Offshore plays draw Canadian juniors

As the 1990s unfold, many Canadian mining companies are looking beyond our borders to develop low-cost gold or base metal projects in Central and South America. One obvious benefit of this international trend is that investors are also enjoying the advantage of greater geographical diversity in their portfolios. Until recently, overseas mining ventures were the exclusive domain of senior companies such as Placer Dome (TSE), Inco (TSE), Cominco, LAC Minerals (TSE) and TVX Gold (TSE). These days, however, a growing number of juniors are migrating offshore in search of the next big gold play. A brief survey of companies by The Northern Miner revealed that there are at least a dozen juniors with significant foreign exploration projects and joint ventures abroad.

Lured by new investment laws in Mexico, Chutine Resources (VSE) has recently teamed up with American Barrick Resources (TSE) to explore for heap leachable gold deposits near Magdalena in the Mexican state of Sonora. The companies were drawn to the area because of its geological similarities to the Carlin Trend of Nevada.

Heading south to Costa Rica, companies such as Minera Rayrock (TSE) and Greenstone Resources (TSE) are leading the way with two advanced gold projects — El Recio and Bellavista — which are slated to become significant new producers in that country. In a recent development, Minera Rayrock formed a 50-50 joint venture with Battle Mountain Gold (TSE) to explore another Costa Rican gold prospect known as Turin. The prospect hosts a large epithermal alteration system situated in the country’s central gold belt. Minera is also in negotiations with the Central Bank regarding repatriation of funds from its Bellavista gold project.

In nearby Panama, Greenstone Resources and its 51% partner Boliden International Mining are moving at full speed to “fast track” their 12-million-ton Santa Rosa gold project to production. A major exploration program is under way with drilling, metallurgical test work and a feasibility study. Greenstone is responsible for managing the exploration phase while Boliden has the right to operate eventual production. Significant growth in reserves is anticipated for the Santa Rosa deposit as exploration continues on promising targets nearby.

Another country in Latin America that is just beginning to capture renewed foreign investment interest is Venezuela. Earlier this year, Vancouver-based Jordex Resources (VSE) formed a new joint venture company called Cofemina to acquire strategic ground positions for gold and base metals in Venezuela. Unlike Chile, which is highly populated with Canadian mining companies, the Venezuelan market is only starting to attract foreign investment to its metal mining sector. Aluminum, steel and gold are the country’s three main earners of foreign exchange, behind petroleum.

Jordex also has mining ventures in Honduras and Bolivia where the company is a 50% partner with Tiwanacu, the third largest private mining firm in Bolivia. Tiwanacu comprises two milling and mining complexes with production expected to reach 30,000 tons of zinc and lead concentrate this year. Jordex considers Bolivia to be a stable country with the advantages of free currency exchange and the lowest income tax rate in Latin America. There are also no restrictions on imports or capital entering or leaving the country.

English-speaking Guyana is also the site of several precious metal exploration projects operated by companies like Cambior (TSE), Golden Star Resources (TSE) and South American Goldfields (TSE). The latter company has reported encouraging assays from drilling on its Aurora gold prospect where results have been as high as 41 ft. grading 0.22 oz. gold per ton. To the south at Omai, partners Cambior and Golden Star Resources have completed a final feasibility study on their 52-million-ton gold deposit and will need about US$151 million for construction of the open pit mine. Omai is expected to have operating costs as low as US$185 per oz.

Meanwhile in Chile, Dayton Developments (TSE) of Vancouver has recently received a positive feasibility study for its 23-million-ton Andacollo gold deposit. The project was purchased from Chevron a few years ago when the latter company decided to pull out of mining altogether. After spending more than $8 million on exploration, Dayton now needs US$32 million to construct a 12,000-ton-per-day, open pit, heap leach mine which will have operating costs of around US$183 per oz.

Vancouver-based Bema Gold (TSE) is also working on financing plans to develop its 215-million-ton Refugio gold deposit in Chile. The company needs about US$100 million to pay for the costs of building an open pit, heap leach mine with operating costs of US$182 per oz.

Elsewhere in Chile, Minera Rayrock is gearing up to drill test a number of copper and gold targets it has outlined as part of a 50-50 exploration joint venture with Hecla Mining (NYSE).