant mines and development projects including Xstrata’s (XTA-L, XRAF-O) Las Bambas and Tintaya projects, Norsemont Mining’s (NOM-T) Constancia project, Buenaventura’s (BVN-N) Trapich project, and the soon to be acquired Antares Minerals (ANM-V) Haquira project.

Alturas two projects lie in the north western flank of the belt, with the more southerly project, Chapi Chapi, set to be drilled by the spring of 2011.

Alturas acquired an option to earn into 80% of the project from Minera IRL (IRL-T), which is looking to develop itself into a mid-tier gold producer and as such, had a hard time justifying deploying capital in world renowned copper region.

To earn that full 80% stake Alturas has to complete 15,000 metres of drilling and finish a scoping study on the project.

Initially, the deal stipulated that Alturas had to begin drilling by the end of the November, but the company negotiated with Minera IRL for an extension until June of next year. The extension cost Alturas $200,000.

Cardozo says he is eager to start working on three copper and gold in soil anomalies on the project.  

The first area is called Chapi Chapi and is a 3-km long corridor of magnetite skarns that has sampled 18 metres grading 12.7% copper and 0.13 grams gold.

The second is known as Huarajo which is described as a disseminated gold target with fractured and pyritized sandstone.

“We have found gold mineralization at surface at Huarajo,” Cardozo explains, “But often what happens is that copper is leached out of the upper zones down into a deeper copper and gold porphyry system.”

The third zone is know as Cullimayo and it is composed of 2-km long epithermal disseminate gold mineralization. The area is the least tested as surface exploration has not yet been conducted.

The plan, Cardozo says, is to have geophysical work done on all three zones early next year with the aim of identifying drill targets, with drills cutting the rock by June.

While Chapi Chapi  still needs some early stage work done before the drills are set to turn 80-km northwest at the company’s wholly owned Sombrero project, things are ready to heat up.

“We have just been waiting at Sombrero,” Cardozo says. “We have done the geophysical work and we have the anomalies that we want to drill test.”

The area is described as a copper and gold skarn system hosted by limestone and cut by intrusive stocks.

To get a clearer picture of just what it has on its hands, Alturas is looking to raise roughly  $5 million through an equity financing, Cardozo says.

If the capital raise proves successful, roughly $3 million will be allotted to exploration work at Chapi Chapi and Sombrero, with each project getting an equal share of the capital.

Alturas currently has 72 million shares outstanding and roughly $500,000 in the kitty.

And while the company will need to issue shares now to get the capital it needs, in the very near future it may be less likely to turn to the market for cash.

That’s because Alturas holds an interesting card up its sleeve in the form of its Pampa Colorada project in the northwestern corner of Peru.

On Nov. 3 the company announced it had come to terms with a Chinese steel firm, Origen Group, which will allow Origen to mine iron-ore at the project for 10 years in exchange for a sizeable royalty to be paid to Alturas.

The amount of the royalty is US$1.70 per tonne for the first three years of mining, reducing by 10¢ a year ending at 90¢ per tonne in year 10. Cardozo says this is significant when compared to deals that other company’s have cut with Chinese for iron-ore which have generally had royalties in the 30¢ per tonne range.  

Cardozo says Origen plans to begin mining at Colorada in six months time despite not having a resource estimate on the project – such is the hunger for iron-ore in China. Origen’s plan is to simply mine the iron-ore, which outcrops at surface, and truck the rock to the port for shipping directly to China.

And even in the unlikely event that a mine never gets constructed Alturas is guaranteed a total payment of $2.7 million over the next 10 years.

It’s the type of deal you’d expect to see made by a junior run by three mining veterans with the know-how of Cardozo, Pearson and Baerti, and it’s the type of deal that should keep the drills turning at its projects in the Apurimac belt for years to come.