Colossus nears the finish line at Serra Pelada

If Nicholas Campbell and Chris Lerch of Canaccord Genuity are right, shares of Colossus Minerals (CSI-T, COLUF-O) could reach $7.75 apiece within the next twelve months—a big jump from where they currently trade at $2.98 per share.

About 70% of the construction of its high-grade gold-platinum-palladium project in northern Brazil is complete, and the junior exploration and development company expects Serra Pelada will achieve an initial production rate of 250 tonnes per day in the second half of 2013. The mine should ramp up to about 500 tonnes per day by the end of the year and to 1,000 tonnes per day by the end of the first quarter of 2014.

Colossus, which owns 75% of the project, told investors that the process plant is on schedule for commissioning early in the second half of this year, while more than 97% of engineering and procurement work has been completed. In addition, 80% of the concrete has been poured and half the structural steel for the project has been delivered. The power line and power house are also on track to be commissioned early in the second quarter of this year, while the tailings dam is expected to be ready in conjunction with the commissioning of the mill.

Earlier in March, Colossus exercised its option agreement with VALE (VALE-N) for the mining rights to a 700-hectare piece of ground adjacent to Serra Pelada called Area B. Colossus has paid about US$6.7 million and spent about US$4.5 million on exploration so far. The agreement includes the payment of a fee of US$35 per oz. gold, platinum and palladium produced from the area.

Last September, Colossus signed a precious metals purchase agreement with Sandstorm Gold (SSL-V, SAND-X) to sell refined platinum, palladium and gold produced from the Serra Pelada property. Colossus received an upfront deposit of US$75 million in exchange for delivering life-of-mine payable metal equal to 35% of both platinum and palladium and 1.5% of gold. In addition, Sandstorm will pay Colossus a purchase price equal to the lesser of US$400 per oz. gold, US$200 per oz. platinum and US$100 per oz. palladium, and the prevailing market price.

Colossus’ surface and underground exploration program for 2013 includes 12,000 metres of underground drilling on the central mineralized area; 1,250 metres of surface drilling on the Elefantearea, and 4,000 metres of surface drilling on the Cutia property, which Colossus acquired 75% of in January 2012.