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Peru: A critical part of the precious metals supply equation

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PPX Mining's developing project in world-class mining jurisdiction

Igor Project: high grade underground mine development coupled with new gold discoveries in Northern Peru.

By Jason Smith

Modern precious metals mining has a supply problem. The discovery rate of new gold and silver deposits is declining and getting new projects into construction and operational has become more difficult.

In this environment, mining-friendly and precious-metal rich mining jurisdictions like Peru will play a pivotal role. While Peru doesn’t lack the social and environmental challenges that arise with any mining project, it has an economy that depends on mining and a population that appreciates its importance as a job creator.

Moreover, the country has produced multi-million-ounce gold projects like Yanacocha, Lagunas Norte, and Pierina. Peru’s mineral endowment made it the number two copper, zinc, and silver producer in the world in 2017.

Ricardo Carrion, an analyst at Kallpa Securities, noted, “Mining represents 15 per cent of our GDP and 60 per cent of our exports. It still has a lot of geologic potential, making Peru one of the few countries that still has a chance for big discoveries.”

One company Carrion likes is PPX Mining Corp. (TSX.V: PPX), a precious metal developer and explorer with a key project, Igor, located in Peru’s La Libertad Department. “PPX has done an excellent job of surviving the last commodity crisis and demonstrating the viability of its flagship project,” says Carrion.

PPX is a company that has the potential to convert its Igor asset to cash flow via development of an existing resource and to simultaneously grow that resource through exploration. As such, it has a chance to help alleviate the industry’s supply problem.

A Compelling Development Story

The development story at Igor centers on the Callanquitas structure on the property. That structure contains an underground mineable resource of 730,000 ounces of gold equivalent (448,500 ounces of gold and 16.6 million ounces of silver). That inferred resource estimate contains a smaller, higher-grade resource containing 239,400 ounces of gold and 10.5 million ounces of silver.

The company is currently in the process of collecting the bulk sample and metallurgical information it needs to put together a prefeasibility study on Callanquitas. Recent infill and resource expansion drilling on Callanquitas has yielded very high grades, which suggests that the project’s resource will improve in size and confidence level when the study is released.

PPX Mining’s CEO and Director, Brian Maher, adds, “Recent drilling appears to be increasing the confidence level of the deposit, and the new resource number in the upcoming prefeasibility study will likely include reserves.”

This last point is key, as it suggests that the company can quickly move forward with a production decision once the study has been released.

Maher notes, “We are working with MDA of Reno to complete this document. There will not be a long delay between receiving the official document and making a production decision. We are already in the process of ordering the needed equipment and have been very proactive anticipating what our needs will be once the study is received.”

With District-Scale Exploration Upside

Adding to the excitement PPX has about Igor is the project’s long-term exploration potential.

The district-scale property has several attractive targets, with the most advanced being the Portachuelos, Domo and Tesoros targets. Management is particularly enthused about Portachuelos, which lies to the south of Callanquitas and has been traced for 1.1 kilometres on strike. The potential resource here is lower grade than Callanquitas, but it extends to over 300 metres’ depth and its open in all directions.

Tesoros and Domo are targets that lie within a similar geologic setting to Portachuelos. All three targets will see drilling while PPX moves forward with a production decision for Callanquitas. Maher commented, “Tesoros and Domo are similar targets to Portachuelos, making Igor a district-scale, multi-deposit type of project.”

If the drilling for these targets in the upcoming months bears fruit, it could add a whole new wrinkle to PPX’s story.

A Great Working Relationship with the Local Community

A key to advancing that story is the company’s relationship with the local community. On that score, PPX appears to be ahead of the curve. Management recently signed a 10-year agreement with the nearby community of Callanquitas for exploration and mining operations in the area.

“There is a 500-year history of mining in Peru, which means mining and resource extraction are part of the culture,” says Maher. “The people recognize the importance of mining to the economy, and that means the government has put together an infrastructure to support efficient mining permitting and decision making.”

The company has been in the area for a long time, allowing it to build up a lot of goodwill in the community. In addition, the people in the area have seen mines built, closed, and remediated, meaning they have seen, first-hand, how modern mining techniques can minimize the legacy footprint of operations.

A Bevy of Potential Share Price Catalysts

Looking ahead, management sees several potential catalysts for PPX’s market capitalization.

Maher sums it up nicely, “We see two different avenues to create value. The first is formal commencement of production at Callanquitas. The initial target will be for a 350 tonne per day operation. At each step of the way — prefeasibility, final permit receipt, and commencement of commercial production — we have great share price catalysts. The second is the resource expansion story at Igor, and that’s where things really get exciting.”

Assuming the drilling on Igor’s other targets continues to generate strong results, PPX has the opportunity to move ahead with a development story to generate near term cash flow and an exploration story to foster long-term growth.

It’s a potential winning recipe for PPX Mining (TSXV: PPX), one that could allow it to etch its own chapter in Peru’s mining history.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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