Cliffmont Resources is a Vancouver-based mineral exploration company focused on advancing and developing exploration projects in Colombia. Earlier this year, the company acquired all of the outstanding shares of Tarana Resources, which held 100% of the exciting San Luis property in the Huila department of Colombia.
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Cliffmont Resources Ltd. – Exploring for Colombia’s next high-grade gold property
Summary
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- Exploring for gold on high-grade veins in Colombia
- Property was previously owned by TVX Gold, headed by Eike Batista
- Drill Results expected in October
- Project could be in production within 12 months as there already is a mining license in place
- Company could be self-funding further exploration by 2014
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Introduction
Cliffmont Resources is a Vancouver-based mineral exploration company focused on advancing and developing exploration projects in Colombia. Earlier this year, the company acquired all of the outstanding shares of Tarana Resources, which held 100% of the exciting San Luis property in the Huila department of Colombia.
The San Luis Property
Cliffmont has an option to acquire two concessions of approximately 2,700 hectares in the San Luis gold district in Colombia, which has a rich history of high-grade mining, dating back to the 19th century. The total mineralized area comprises in excess of 20 square kilometers, and over 100 mineralized veins have been identified to date. The project is easily accessible by paved and gravel roads, and the company will have no problems accessing other necessary infrastructure as there’s a power line running right through the property.
Previously the property has only been mined by very inefficient artisanal miners with limited technical capabilities, and so Cliffmont believes there’s a good chance of finding a feeder system at depth below the water table.
The company is focused on five major vein zones, of which San Jorge is the largest and can be traced for over 3 kilometers on surface.
Past exploration at San Luis
Exploration was carried out between 1993 and 1997 by TVX Mineria Ltda. and they discovered several veins containing high-grade free-milling gold. TVX also conducted channel sampling at the El Callao mine, and ended up with in excess of 8 grams per tonne over a 1 meter width along a strike length of 115 meters. Cliffmont has completed a sampling program at El Callao to confirm the historical exploration work by TVX, and assays returned grades up to almost 42 g/t.
TVX also conducted a sampling program at the south drift of the San Jorge mine, and 71.72 meters samples averaged 39.09 g/t gold and 11.66 g/t silver over a width of 1.52 meters. TVX Mineria – a company fully owned by Brazilian billionaire Eike Batista – estimated there was a resource of approximately 500,000 to 700,000 ounces at only a part of San Luis. These were only quick calculations based on their sampling program, and are obviously in no way NI43-compliant.
AngloGold Ashanti Ltd. (NYSE:AU; ASX:AGG, LON:AGD) had an option on the property from 2004 to 2010 and continued exploration. They completed some sampling and mapping but had an option payment of almost $3 million coming up and AngloGold decided to walk away without drilling.
The 2012 exploration program at the San Luis concession
Cliffmont Resources started a 5,000m Phase I drill program at San Luis back in June of this year, and drill results should be out soon. The company is currently drilling with two diamond drill rigs, and expects to finish the Phase I drill program by the end of October, so we should have all drill results back by year’s end.
The first four holes were drilled at the San Jorge mine, and the rigs have now moved to the Merceditas and Ell Callao mines where the company will drill to follow up on their channel samples.
We expect Cliffmont to release the first drill results in early October, which should already give us a good indication about the potential of the property.
The management believes there’s a good chance to find a larger body of mineralization under the high-grade veins they are currently exploring on.
This is also one of the reasons why they added Marco Antonio Camino to the team, as he has a lot of experience in copper-gold porphyry and epithermal exploration with Corriente Resources Inc. and IAMgold Corp. (TSE:IMG; NYSE:IAG).
Potential to fast-track production plans
It’s very important to emphasize that the San Jorge mine already has two mining licenses. Management believes a mining permit could be obtained within 8-10 months.
As San Jorge is a past producing mine and was in production as recently as 2011, operations could easily be restarted at a very moderate capex.
There are preliminary plans to re-open the San Jorge mine as early as next year, and use a 150-200tpd mill to start small-scale mining. Grades in the San Jorge veins are exceptionally high, and so this small-scale mining plan could see production of in excess of 20,000 ounces of gold per annum.
If we apply a hypothetical cash cost of $500/oz, this operation could bring in $20M per year and would avoid any further dilution to shareholders as Cliffmont will be able to fund all further exploration programs with the operational cash flow from the San Jorge production.
Corporate Social Responsibility
Community relations are always important but this is particularly the case in South America. More than anywhere else in the world, local communities can block the development of new mines when they see that the project will bring them no benefits.
Cliffmont went into the project convinced that if they acted with transparency, honesty, social and environmental responsibility and a deep appreciation and respect for community organizations it could build confidence, credibility and cooperation to help build a brighter future.
They have addressed local needs with contributions and partnerships with the local communities and surrounding municipalities helping with; road infrastructure, improving and equipping schools, enhancing community gathering places, assisting in natural emergency response and linking the company with cultural, sports and entertainment of almost all paths of influence of the project and the surrounding area.
Their policy of hiring goods and services locally as well as local hiring practices has helped revitalize the local economy and assisted in managing public and private aid to support productive projects such as telecommunications. Cliffmont initiated support for a cellular antenna with the widest coverage in the country as well the creation of an association of farmers in the area to organize projects in coffee, sugar cane and citrus.
The creation of a program of support to the needs and potential of the community allows the company to build a relationship of trust. This is one of Cliffmont’s greatest achievements and is essential for further progress towards meeting responsible mining and exploration practices.
The acquisition terms
Cliffmont purchased the project by issuing 10M shares to the vendors, and making staged payments totaling $2M (of which $1.4M will have to be paid in January 2013 and 2014). The 10M shares paid to the vendors are obviously subject to escrow according to TSX-policies.
Cliffmont also agreed to incur $2M in exploration expenditures on the property.
The management team
Jeffery M. Tindale – President and CEO
Partner of a private consulting group providing services to several Exchange listed companies since 2006; Diversified background that includes extensive experience in raising capital, investor relations, marketing, and strategic planning for public companies focused in Latin America; Six years in the exploration field, exploring for precious metals where he was a part of major economic discoveries; Founder of Batero Gold Corp. (Colombia)
Antonio Uribe – Director
Mr. Uribe is a native to Colombia and a retired banker and entrepreneur currently focused in the Colombian mining sector where he has been an integral part of several major transactions; Former vice President with Citibank Colombia from 1981 to 1990, guiding multinational companies in the country; Former President of a private financial consulting group, Uribe Isaza & Cia Ltd., which operated successfully in the area of infrastructure development until 2006.
Liliana Alvarado – Head of Colombian Operations
Masters in Mineral Economics with emphasis on socio-economic impact assessment and environmental projects; Business administration management specialist with experience in planning, design and development of technical, economic, regulatory, environmental and infrastructure projects for the development of the Colombian mining sector; Former Deputy Director of Ingeominas and Socio-Economic Analyst for Anglogold.
Marco Antonio Camino – Exploration Manager
Extensive experience in mineral exploration, mainly in High – Low sulphidation and Au-Cu porphyries, hydrothermal alterations, geochemistry and 3D modeling with GEMCOM and SURPAC; Senior Geologist from 2010 to 2012 with Ecuacorriente S.A. and from 1998 to 2010 was Senior Geologist with IAMGOLD Ecuador S.A..
Dr. Alfredo Parra Davila – Mining Consultant
Over 30 years of mining exploration and operations; Work experience includes Mine Production Superintendent and General Manager for CIA Minera Penoles; Vice President of Kennecott including other executive positions in the mining industry over the past seven years.
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Conclusion
As Cliffmont currently only has 36.5M shares outstanding, they are trading at a market capitalization of less than C$23M and an enterprise value of C$20.5M after deducting approximately $2.5M they currently have in the treasury.
We expect to see the first assay results relatively soon, and these should give us a preliminary idea about the high-grade part of the deposit. Once those drill results have been received, we also expect to hear an update from the company regarding their plans to fast track the San Jorge veins towards production.
The fact that a small exploration outfit already has a mining license in their hands could be a real advantage over all other Colombian explorers. As we see it, Cliffmont could be Colombia’s next junior to enter the production phase, as no one else will be able to secure their mining permits within the next 12-18 months. The production profile would obviously be limited to an annual rate of 20,000 ounces per year but with a $500 cash cost and $1600 gold price, Cliffmont could be able to generate in excess of $20M per annum in operational cash flow, which could be spent at further drilling. These numbers are obviously back-of-the-envelope calculations, and we’ll provide updates when the company unfolds their production plans.
It’s early days at Cliffmont, but historical exploration and artisanal mining have confirmed there still is a lot of potential at the San Luis Property, and we will know by the end of this year, when all drill results will have been released, whether or not this company is a gem in the rough.
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Disclosure: Cliffmont Resources Ltd. is a sponsoring company. Please see our disclaimer for current positions.
