Ecuador Re-emerges as a Mining Destination
Core Gold aims to be key player in the trend
|Core Gold's Portovelo Processing Plant. Currently the largest in Ecuador.|
By Jason Smith
Ecuador is a country with a potentially rich mineral endowment that, up until recently, has been absent from the mining scene.
The cause was a 2008 memorandum on mining exploration put in place by former President, Rafael Correa. That edict effectively shut down foreign investment in the country for several years.
Fast forward to 2015, and the country’s government had changed its tune about mining. A new administration has introduced government incentives and policies designed to entice foreign capital back into the country.
Located at the “hinge” of the Andes between mineral-rich Peru and Colombia, Ecuador represents a largely underexplored region for the Canadian mining industry to invest in. Keith Piggott, president and CEO of the Canadian company Core Gold Inc. (TSX.V: CGLD), comments, “Most of the twist of the Andes is in Ecuador. The geology is some of the best in the world.”
He should know. He was one of the first players back into Ecuador when it reopened in 2015. At the time, the former Dynasty Metals and Mining, which once had a market cap of $400 million, was looking to Piggott for advice and, potentially, a loan. The company eventually came to the verge of bankruptcy, and Piggott gathered investors to raise $4 million U.S. to rescue it and take over as management.
The result was Core Gold, an Ecuador-focused exploration and development company that is in the process of one of the sector’s most impressive turnarounds.
Executing a Turnaround
When Core Gold took over Dynasty, the company was mining its underground Zaruma gold project at a loss. The mine had 650 employees who, after several months without pay, went on strike.
Piggott and his management team quickly resolved the strike, rationalized the work force, and elected to shutter Zaruma. In its stead, Core decided to put the nearby Dynasty Goldfield project and its 2.1 million ounces of gold into production as an open-pit mine.
The effort wasn’t without its challenges. The company had access to a mill with nameplate capacity of 2,000 tonnes per day. Although the mill was relatively new, it hadn’t been kept in good repair. After the worst rains in the region in 70 years, the company was able to restart the mill and feed it ore from Dynasty Goldfield.
The mill is currently producing around 1,800 ounces of gold per month and plans are underway to increase that production to 4,000 ounces of gold per month by the end of 2018. The cash flow from this endeavor has allowed Core to almost halve Dynasty’s legacy debt of $25 million.
Piggott commented, “As we’ve been producing, we’ve gained the confidence of the market and been able to finance further development at higher prices. Between the expanding plant and a potential expanding mine, we’re looking to continue to whittle the debt down via cash flow.”
An Underexplored Section of the Andes
One of the ways Core plans to expand mine production is by outlining a mineable gold resource on its nearby Linderos project, a virgin discovery that the company found last year. Management is incredibly enthused about the surface mineralization they’ve encountered so far at Linderos.
James Phipps, fund manager at Strategic Resource Capital, considers Linderos “a 3-million- to 10-million-ounce gold target.” Even if it doesn’t turn out to be that big, Piggott is confident that his company can quickly outline a resource on the project to help grow production at its mill.
Surface sampling and trenching at Linderos has so far turned up grades averaging 8.1 g/t gold across the initial 900 metre discovery structure. Core is in the process of drilling five holes into the property to help determine the extent of that mineralization. Management is extremely excited about the results from this effort.
More Growth Via Drilling
The company is also about to start drilling the Copper Duke property. Like Linderos, Copper Duke is a porphyry target, a typically large mineralization style capable of hosting world-class cooper-gold deposits.
Prior surface exploration at Copper Duke has generated samples grading as high as 5 per cent copper. Phipps says, “It should be one of the top copper-gold porphyry targets in the world. The scale of Copper Duke looks like its should host hundreds of millions of tonnes of copper-gold mineralization.”
According to Piggott, the mineralization identified so far at Copper Duke is higher in copper in its central part, and higher in gold on either end of the defined area. Between the results from this target and those from Linderos, the team at Core is confident it’s going to capture the market’s attention in the coming weeks.
Those results, combined with improving production at Dynasty Goldfield, should turn heads. With news flow from its exploration and development projects just starting to gain steam, Core Gold has the potential to write its own chapter in Ecuador’s mining history.
Piggott comments, “Ecuador reminds me of Mexico in the 1990s. That country opened the doors to foreign investment in 1992 and it saw its mining industry explode in the late 1990s through the 2010s. Now, with a stable, pro-mining government, Ecuador is set to take off in the same fashion.”
Given the quality of the assets Core Gold holds in the country, it is well positioned to be part of a mining boom in the country. Indeed, Phipps believes Core’s (TSX.V: CGLD) assets have the potential to become “the next big gold and copper mining district.”