LATIN AMERICA SPECIAL — Venezuela may rebound as regional

Investor interest in juniors exploring in Venezuela has, of late, taken a 180-degree turn for the worse.

Gone is the euphoria that surrounded the exploration initiative there a year ago. The cause of the decline is twofold: disappointing assay results from the Kilometre 88 region, combined with turmoil in the Venezuelan economy. Yet, despite the current negative sentiment — reflected in the fact that several companies, such as Tombstone Exploration (VSE) and Canarc Resource (TSE), have turned from Venezuela to focus on more acceptable climes — some analysts remain optimistic.

Brokerage house Yorkton Securities, for example, believes the district may heat up again if Placer Dome (TSE) releases a positive feasibility study and a production decision for its Las Cristinas project.

The gold property contains a resource of about 214 million tonnes grading 1.25 grams per tonne.

Preliminary studies call for a US$400-million mining and milling complex operating at 20,000-35,000 tonnes of ore per day. Annual production is projected at 380,000 oz. at a cash cost of US$210 per oz.

Placer expects to complete the full feasibility study this April and, assuming the conclusion is positive, will proceed with development. First, however, it must resolve certain business issues with the Venezuelan government. These include reforming the Mining Law to ensure tenure is not in question, and negotiating an investment protection treaty with the government outlining the terms of its investment. The company wants access to foreign currency movements both in and out of the country, as well as agreements on the sale of gold from the project. “We would obviously prefer to sell the gold production on world markets for hard currency,” says Hugh Leggatt, Placer’s media relations manager.

Among other companies committed to exploration and development in the South American country is Bolivar Goldfields (TSE), which plans to spend at least $1.5 million this year on its Tomi and Dividival concessions in the region of El Callao.

Drilling on the Tomi has outlined a potentially open-pit resource of 1.1 million tonnes grading 8.7 grams gold per tonne within the upper 60 metres of two zones. The company is testing for continuity and extensions to the known gold zones, as well as other targets on the property.

Bolivar’s president, Ian Gray, says the company will re-assess the resource at the end of the first quarter to determine whether further drilling is required before prefeasibility work can get under way.

The Vancouver-based junior is also exploring its Nena property (60 km west of Kilometre 88) and on its Marwani concessions (on the border with Guyana). Meanwhile, El Callao Mining (VSE) continues to advance the nearby Lo Increible project, where it can earn a 70% interest in the No. 2 and No. 4 concessions.

The company plans to ship ore to the Revemin mill, about 5 km south of Lo Increible. Operated by Monarch Resources (TSE), the facility will receive up to 7,500 tonnes of ore per month from El Callao.

El Callao is currently carrying out infill drilling on the Victoria deposit in an effort to block out reserves, and ore deliveries are to begin in June, 1995.

Based on an assumed average grade of 6 grams, production will total about 16,000 oz. per year. El Callao expects to net a profit of about $200,000 per month as a result of the milling agreement, and will use the funds to continue exploration and drilling work on the deposit.

Monarch is expected to spend in the order of US$5 million this year on its holdings in three districts: El Callao, Bochinche and El Dorado. Monarch poured the first gold at its Camorra mine in El Dorado last summer, and expects to be producing at an annual rate of 80,000 oz. by mid-1995, at a cash cost of US$125 per oz. Reserves are sufficient for about four years. Queenstake Resources (TSE) is working to outline a minable reserve at its Bizkaitarra concession, east of Placer’s Las Cristinas play. Vengold (TSE) is funding work on the property, under an option to earn up to a 65% interest, while Queenstake holds the rights to a 90% indirect stake.

Diamond drilling is testing gold zones identified by previous work, including auger drilling. Assay results are expected in April.

Southwest of Bizkaitarra and adjacent to Las Cristinas, Crystallex Resources (VSE) is developing its Albino gold mine, where reserves are estimated to be 580,000 tonnes grading 6.3 grams.

Last year, the company built a 360-tonne-per-day carbon-in-pulp plant, which was subsequently expanded to 540 tonnes.

The mill produced 1,933 oz. in February from 5,300 tonnes grading 13.4 grams; the average cash cost was about US$217 per oz. (Production in January was only 265 oz. from 4,000 tonnes grading below 3.4 grams.)

Crystallex is confident that, after making some minor adjustments to the recovery plant, it can bring the plant to full capacity. The company expects to produce about 4,000 oz. per month (or about 30,000 oz. for the year), and the cash cost is expected ultimately to level off at US$100 per oz. Crystallex needs the cash flow from the operation to meet payment obligations. Payment of US$500,000 was due March 23; an additional US$1 million is due by April 23, US$2 million by June 23 and a final US$3 million by Dec. 23.

In addition to its production plans, Crystallex has budgeted US$3.8 million for exploration this year.

Meanwhile, Gold Reserve (TSE) will spend up to US$10 million on its Brisas Del Cuyuni concession, which is south of, and on strike with, the shear zone that hosts much of Placer’s Las Cristinas resource. The company recently settled a dispute with TVX and a local group over ownership of the concession. A resource estimate has yet to be released.

Jordex Resources (VSE), one of the few non-gold juniors in Venezuela, is awaiting word from Anglo American on its plans for the Loma de Hierro nickel-laterite project near Puerto Cabello. Jordex has a half interest in the private company, which owns 90% of the project.

Anglo already has a 10% stake in the project and is conducting a feasibility study.

Upon delivery of the study, Anglo will have six months to exercise an option to buy an additional 60% for US$27.4 million (less 30% of its feasibility study costs). If it does so, Jordex and its partner can sell their 30% stake to Anglo for a further US$40.5 million (less the 60% price). Loma de Hierro contains a geological in situ resource of about 32.4 million tonnes grading 1.57% nickel.

Jordex President Paul Kostuik expects Anglo to deliver the feasibility by April 15, and he is optimistic the study will be positive.