El Callao, Venezuela — Newly listed in January, Toronto-based
In March 2003, the company acquired a 70% interest in the key Choco 10 concession and the adjacent Choco 4 concession in the historic El Callao gold district of southeastern Venezuela’s Bolivar state. These two concessions are 15 km west of the town of El Callao and cover 72 sq. km of the prolific Pastora greenstone belt of the Proterozoic-to-Archean Guyana Shield, which extends east into Guyana and south into Brazil. The remaining 30% interest in the two concessions is held by Ferrominera del Orinoco, an iron-ore mining subsidiary of government-owned mining company Corporacion Venezolana de Guyana (CVG).
Three 100-metre shafts were sunk on Choco 10 in the late 19th century to gain access to high-grade gold ore, though modern work at the property dates back to the late 1980s, when a privately held Venezuelan cement company, Venezolana de Cementos (Vencemos), established a mineral-exploration subsidiary, Promotora Minera de Venezuela (Promiven).
In 1988, Promiven and CVG formed a joint venture to explore the Choco 10 and 4 concessions, as well as three concessions in the Bochinche district. Ownership in the venture was soon amended to give Promiven a 70% interest and CVG the remainder; then CVG assigned its interest to Ferrominera del Orinoco.
In 1990, the partners completed a regional aeromagnetic and geochemical survey over Choco 10 and 4 that delineated a magnetic high coincident with a strong geochemical gold anomaly. They followed up with a ground magnetic survey, a geochemical soil survey and trenching over five prospective areas.
By 1993, a geological survey and further soil sampling within the Choco 10 concession outlined a large gold anomaly covering 1,500 sq. metres. Buoyed by that success, the partners, led by Australian geologist Peter Simon, launched a reverse-circulation drilling campaign consisting of 1,288 holes and spanning 50,000 metres.
The drilled area measured 1,500 metres north to south and 1,100 metres east to west, and much of the drill spacing was a tight 25 by 25 metres. However, the average depth of the holes was only 30 metres (the depth of the oxide material), since the operators were focused on developing a heap-leach operation. Only six holes exceeded 100 metres in depth.
The geology of the concessions is characterized by greenschist-facies metavolcanics and metasediments of the El Callao and Yuruari formations, which have been intruded by younger felsic-to-mafic stocks and sill-like bodies. The geological structures are complex, with shearing seen both within the stratigraphic sequence and near the margins of intrusive rocks. As well, large-scale gabbroic intrusions in the concession area form topographic highs and are probably over-thrust blocks.
Primary gold occurs in irregular lenses and pods of quartz-sericite-altered metavolcanics that contain up to 20% pyrite, with high-grade gold generally occurring in sulphide-rich zones.
In the oxide zone, the gold is fine-grained and associated with limonite, while in the sulphide zone, it occurs in fractures within pyrite grains or as gold grains with quartz veining.
The mineralization discovered so far at Choco 10 has be divided into three main deposits:
— Rosika — This, the largest deposit, is in the north-central portion of the concession. Gold is shear-hosted in steeply dipping, north-south trending structures.
— Coacia — This is the smallest deposit, and lies immediately south of Rosika. Mineralization occurs in clay-zone material at the contact between basalts of the El Callao formation and pyroclastics of the Yuruari formation.
— Pisolita — Situated immediately west of Rosika and Coacia, mineralization here occurs in steeply dipping, north-trending quartz veins.
One peculiar feature of the El Callao district is the El Laguna diabase dyke, which is likely Jurassic in age and extends east-west across the district, immediately south of CVG’s Colombia gold mine and the Choco 10 property.
“The Laguna dyke is not mineralized but is somehow related to mineralization,” said Jose Francisco Arata, Bolivar’s executive vice-president of exploration. “Anytime the dyke intersects with other structures, you have gold mineralization.”
Cemex
Work progressed rapidly until 1994, when Mexican cement giant
With no more drilling taking place, BHP Engineering and Snowden Associates carried out a resource study of Choco 10 in 1994, and BHPE completed a preliminary feasibility study in 1995-96. This work resulted in a near-surface, oxide resource estimate of about 1 million oz. gold.
Work was completely halted at Choco 10 in 1996, after US$14 million had been spent on exploration, and Cemex shopped the property around in subsequent years.
Activity at Choco 10 resumed this past winter with a 2-stage property deal that ultimately delivered Cemex’s 70% stake into Bolivar’s hands.
The first stage, in February 2003, saw Cemex sell its 70% interest to privately held Carisma, which, in turn, was owned by the Aruban corporation Newfield Investments, whose sole shareholder was Enrique Valero. Carisma agreed to pay Cemex a lump sum of US$2.9 million, replacing an earlier deal that saw total obligations of US$3.2 million paid over three years.
The second-stage of the deal saw Bolivar acquire Carisma by paying 5 million Bolivar shares, with a deemed value of US$1.5 million (30 per share), and agreeing to complete the required cash payments to Cemex.
As well, Carisma must pay Cemex a sliding-scale royalty of US$10-20 per oz. on any production above 700,000 oz. gold, and any production from the two Choco concessions is subject to three royalties payable to the government, totalling about US75 per tonne milled.
Meanwhile, Ferrominera del Orinoco’s 30% stake in the concessions has been a carried interest throughout the exploration phase, but it will soon become a participating interest as the project moves into the exploitation phase.
Since Ferrominera’s primary focus is farther north, on its iron ore mines on either side of the Orinoco River, Bolivar has entered negotiations with the CVG subsidiary to convert its interest into a royalty.
In January 2003, as part of Bolivar’s due diligence, Micon International reviewed and updated BHPE’s work, and calculated a new resource estimate of 12.5 million tonnes grading 2.5 grams gold, or 1 million contained ounces gold, based on a cutoff grade of 0.8 gram per tonne and a gold price of US$315 per oz.
Micon said in its report that “the level of supervision and the extent and nature of the quality-control measures in place during [Cemex’s] Choco drilling campaign were of a high standard.”
The company calculates that at a mining rate of 4,000 tonnes per day and a stripping ratio of 3-to-1, the production potential at Choco 10 is at least 90,000 oz. gold per year over nine years. The total operating cost is expected to be US$162 per oz., or US$9.89 per tonne, and the capital cost of building a conventional milling operation with carbon-in-leach recovery is pegged at US$25 million.
Ore would be sourced from three shallow pits, Rosika, Coacia, and Pisolita, which would eventually become one large pit.
“The milling of oxides is nothing to sneeze at, but our chief interest is what’s going on beneath the oxides,” said Robert Doyle, Bolivar’s chief financial officer. “Our oxides will make for a great starter pit before we tackle the sulphides beneath.”
Grouse Creek mill
In April, Bolivar made a canny move by acquiring a mothballed, 5,400-tonne-per-day gold mill from
The mill is at the failed Grouse Creek gold mine in Idaho but is being dismantled and will likely be transported to Houston before spending the winter in
the Venezuelan port city of Puerto Ordaz, on the Orinoco River, 180 km north of El Callao. The same contractor that is dismantling the mill will also begin re-assembling it on-site early next year. Bolivar has budgeted US$2 million for moving the mill and buying the parts required to reactivate it.
At the front end, the mill needs a crusher, which Bolivar has yet to acquire, and, at the back end, it lacks carbon-adsorption equipment. The existing gravity circuit probably will not be used at Choco 10, since, according to Franciso, gravity circuits are considered a “licence to steal” in Venezuela.
The mill also has a Merrill-Crowe unit to recover silver, which will be unnecessary at Choco 10, where silver mineralization is minimal.
Milling Choco 10 ore at a rate of 5,400 tonnes per day would produce 118,000 oz. annually for 6.8 years, though no associated costs have been calculated. Bolivar’s consultants will further study the potential for mining Choco 10 at higher rates, though Doyle commented that “with our extra milling capacity, it’s still our desire to acquire additional assets in the El Callao district.”
Bolivar gained a solid financial footing in late May by raising C$19.2 million through the placement of 25.6 million units priced at C70 each. Each unit consisted of a share and half a warrant, with a full warrant entitling the holder to buy another share for $1.10 before March 2008. Dundee Securities, Griffiths McBurney & Partners and Sprott Securities acted as agents and collected a 6% commission and an option exchangeable into 1.5 million units at 75 ending September 2004. At mid-July, Bolivar still had US$7.5 million left in cash and no debt.
On the ground at Choco 10, Bolivar is digitizing all the exploration data generated on the property over the past 14 years, and is part-way through this year’s US$1-million drilling program.
The 15,000-metre program consists of: 3,000 metres of infilling to upgrade inferred resources to indicated (completed in late June); 7,000 metres to explore for resources beneath the current pit outlines; and 3,000 metres of exploration at other targets.
So far, angled holes drilled in the Coacia deposit have returned metre-wide intersections grading 7.2-25 grams gold at depths of 130-180 metres. Deeper drilling in the northernmost part of Rosika returned particularly enticing results, including hole CO-274, which yielded 87.6 metres grading 3.6 grams gold, including 50 metres of 5 grams gold. This intersection, which shows mineralization getting wider and higher-grade with depth, was drilled to a depth of 221 metres, that is, towards the lower limit of open-pit mining.
Recent petrographic study of core CO-274 within a high-gold grade interval at a depth of 205 metres has shown a peculiar hydrothermal assemblage represented by extremely fine-grained foliated rock (ultramylonite), which is highly magnetic and consists of fine-grained quartz, carbonate and magnetite with minor pyrite and chalcopyrite.
“Looking at the gold mineralization of the deepest cores drilled so far, there is a high enrichment of magnetite,” said Francisco. “We don’t know why exactly, but this [could influence] our deeper exploration plans.”
The list of other, smaller targets on the Choco 10 property includes Choco, McKenzie, Mina Concordia, Avila (all of which are south of the main deposits) and the promising Villa Balazo target, just northwest of Rosika, where Bolivar hopes to be able to define another 100,000 oz. of reserves.
In short, the geology looks highly favourable for Bolivar to be able to double the open-pit resource to 2 million oz. gold.
Left for later years will be any gold mineralization deeper than 250 metres, which could potentially be mined via a ramp from the bottom of the proposed pit.
Bolivar has applied to convert its Choco 10 and 4 exploration concessions into exploitation concessions, and so is relinquishing half of the area covered by two concessions. Bolivar expects it will take about six months for the changeover to take place. The exploitation permits will be valid for 22 years and be extendible in further, 10-year increments.
Bolivar still needs its environmental permits, and plans to finish an environmental impact study (EIS) at Choco 10 within three months. It has hired Venezuela-based AmbioConsul to update a previous EIS at Choco 10, completed by AmbioConsul for Cemex in 1996.
Bolivar has begun engineering work and, by September, plans to complete a revised feasibility study that includes the recent infill drilling. At this rate, construction of the mine could begin in November with a first gold pour envisaged for the second half of 2004.
Said Doyle: “There’s probably no other company out there right now, junior or otherwise, that is going from inception to production in only twenty-four months.”
Bolivar reckons it will have to raise an additional US$20 million to cover all its needs over the next 12 months. These include US$25 million for capital expenditures, US$2 million for exploration, US$1 million for engineering studies, and US$1 million for corporate expenses. (These figures assume a 100% project interest.)
Doyle said Bolivar intends to be a staunch non-hedger of its gold production, and that banks have already shown a willingness to lend the company funds without any hedging constraints.
There is good mining infrastructure in place in the region, which has a gold-mining history stretching back to the 1860s, when El Callao was the world’s richest gold camp.
The climate is tropical, and the topography, characterized by gentle hills at an elevation of about 250 metres above sea level. In addition to El Callao’s paved roads, water resources and able workforce, a power line from a hydroelectric dam to the north runs through the Choco 10 property southwards to customers in Brazil.
There is a paved airstrip in the town of Guasipati, just north of El Callao, which has a population of 5,000.
“People here love mining and they want jobs,” said Francisco, “so there aren’t many complaints about noise or dust, and we won’t have any troubles with permitting.”
One unresolved issue is the presence of about 150 mineros, or artisanal miners, who are active on Choco 10. They are there illegally, but Bolivar tolerates their presence to ensure goodwill in the community and to dissuade any more mineros from entering the property. Ultimately, Bolivar hopes to be able to hire many of the mineros once the project reaches a more advanced stage.
Bolivar has several more gold exploration opportunities nearby:
— The much-less-explored Choco 4 concession, directly north of Choco 10, displays a similar magnetic anomaly seen at Choco 10, and also shows a gold anomaly in a geochemical survey. There has been limited drilling on Choco 4, but artisanal miners are active there.
— At Choco 5, immediately west of Choco 4 and the northern portion of Choco 10, Bolivar has just teamed up with Spokane, Wash.-based
— As part of the Carisma purchase, Bolivar acquired the 150-sq.-km Bochinche 1 and 2 concessions and the Bochinche Zero area, all of which are farther east in the Bochinche gold district. Work at Bochinche has been limited to trenching, and the property is not yet accessible by road.
Although Bolivar Gold is a new company, most of the men behind it are no strangers to El Callao district, having developed and brought into production the Tomi gold mine in the eastern El Callao district in the 1990s.
The company Bolivar Goldfields operated Tomi for three years
at a rate of 55,000 oz. per year before it sold its El Callao assets to Crystallex in June 2000 for US$20 million and the assumption of US$13 million in debt.
“Bolivar is one of the few groups in the 1990s to have actually put a mine into production in the area,” said Francisco.
After the sale to Crystallex, Bolivar Goldfields became a dot-com company, and the principals moved on to other ventures. One of these was the TSX-Venture Exchange-listed company
The nadir of the venture was the kidnapping of three employees who were held captive for more than two years.
By June 2001, Tecnopetrol had sold off all its operating Colombian assets for US$1 million in cash and the assumption of debt, and by November 2002, Tecnopetrol had relinquished or sold off the remainder of its Colombian assets.
In mid-2002, Tecnopetrol dabbled with the idea of buying into a luxury real estate developer in Italy, but then backed away from consummating the deal. In August 2002, Tecnopetrol shares were consolidated on a 6-for-1 basis, and the shares began to trade in Canadian, rather than U.S., dollars. Finally scrubbed clean, Tecnopetrol changed its name to Bolivar Gold in January 2003 and once again had a property of merit, Choco 10, by March.
Today, Bolivar Gold has corporate offices in Toronto and Caracas, and a field office in El Callao. An office in Bogota, Colombia, was closed last year.
Bolivar Gold’s management consists of: Serafino Iacono, chairman and CEO; Miguel de la Campa, president and COO; Francisco; Doyle; John Thomas, vice-president of operations; and Peter Volk, corporate secretary and legal counsel.
Speaking at the company’s recent annual meeting in Toronto, Iacono said the recent political instability in Venezuela had not affected Bolivar’s ability to operate in the country.
He emphasized that the same competent technocrats run Venezuela’s government-owned mining companies on a day-to-day basis, and that personnel changes have only occurred at the very top of these organizations.
One thing Bolivar has working in its favour is the Investment Protection Treaty signed by Canada and Venezuela in 1998. Under this treaty, Canadian investors in Venezuela may be afforded greater protection than certain other foreign investors and may be exempt from complying with exchange control regulations.
The treaty guarantees Bolivar the free transferability and convertibility of dividends and other profits or gains resulting from an investment, and guarantees the repatriation of the investment.
In terms of share capitalization, Bolivar has 43.6 million shares outstanding (65.3 million fully diluted), and a 52-week trading range of 52 to $1. Shares last traded at $1, for a market cap of C$44 million.
Institutions hold 34.9 million shares, whereas management and other insiders hold 2.7 million shares in escrow.
At mid-May, officers owned the following shares: Iacono, 389,000; de la Campa, 687,000; Francisco, 438,000; Ward and Doyle, nil.
The company also has 18.7 million warrants outstanding, of which 12.8 million warrants can trade on the TSX Venture Exchange using the ticker symbol bcg.wt. Each of the listed warrant entitles the holder to buy one share for $1.10 and will expire on March 17, 2008. However, the warrants have traded only once since their listing, on June 20, and the current bid price is 30.
Bolivar was recently approved for a conditional listing of its shares and warrants on the main Toronto Stock Exchange, subject to the company’s fulfilling all the requirements of the exchange before the end of September.
To comply with the wishes of the TSX, Bolivar is replacing director Ian Ward, vice-president of Micon International, with outside director Stephen Wilkinson, who is president and CEO of
Other directors include Perry Dellelce and Venezuelan businessman Andres Carrera.
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