Goldrock nears construction decision with positive Lindero feasibility study

VANCOUVER — With a new name, a revamped management team and now a feasibility study for its flagship Lindero gold project in Argentina, Goldrock Mines (GRM-V) is striding towards its goal of becoming a gold producer.

Goldrock started work on the Lindero feasibility study in mid-2012, when the company was known as Mansfield Minerals. Now the work has paid off. The Lindero study outlines an operation producing an average of 109,000 oz. gold annually for nine years, for an all-in cost of US$703 per oz.

“For me and for investors, the most important outcome of this feasibility is the cash cost,” Paul Matysek, Goldrock’s president and CEO, says in an interview. “The low costs mean that the return is over 30% after tax. In addition we’re in a great province, it’s technically simple, we’re in the high desert with no communities within 100 km, but with great support from the government — it’s the perfect heap-leach deposit.”

Lindero is in Argentina’s northwestern Salta province. Goldrock geologists identified mineralization at the site in 1999, noting potassic alteration that led to a gold-bearing dioritic porphyry discovery.

The porphyry now hosts resources totalling 128.7 million measured and indicated tonnes grading 0.53 gram gold per tonne, plus 59.7 million inferred tonnes averaging 0.37 gram gold. To transform that resource into a reserve, Goldrock designed open pits using a cut-off grade of 0.35 gram gold, which resulted in a reserve of 65.5 million proven and probable tonnes grading 0.72 gram gold, for 1.5 million contained oz. gold.

The Lindero reserve is amenable to open-pit mining, and 68.3% of the contained gold can be recovered via three-stage crushing and conventional heap leaching, followed by carbon adsorption-desorption processing. For the first two years the operation would churn through 15,000 tonnes per day. In the first three years a higher-grade ore zone would enable gold production to average 128,000 oz. a year.

It would cost US$155.3 million to get the planned Lindero mine into operation, plus another US$64 million starting in year three to expand the operation from a daily 15,000 to 18,750 tonnes, and change from contract to owner-operated mining. Based on a gold price of US$1,400 per oz. and a 5% discount rate, the project carries an after-tax net present value of US$215 million.

Once operational the Lindero mine is expected to generate an after-tax IRR of 33.4%, enabling capital payback in two years.
“We really wanted to drive the capex down because, at the end of the day, we’ve got a $45-million market capitalization, and we’re looking for $150 million,” Matysek says. “We needed to keep the numbers as low as possible, so for the first two years we use contract miners. Then, when we’re cash-flow positive in year three, we do an expansion and buy our own mining fleet.”

Lindero is already permitted for construction, having received its key environmental permit in late 2011. Goldrock says the authorities in Salta province want Lindero to become the province’s first metal mine.

The project sits 250 km due west of the city of Salta and is road accessible. The surrounding Puna district is only sparsely populated, but the area has good infrastructure, including an airstrip, roads, gas pipelines and an international rail line.
The railway connects the city of Salta with the deep-sea port of Puerto Angamos (also known as Antofagasta) on the Chilean coast.

Power for a mine at Lindero would be generated by burning natural gas. The Salta government built a gas line through the Puna region to encourage mining and other forms of economic development.

Goldrock could tap into this line in the village of Pocitos, 160 km by road from the mine site.

Rather than build a pipeline, Goldrock plans to transport gas from Pocitos to Lindero by truck.

Mining operations at Lindero are divided into four stages.

Contract miners would be employed in stages one and two, during which time the strip ratio would average 0.48 tonne of waste for each tonne of ore.

In stages three and four the strip ratio rises and mining would shift to owner-operated equipment. Over its lifespan the mine’s strip ratio would average 1.79 to 1.

With a feasibility study in one hand and a permit for development in the other, Goldrock says it is now focused on securing the financing it needs to build Lindero.

“We’ve had a lot of interest because of the robustness of the project,” Matysek says. “It’s going to be a combination of debt and equity, and we’re also looking at streams. We just want to make sure the financing is not dilutive to the share price because we really want to look at other deposits out there, and the only way I can do that is with a healthy share price.”

Matysek’s focus on financing and moving Lindero towards construction represents a departure from the exploration-oriented goals that have driven the company over the last decade. Matysek came on board because that is precisely the transition that was needed to take Lindero and the company to the next level.

Matysek joined the company in November and soon added a few other new faces to the management team, including David Keough, who was appointed to the newly created role of chief operating officer.

Matysek has an impressive resume of success: in the last two years he led Potash One into a friendly U$434-million takeover by German company K+S AG, and took Lithium One into a $112-million merger with Galaxy Resources (GXY-A).

Both of those deals followed Matysek’s success with Energy Metals, a uranium company that he founded and grew until it was taken over for $1.5 billion in 2007.

After completing the Lithium One deal, Matysek says he decided his next project should be in gold. He looked around for a company with a great asset but in need of new management — and found Mansfield Minerals.

“When I saw Mansfield I thought: ‘Wow — this is a company with a prefeasibility study and a permit, in Argentina, in the province where I just sold my last project, with a great asset, and trading at an $18-million market capitalization,’” Matysek recalls. “So I went to management and said: ‘What you guys need is a build team — if you want to sell it, you have to actually try to build it.’ I convinced them to let me take it over, put my team in place and try to build it — and to move quickly, because all of my deals I do in three years. Time is money.”

With new management Goldrock also adopted a new name. The company dropped the Mansfield Minerals banner just as it announced a long-term objective of becoming a 250,000 oz. per year gold producer. The company plans to achieve that goal through both organic growth, anchored in the development of a mine at Lindero, and through the acquisition of near-term production assets.

Lindero might contribute more to Goldrock’s gold output goal than the current study suggests if the nearby Arizaro discovery continues to grow. Arizaro is located 3 km southeast of Lindero, and a recent 13-hole drill program produced some promising results.

Goldrock discovered mineralization at the Arizaro porphyry target in late 2011, when a drill returned 122 metres grading 0.75 gram gold and 0.24% copper. Recent drilling returned such results as 34 metres grading 0.73 gram gold and 0.19% copper, 206 metres of 0.43 gram gold and 0.19% copper, 96 metres of 0.43 gram gold and 0.14% copper and 339 metres of 0.44 gram gold and 0.16% copper.

At Arizaro, higher-grade copper mineralization is associated with a magnetite breccia, which is surrounded by a fractured diorite porphyry unit with a well-defined, quartz-chalcopyrite stockwork. The system covers an area of 500 by 600 metres, and mineralization starts
at surface. To date mineralization has been tracked to 300 metres depth, and the system remains open in all directions.

Goldrock plans to calculate an initial resource for Arizaro sometime over the next 18 months.

On news of the Lindero feasibility study Goldrock shares fell 7¢ to 58¢. The company has a 52-week trading range of 55¢ to 90¢, with 65 million shares outstanding.