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PanTerra Gold (ASX: PGI), formally known as EnviroGold, is a near term gold producer at its Las Lagunas project in the Dominican Republic with construction scheduled for completion in December 2011. The project has an expected life of seven years at an annual production rate of 65,000 ounces of gold and 600,000 ounces of silver.
PanTerra Gold is also active in Ecuador with the advanced Azuay Gold Mining project and the San Gerardo Gold Mining prospect. At the Azuay project, construction is targeted to commence in mid 2012.
EnviroGold boosts stake in Azuay gold project in Ecuador to 80%
EnviroGold (ASX: EVG) has increased its shareholding in the Azuay gold project in Ecuador to 80% and intends to restructure the joint venture in order to accelerate development.
EnviroGold previously held a 65% earn-in interest on the Azuay project by entering into agreements with two privately held mining companies with two small gold mining operations in Azuay Region of Southern Ecuador.
The company expects significant exploration potential over the 700 hectare lease areas and the opportunity to expand gold production to 100,000 ounces per year. The aim is to commence development before the end of 2011 with gold production in early 2013.
The initial US$10 million capital of the JV development company, EnviroGold (Azuay) SA (EVGA), will now be established by Empresa Minera Papercorp SA (EMP) transferring its Papercorp underground mine and 250 hectare mining lease, for US$2 million of shares in EVGA.
EMP is a private company that is well connected in Ecuador and its shareholders are expected to be stable and supportive participants in the proposed project.
EnviroGold will grant mining rights to EVGA over five small scale underground mines and 420 hectares of highly prospective surrounding areas within its optioned San Gerardo concession, for US$1.5 million of shares in EVGA.
EnviroGold will also progressively subscribe US$6.5 million for shares in EVGA to be spent on drilling and feasibility study costs, with US$1.3 million advanced to date.
EnviroGold will effectively replace Grumintor SA’s 15% interest which was previously to be earned by the transfer of its Pinglio mine to the JV.
Though Grumintor will not participate in the expansion of mining operations and construction of a process plant, it has expressed an interest in supplying ore to the JV in some form of tolling arrangement.
Grumintor’s withdrawal has also allowed the JV to revert to a single stage development which was previously planned over two stages to reduce the size of initial shareholder loans.
EnviroGold now aims to establish five or six separate mining operations capable of collectively producing ore at the rate of 200,000 onnes per annum (tpa) by first quarter 2014, ramping up to 300,000 tpa by the end of 2014.
A combined gravity/Albion/CIL circuit is planned for installation by the end of 2013 following a development decision in mid 2012.
The company expects the proposed gold extraction process to recover 90% of free milling gold and that bound up in silicates and refractory ore, based on preliminary metallurgical testwork.
The decision to proceed with the development depends on the results of a Feasibility Study for the production of 100,000 ounces (oz) gold per year for a minimum of 12 years, and the current drilling program confirming a mining target of at least 4 million tonnes (Mt) grading 10 grams per tonne (g/t) gold to 12g/t gold.
EnviroGold proposes to truck ore a maximum of five kilometres from the various workings to a suitable plant site on the Papercorp lease, with tailings piped to a valley dam on the adjacent San Gerardo lease.
Development costs will be aboutf US$80 million in addition to EVGA’s capital of US$10 million which will be spent on acquisitions, drilling, metallurgical testwork, and feasibility studies.
Funding is likely to be a mixture of shareholders loans, proceeds from the provision of a gold royalty, and a project loan.
EnviroGold’s total contribution to EVGA for implementation of the project will be in the order of US$20 to US$25 million.
At at a gold price of US$1,200 per oz, the company said it has potential to book after tax profits of about US$380 million over the 12 years following commissioning.
Brian Johnson, EnviroGold's executive chairman, said “EnviroGold will provide US$5.2 million of equity for the Azuay project over the next 15 months, in addition to the US$1.3 million already contributed.
"The company will also exercise its option to purchase the San Gerardo concession for US$4.3 million around December 2012."
EnviroGold’s funding will be sourced primarily from surplus cash generated by the Las Lagunas project in the Dominican Republic. Gold and silver production is expected to commence in January 2012.
Of the San Gerardo purchase price, US$1.5 million will be allocated to 420 hectares covering the five small scale operating mines to be transferred to the Azuay JV, and US$2.8 million to the highly prospective 80 ha Vittoria copper/gold/molybdenum exploration target within the San Gerardo lease.
This area is currently the subject of a soil sampling program in advance of commencement of a drilling program in third quarter this year.
The Azuay project is at the centre of a highly mineralised gold belt with the Papercorp and San Gerardo mines surrounded by reported N143-101 (Canadian JORC equivalent) compliant resources of over 15 million oz of gold.
EnviroGold is also progressing construction on its Las Lagunas gold/silver project in the Dominican Republic with the key modular oxygen plant having been shipped by the supplier ahead of schedule.
The project remains on schedule for early 2012 start-up of gold and silver production and is set to benefit from high gold and silver prices.
