Medoro Moves Ahead At Marmato ‘Golden’ Mountain

Now that Medoro Resources (MRS-V) has compiled resource estimates for its three newly acquired projects in the Marmato Mountain gold district in Caldas state, Colombia, the company plans to expand and upgrade resources and then add them all together.

When that happens, the number of gold oz. will likely reach an impressive 10 million for the three neighbouring projects, says Medoro president and CEO John Hick.

“It’s really one big system,” Hick says. “And that’ll make it easier — some people don’t understand that it’s A plus B plus C.”

The most recent resource estimate was for the Zona Baja property, acquired from a Colombian mining company.

Measured and indicated resources there total 3.5 million oz. gold and 9.7 million oz. silver contained in 92.5 million tonnes grading 1.17 grams gold per tonne and 3.26 grams silver.

Inferred resources total 1.3 million oz. gold and 4.1 million oz. silver. The resource was based on about 17,000 metres of drilling in 79 holes using a cutoff grade of 0.3 gram gold per tonne.

Zona Baja adjoins and underlays the Zona Alta and Echandia properties which Medoro acquired last fall when it took over Colombia Goldfields. Combined, the three properties have measured and indicated resources totaling 6.9 million oz. gold and 37.1 million oz. silver, plus another 2.6 million oz. gold and 13.2 million oz. silver under the inferred category.

There is an operating underground mine on the Zona Baja property. The Mineros Nacionales mine and mill, which is currently operating at a rate of 800 tonnes per day, produced about 25,000 oz. gold last year from ore averaging 3.5 grams gold per tonne. Hick expects the grade to be slightly higher this year.

Hick says operations will continue at the mine. It employs about 600-700 people and is the largest employer and tax payer in the area. Hick says that last year, after all costs and taxes were paid, the mine earned $5 million.

“The focus of the mine will be cash flow,” Hick says. “Cash flow can be increased production or it can be lower production but less expensive production.”

Although underground vein mining will continue, Medoro’s ultimate focus is developing the low-grade resources into an open-pit mine, recovering gold and silver through cyanide leaching or by heap-leaching. To get there, Medoro is embarking on a 58,000 to 65,000-metre drill program over the next 18 months to increase and upgrade resources. The budget for 2010 is about $25-30 million.

“We want to hit the drilling hard,” Hick says. “We have five drills turning at the moment and we expect to have ten drills by April.”

By mid-year, Hick anticipates having in hand a scoping study evaluating the potential of all the resources together.

The company will face some additional challenges as the project develops: namely with local small-scale miners, environmental issues and the relocation of the town of Marmato.

The Marmato Mountain gold district, known locally as “Golden Mountain,” is 80 km south of the city of Medellin on the eastern edge of the Western Cordillera of the Colombian Andes.

The region has been a centre for small-scale mining for centuries and the cost to the environment has been devastasting, with hundreds of mines and dozens of mills in operation, many illegally. According to the company’s technical report, in 2005 there were more than 200 small underground mines and more than 30 mills in operation at Zona Alta with none following the country’s environmental laws.

The mines are primarily horizontal tunnels driven as far as 250 metres along the veins with some internal crosscuts. Waste rock and tailings are usually dumped down the mountain sides and into the creeks, where small miners then try to recover more gold. Many of the mines are unsafe and lack proper ventilation.

This unrestrained mining has led to large-scale environmental deterioration which threatens the stability of higher portions of the mountain above Marmato. Landslides have already destroyed homes in the town.

Many of the mining licences have been acquired by the prior operator, Colombia Goldfields, and some of the operations have been shut down. Medoro is going to continue the process.

Hick says there are some individual claims in the Zona Alta area where locals still have small-scale operations underway.

“It’s now down to 12-15 legal ones,” Hicks says. “And our plan is to acquire them over time — as long as it’s done fairly it shouldn’t be a problem.”

As Medoro develops the project it will be obligated to help with the relocation of the town of Marmato, which has a population of about 1,000 people. The government first started this process back in 2002, building more than 100 homes 1.5 km away in El Llano (population 1,250). The effort so far has been unsuccessful. Residents have complained that their new dwellings were poorly constructed and that the climate in the new town is hotter.

Hick says this could cost the company about $25-30 million. “We would be working with the government paying a lot of the cost for that, but that would be a year or two away.”

As all of the small mines are shut down, Medoro may also have to help with the economic situation in the area, which has been dependent on mining. People will be in need of both work and skills training before a new mine is put into production.

Hick joined Medoro last fall, after deals to acquire the three projects were made. He’s a lawyer who has worked in the mining industry for nearly three decades, starting with Dome Mines and then Placer Dome, and more recently holding senior positions at TVX Gold, Defiance Mining and Geomaque Explorations before it was bought by Rio Narcea Gold Mines.

Hick has worked in many countries in South America but has avoided Colombia on purpose.

“There was a period of time when I just had no desire to go there,” he says. “Colombia has always been a great geological place but there were difficult years from a safety point of view and a government point of view.”

But there’s been quite the turnaround. President Alvaro Uribe has made free market reforms and campaigned against the Revolutionary Armed Forces of Colombia (FARC), which has been notorious for using kidnapping as a terror tactic.

“The country now, relatively speaking, I find it quite safe,” Hick says. “It has changed dramatically thanks to Uribe’s government and it’s a good place to work.”

So when the opportunity came along to join Medoro, Hick liked what he saw. He says the mining and environmental laws are clear and the taxes and royalties are reasonable.

“If you do things properly you should be able to develop mines in a reasonable time frame,” he says. “I found the project very interesting. This is one of the great mining areas of Colombia and it has great potential.”