Ariel mines gold vein in Costa Rica

Without attracting much attention in North America, Vancouver junior Ariel Resources (VSE) has successfully operated Costa Rica’s only “substantial” gold producer for the past four years.

Situated on a 90-acre concession about two hours’ drive from San Jose, Ariel’s Tres Hermanos mine is producing about 1,000 oz. a month from a narrow vein system hosting 471,000 tons of grade 0.28 oz. gold per ton. While expansion opportunities based on known reserves are limited, a group of Canadian investors can see a myriad of opportunities in the tropical rain forests surrounding the Tres Hermanos mine.

By utilizing the Tres Hermanos mill and a second 125-ton-per-day mill on Ariel’s Esperanza concession, eight miles further north, investors led by Merit Investment analyst Paul Esquivel say the company could process other gold deposits in the region.

Toronto-based Greenstone Resources (TSE), for instance, has outlined minable reserves of 254,836 tons grading 0.22 oz. on its Recio project half a mile from Tres Hermanos. Greenstone is currently attempting to raise $2.5 million to bring the project into production.

The fact that Ariel is already in production gives it a big advantage over other small companies in Costa Rica, according to Esquivel, who was recently invited by Ariel President Bill Bennett to sit on the Ariel board. Merit and brokerage firms RBC Dominion Securities and Midland Doherty hold about 40% of the company’s nine million issued shares, which traded recently at around 35 cents.

An electrical engineer raised in Costa Rica, Bennett has taken a low-key approach to running the Tres Hermanos operation since he secured a 10-year lease on the concession and dealt the asset to Ariel Resources. Ariel is mining ore from a 6.6-ft wide vein system using shrinkage stoping methods and trucking the material to a mill about 12 miles from the mine. Ariel owns 100% of production subject to several royalties including a 4% gross royalty to property owner Giovanni Sosto. A Costa Rican attorney, Sosto will receive a 3% royalty payment from Greenstone if and when the project comes on stream. Ariel is paying a 5% gross royalty to Crimco U.S. a limited partnership which helped finance expansion of the Tres Hermanos mine and mill to 300 from 200 tons per day. Work should be completed in May. In addition, European Mining Finance, based in London, England, is entitled to an 8% net smelter return royalty on the first 60,000 tons of ore produced over the next four years to a maximum of 540,000 tons. The London firm contributed $600,000 toward mill expansion while an additional $250,000 was provided by Crimco.

Given those commitments, Bennett says the operation wouldn’t be viable if it was in North America. But miners in Costa Rica typically earn US$1 an hour and production costs at Tres Hermanos are running at US$175 per oz. Costa Rican gold miners receive a 10% premium on the market price of all gold delivered to the central bank. They are also subject to a 30% corporate tax rate. In the near future, Ariel hopes to double its reserves by drilling a northern extension of the Tres Hermanos vein system which is known to widen below the mine’s 6th and deepest level.