Gold Junior Los Cerros Welcomes Mining Major to the Register
article PUBLISHED: 30-04-2020
Stock market volatility is at all-time highs and that uncertainty has put gold back in the spotlight with talk of the precious metal hitting US$3,000/oz in the next 18 months.
Leveraged to the rising gold price, but with the potential for even greater gains, junior gold explorers are increasingly attracting attention.
And it’s not just small cap investors taking an interest — some of the biggest gold miners in the world are investing in up and coming junior explorers. However, not just any gold explorer will do...
In news just announced today, US$11 billion AngloGold Ashanti Limited (JSE: ANG | ASX: AGG | NYSE: AU) entered an agreement to become a shareholder in Colombian focused ASX gold junior, Los Cerros (ASX:LCL).
AngloGold was already involved with Los Cerros as a JV partner for one the assets in the vast Los Cerros portfolio, however with this deal AngloGold relinquish that JV interest to become a Los Cerros shareholder and gain exposure to that vast and highly prospective entire portfolio.
Los Cerros’ Quinchia Gold Portfolio comprises the Andes and Quinchia Projects and is located within the same structural trend as the 14Moz Marmato Gold Mine and the 29Moz La Colosa gold project.
AngloGold’s support speaks volumes to Los Cerros, its management and its portfolio of Colombian gold exploration targets.
AngloGold brings vast knowledge of Colombian geology and gold discoveries, as one of the most successful explorers in Colombia, with 100+Moz of gold resource discoveries. It’s had direct experience in the Quinchia region and in some of LCL’s highest priority targets in the extensive Andes portfolio that were also once AngloGold assets.
The deal gives LCL a 100% interest in Chuscal and in so doing gives Los Cerros 100% control of the entire Quinchia project, its multiple targets and established gold Reserve.
AngloGold is joining existing LCL shareholder, the $780 million capped Australian mining company Sandfire Resources (ASX:SFR) on the register, as well as the highly accomplished geologist Dr Minlu Fu.
Just over a week ago, the Perth-based company welcomed Dr Fu to its register. Having participated in LCL’s recent capital raising, he will be one of LCL’s largest shareholders upon completion of the placement.
Furthermore, LCL last week executed a Strategic Partnership Agreement, to provide IP survey services, drilling services, drilling equipment, personnel and consumables with Dr Fu’s company, Hong Kong Ausino.
This will bring more exploration capability in-house giving LCL a significant long-term advantage and flexibility to navigate the immediate pressures on junior explorers caused by the current COVID-19 pandemic.
In that context, this is a brilliant move by Los Cerros as not only have they signalled a potential $2M exploration program, but they can choose to fund much of that program without drawing on cash reserves by opting to pay Ausino in shares if it so chooses.
LCL expect Dr Fu and Ausino’s geological and geophysical expertise to be invaluable as the company seeks to improve drill targeting in its search for large-scale mineralised gold-copper systems at Chuscal and Tesorito.
Los Cerros Limited
Share Price: 3.4 cents
Market Capitalisation: $7.46
Here’s what I like about Los Cerros:
The Mid-Cauca Porphyry Belt hosts some of the world's largest gold producers, Newmont Gold Corp. (NYSE: NEM), Barrick Gold Corp. (NYSE: GOLD), and AngloGold Ashanti — each of which has poured funds into developing the region.
China’s Zijin Mining Group also entered the region late last year in a US$1 billion acquisition of Continental Gold Inc. and its flagship Buritica Mine, which is approximately 100km north of Los Cerros’ projects and on the same geological belt.
A number of significant gold discoveries have been made here and in just the last seven years more than 100Moz of gold resource have been defined from its porphyry-style deposits, including several recent discoveries of greater than 10Moz in size.
These discoveries include the 30Moz La Colosa, the 30Moz Nuevo Chaquiro, the 12.2Moz Titiribi, and the 12.4Moz Marmato deposits, as can be seen on the map below.
Los Cerros’ Colombian Portfolio
Los Cerros Limited (ASX:LCL) was formed in August 2019 when Metminco Ltd merged with Andes Resources, giving the company a dominant position within the Andes and Qunichia regions of the Mid-Cauca Gold belt in Colombia.
Across the ~100,000ha portfolio of applications and granted titles, LCL’s projects range from early stage exploration, through to advanced projects including feasibility.
Its Quinchia and Andes Portfolios are ~70km apart and located in Colombia’s Mid- Cauca copper/gold porphyry belt.
The company’s Andes Gold Portfolio consists of a 90% interest in ~85,000ha of tenements, including three granted titles. Only around 10% of the expansive portfolio has been systemically explored but has already delivered 12 vein type gold/silver targets and multiple gold/copper porphyry targets.
The portfolio contains a number of gold deposits and significant exploration and development targets including Miraflores, Tesorito, Chuscal and Dosquebradas.
The Quinchia Gold Project hosts four discoveries, Miraflores, Tesorito, Dosquebradas and Chuscal — and has potential for more with there being multiple untested areas of interest. The project has total JORC Resource of 1.3Moz gold, including a JORC Reserve of 457,000 ounces for the Miraflores deposit.
The company’s Managing Director, Jason Stirbinskis provides a very succinct summary of the Quinchia project in the following interview.
LCL adds AngloGold Ashanti as shareholder, gains 100% interest in Chuscal
In late 2018, Los Cerros formed a joint venture with AngloGold Ashanti Colombia SA, an entity owned by AngloGold Ashanti Limited (JSE: ANG | ASX: AGG | NYSE: AU), to explore the large Chuscal porphyry/epithermal gold target.
The Chuscal Prospect is a fragment of the larger Quinchia Gold Project which is 100% owned by Los Ceros and includes a gold reserve of 600k oz at Miraflores.
The Chuscal discovery is approximately two kilometres from the proposed Miraflores processing plant and features an extensive, surface gold geochemical anomaly (rock-soils and rock chips) with high grade sample results (up to 54gpt Au). Note that Miraflores Mining is a 100% subsidiary of Los Cerros.
Late last year the company drilled four holes at Chuscal, the first ever drilled at the target, and was very pleasantly surprised by its very first hole containing gold mineralisation for its entire 450m length with 5g/t at surface and the first 350m grading nearly 0.6g/t gold. The second hole was almost as good with a 320m length grading 0.47g/t.
In news just announced today, AngloGold has agreed to exchange its Chuscal JV interest for a shareholding in LCL.
The deal (subject to a formal agreement) will provide AngloGold with exposure to the broader LCL portfolio via a 4.3% relevant interest in LCL and the right to increase that shareholding to 10% (options with an exercise price of $0.16 and an expiry date 12 months from the date of issue).
It will see Los Cerros gain a 100% interest in the Chuscal Project — resulting in the company holding 100% of the entire Quinchia Project — and the addition of AngloGold to its share registry. It also gives LCL access to AngloGold’s regional IP geophysics dataset and unlimited use of its IP equipment for 1.5 years.
Los Cerros Managing Director, Jason Stirbinskis said, “We welcome AGA to the share registry; they have proved to be supportive JV partners at Chuscal and we look forward to their ongoing support as a shareholder of Los Cerros.
“In addition to their vast knowledge of Colombian geology and gold discoveries, they have direct experience in the Quinchia region and some of our highest priority targets in the extensive Andes portfolio were also once AGA assets”.
Mr Stirbinskis added: “The recently completed maiden drilling program at Chuscal has sharpened the company’s position that Chuscal is a critical element in the regional scale Quinchia Gold Project which already hosts three other discoveries (Miraflores, Tesorito and Dosquebradas) within a 3km radius with great potential for more.
“We therefore hold the view that controlling Chuscal and having discretion over how the larger opportunity presented is explored and developed is of substantial strategic importance and benefit. Likewise, AGA now has exposure to the larger Quinchia Project and the enormous greenfield potential of the Andes Project 70km to the north.
“All of these projects are located within the highly prospective mid-Cauca porphyry belt which hosts many multi-million-ounce discoveries, some owned and discovered by AGA such as Nuevo Chaquiro (+30Moz AuEq) and La Colosa (25Moz Au).
“With this deal we welcome one of the most successful explorers in Colombia, with 100+Moz of gold resource discoveries, to our share register.”
LCL’s signs $2 million strategic partnership to accelerate exploration
On 22 April, LCL announced that it had executed a Strategic Partnership Agreement for the provision of IP survey services, drilling services, drilling equipment, personnel and consumables with Hong Kong Ausino Investment Limited.
Under the terms of the agreement, Ausino will provide a new, fit for purpose, diamond core drill rig, drill rods, consumables and extended after sale support in the form of expert senior drillers on site to build the company's internal capabilities.
Ausino will also provide two sets of specialist Induced Polarisation (IP) equipment and a specialist geophysics team to conduct IP surveys over targets within the company’s portfolio.
Forging the strategic partnership and bringing more exploration capability in-house will give LCL a significant long-term advantage, as well as providing flexibility to navigate the immediate Covid-19 induced pressures that junior explorers are facing.
Prior to making each purchase order, LCL will decide whether the order will be satisfied by way of share issue or cash, with no obligation on the company to issue shares.
However, subject to shareholder approval, management will issue Ausino up to 12 million options if it satisfies minimum performance obligations under the agreement. The options will be exercisable at either $0.04 or $0.07 depending whether Ausino completes 10,000 metres of drilling during the term.
The key driver behind the agreement is to help LCL in driving down its in-country exploration costs, maintain cash, improve efficiencies and facilitate significant drilling and IP programs over the company’s 100,000 hectare holding in the prolific mid-Cauca gold belt of Colombia.
Ausino’s willingness to accept shares at no discount to the VWAP (volume weighted average price) for capital items and services provided will allow the company to conduct significant exploration programs without the commensurate impact on cash reserves.
The agreement includes a 6-month trial period so both parties can test the concept of the agreement and the operating detail.
Quinchia Project exploration plans
The maiden drilling program at Chuscal was completed in January 2020, and results from that program continue to yield important information that is being incorporated into regional datasets and geological models.
In February, it announced that the total JORC resource at its Dosquebradas gold deposit now stands at 1.3 million ounces gold, including a JORC Reserve of 457,000 ounces.
Dosquebradas is one of three gold porphyry systems within three kilometres from the established gold resource of 877,000 ounces at the Miraflores deposit that forms part of the Quinchia Project.
Going forward, LCL has three main areas of focus ahead of the next drilling campaign: Chuscal drill targeting, Tesorito drill targeting and Miraflores geological modelling.
More on the company’s exploration plans at Chuscal can be found in the Finfeed article below:
Commenting on the next drill program, Los Cerros’ Managing Director Jason Stirbinskis said the company was thinking both tactically and strategically with its next drill program:
“Tactically, we want to establish that the epithermal vein pulse, the veins that have sustained the artisanal workers for several generations, can be targeted. If these higher-grade veins are close to surface and show continuity, they offer a supplemental feed to boost the economic viability of the Miraflores Project and a pathway to early production.
“Strategically, the pursuit of the porphyry source(s) responsible for the extensive background gold through-out Chuscal might elevate Quinchia (Chuscal, Tesorito, Miraflores) to the ranks of the large scale discoveries of the Mid Cauca Porphyry belt.
“In addition, the completion of current modelling and near-term planned field work, including IP, are likely to also elevate Tesorito to part of the next drill program.”
In response to the uncertain economic climate arising from the spread of COVID-19, LCL has implemented a series of measures to protect the health and safety of its people, contractors and the communities in which it operates, all while ensuring the operational and financial integrity of the business.
Measures include eliminating non-essential travel, encouraging remote work where possible, and reducing discretionary expenditure.
Fortunately, the company recently completed significant drilling and other field activities, meaning that the impact on the business to date has been modest. Also, the fact that LCL raised funds earlier in 2020, means its immediate future is de-risked to an extent.
The Colombian Ministry of Mines and Energy has since announced that mineral exploration work may now resume in Colombia, subject to complying with certain national health authority guidelines around the management and mitigation of the Covid-19 pandemic.
For now, LCL’s geological team are planning the next phases of exploration at the Chuscal, Tesorito and Miraflores project areas. Field crews will also resume ground preparation for the IP surveys across Chuscal and Tesorito — the last critical input before finalising the next drill program.
The company intends to be drilling early in the second half of 2020, subject to the progress of the COVID-19 pandemic.
The company is also currently building its first purchase order with Ausino for long lead time items such as the IP equipment and drill rig.
Longer term, LCL has aspirations to extend the IP program over other targets within the Quinchia Project and within the 90,000 hectares of the Andes Project where the company has identified many compelling targets through extensive surface sampling and mapping.