Candelaria Mining dodges politics at Caballo Blanco in Mexico

After acquiring the Caballo Blanco project in the Mexican state of Veracruz a little more than a year ago, Candelaria Mining (TSXV: CAND) prepared a new environmental impact assessment (MIA) for the gold project and worked closely with the surrounding communities and the local, state and federal governments.

The junior submitted the MIA to the Mexican environmental authority, or SEMARNAT, this July, but in a surprising and unusual move, retracted the MIA in the first week of October. In a brief, two-paragraph press release, the company said it had decided to retract the application for the environmental permit “due to the current political environment and upcoming state and federal elections.”

In a prepared statement, CEO Curtis Turner said: “We are still optimistic about the Caballo Blanco project going forward and continue to have good, open dialogue at all levels of the government and communities.” He also said that postponing the permit application “will allow Candelaria to optimize certain aspects of the project and improve upon existing, and establish new relationships with our stakeholders.”

In an email response to requests from The Northern Miner for comment and the reasoning behind the retraction, Turner said that “unfortunately for Candelaria,” the term of the current governor of the state of Veracruz only lasts two years, because the federal government is aligning elections for state governors and the president to fall on the same date. The next elections will take place in mid-2018, at which time the next governor of Veracruz will be elected to a six-year term.

“The short-term nature of this current term did not create the best environment for long-term decision making and relationship building,” Turner said. “The various political parties are selecting candidates and establishing platforms at the federal, state and local levels. Mining is a sensitive subject in many areas, including Veracruz, and in an effort to not make mining or our project a political issue, we have decided to retract our [application for] permits until the election cycle is complete. We are still confident that our project has and will have support. In essence, we have decided to take a short-term pause to provide a better long-term basis for the project.”

The company has not retracted a pending application for a 7,500-metre, phase-one drill program, however. The drill program will probe several targets identified outside of the La Paila resource area at the open-pit heap leach project. Caballo Blanco is next to the Gulf of Mexico, 65 km northwest of the port city of Veracruz.

“We have good relationships with the current elected officials at the municipal and state level,” Turner noted. “However, as mentioned, as the election process is starting up, it will be important to become familiar with the various candidates and gain insights into their views and understanding of mining, with the desire to educate them about the benefits of mining and our project.”

Turner said the retraction had nothing to do with recent comments from Veracruz’s Secretary of Economic Development, Alejandro Zairick, who said that “if a [mining] project breaks any laws, and if it really damages the environment, as determined by the experts, surely it will not be allowed.”

Workers prepare samples at Candelaria Mining’s Caballo Blanco gold-silver project in Mexico. Credit: Candelaria Mining.

“To our knowledge there has not been a statement by Mr. Zairick, or the Governor, that mining should not be allowed,” Turner continued. “That being said, mining is a federally regulated process and mining rights are federal in nature. Permits are granted at the federal and municipal level and we are confident that the Caballo Blanco project does not break any environmental laws nor causes any damage to the environment and meets or exceeds the environmental requirements, as established by SEMARNAT.”

When asked if the company intends to make any changes to its MIA before resubmitting it after the next elections, Turner said: “At this time we do not anticipate the need to make any changes to the permitting documents.”

In the meantime, he says, Candelaria will finish an infill drill program within the current resource and undertake “additional metallurgical testing at some point in the future, and have several high-priority drill targets that have the potential to be incorporated into future studies.”

Caballo Blanco has 521,000 oz. gold and 2.17 million oz. silver in the indicated category (31.2 million tonnes grading 0.52 gram gold per tonne and 2.16 grams silver), and inferred resources of 95,000 oz. gold and 590,000 oz. silver (8.63 million tonnes grading 0.34 gram gold and 2.14 grams silver). The resource is constrained within a conceptual open pit, using gold and silver prices of US$1,150 per oz. and US$21 per oz., at a cut-off grade of 0.11 gram gold.

Mineralization is open to the north and south along trend and at depth.

In June, Candelaria closed a $9.7-million strategic investment by Agnico Eagle Mines (TSX: AEM;  NYSE: AEM), whose vice-president of exploration, Guy Gosselin, told The Northern Miner that Caballo Blanco has similarities with Agnico’s La India mine in Sonora, 200 km east of Hermosillo. La India started commercial production in February 2014.

“[Caballo Blanco] is shallow and they have identified some good targets,” Gosselin said in an interview at the time of the investment. “This is why we believe that with more exploration it could become a more sizeable deposit, so it was a good early-stage opportunity for us. It’s an oxidized system, having a good strip ratio per metre. It just needs to get bigger.”

Two large, epithermal gold-mineralization zones have been found called the Northern Zone and the Highway Zone. The two zones lie along a north–south linear trend over a distance of more than 9 km, and include the La Paila discovery on the north end of the trend in the Northern Zone. The Northern Zone is 4 by 5 km and the Highway Zone is 4 by 2 km in area.

The deposit is oxidized to a depth of at least 300 metres and the gold mineralization is very fine, occurring within a vuggy and brecciated silica alteration of an original andesite host rock in the upper levels of the surrounding epithermal system.

Candelaria picked up the Caballo Blanco project from Timmins Gold (now Alio Gold [TSX: ALO; NYSE- AM: ALO]) for US$17.5 million.

The project has been worked on by a number of mining companies in the past, including Almaden Minerals (TSX: AMM), Comaplex Minerals, Canadian Gold Hunter/NGEx Resources (TSX: NGQ; US-OTC: NGQRF), Goldgroup Resources and Timmins Gold.

In June, Candelaria appointed Turner as its CEO. The mining executive has spent many years of his career in Mexico, where he has overseen permitting and technical work. Before joining Candelaria he worked as corporate development officer for Argonaut Gold (TSX: AR).