Astur Gold bullish on Salave

VANCOUVER — Five years ago Lundin Mining (LUN-T) was busy developing its Salave gold project in Asturias, Spain, when a provincial zoning change brought progress to a standstill.

The Asturian regional government had extended a development ban from within 100 metres of the coast to within 500 metres, swallowing up the Salave deposit and eliminating the possibility of an open-pit mine, though not an underground operation.

Now, with Spain’s unemployment level hovering around 20% and its fiscal deficit at about 8% of gross domestic product, Astur Gold’s (AST-V) president Cary Pinkowski believes the conditions are right to unlock the deposit. He explained in a recent interview with The Northern Miner that the project will bring much needed economic benefit to the province and the country.

“If this goes through, we’ll be the sixth-largest corporation in Asturias,” says Pinkowski. “We’ll create 250 direct jobs plus an estimated 250 indirect jobs. The potential revenue for Asturias could be 500- 700 million (US$661-US$925 million). So it’s something they’ve got to think about.”

Lundin, through its subsidiary Rio Narcea Gold Mines, had spent close to 40 million, completed almost 15,000 metres of drilling and submitted a feasibility study to the Asturian government when the project was stalled. The company then started legal applications.

Sensing that a junior was better placed to advance the project than a mid-tier base-metals producer, Pinkowski acquired the project and launched Astur Gold earlier this year.

Astur Gold (formally Dagilev Capital) finalized the acquisition of 95% of the property from Lundin in April for 500,000 in cash and 5.3 million shares of Astur Gold. The final 5% was purchased from minority shareholders for 600,000 to secure 100% ownership. If Astur secures an open-pit permit, it must pay Lundin a further 20 million, while the property is also subject to staged payments to a third party.

Thanks to extensive previous exploration, the Salave project now hosts 17.95 million measured and indicated tonnes grading 2.92 grams gold per tonne, plus 2.6 million inferred tonnes grading 1.94 grams gold and 1.2 million underground inferred tonnes grading 4.7 grams gold.

“The beauty is, we don’t have to spend much on exploration,” says Pinkowski.

Instead, the company must concentrate on community relations and public outreach.

“We’re pushing for the people to want this to happen,” says Pinkowski. “We’re dealing with opinion leaders, thought leaders, politicians; we’re doing newspaper mail-outs starting in September. But it’s more just being on the ground.”

The project is headed by Astur president Emilio Hormaeche, who was formerly project manager for Lundin’s Aguablanca nickel-copper mine in Spain. He lives less than a two-hour drive from the project and has been involved with several mining projects in Spain.

But unless the province chooses to allow open-pit mining along its coast, Astur must rely on the court system. The company is currently waiting for the case to be heard before the backlogged Spanish Supreme Court. Pinkowski expects that he will have a decision in about a year or two.

If the company loses the legal battle for an open pit, Pinkowski is prepared to sue the government for damages.

“We can win on either side,” says Pinkowski. “If we win, we get the open pit. If we lose, we can sue them and still go for underground.”

Pinkowski, however, is optimistic on getting approval for the open-pit. “Things are going much faster on the ground than we thought. . . we’ve definitely got momentum with the people,” he says.

In preparation for possible approval, the company recently started a scoping study on the project. Astur also plans to drive an exploration drift and drill further to follow up on the high-grade results Lundin hit in 2005.

Despite the challenges with Salave, Pinkowski believes the economic difficulties in parts of Europe open new possibilities.

“I just feel right now you don’t have to go to strange African countries or South American countries. It’s all about going back to countries like Greece, Spain, Portugal, Ireland, which are great places to work right now.”

Astur Gold’s share price has hovered between 72¢ and $1.01 since listing in mid-April, recently closing at 75¢. The company has 33.8 million shares outstanding.