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Epic & Msn data

Epic	CMR
Time:	07:34:05
Mid Price:	1.38
Change Today:	0.00
Change % Today:	0.00
Fifty Two Week High:	2.75
Fifty Two Week Low:	0.90
Market Capital:	5.08

Period & price data

Period	Price
Now:	1.38
3 Months ago:	1.13
6 Months ago:
1 Year ago:

Additional information

Additional	Information
Market:	AIM
Sector:	General Mining - Gold
Epic:	CMR
News:	Latest news
Web Site:	Cambridge Mineral Resources Plc
Other Articles:	20-11-200820-11-200816-09-2008

Cambridge Mineral Resources – finally coming of age

by Ian Mclelland

2009 will be a crucial year for Cambridge Minerals.  After shifting its focus from mineral exploration in Europe to acquiring and upgrading small gold mining operations in Colombia, the company has been keen to rebrand itself as an emerging gold producer. Not surprisingly, shaking off its reputation as a company that oh so nearly delivered an economic project in Spain, but failed at the full feasibility stage, is not an easy task.  However, for the company’s shareholders the outlook could be about to improve markedly.

Colin Andrew certainly comes across as a man on a mission.  After meeting with him recently, it was very evident that the company, and its CFO Michael Burton, feel very confident that their gamble to switch their attention to Colombia is paying off.  

Colombia is an interesting place to be if you are a mining outfit. For oil and gas juniors, Colombia is heaven; with huge basins of heavy oil home to dozens of companies listed in Europe, North America and Australia.  Recently Pacific Rubiales (TSX:PRE), a mid-tier oil and gas producer on the Toronto Stock Exchange snapped up Kappa Energy, a local operator.  Solana Resources, dual listed in Toronto and London, has also agreed to a merger with Gran Tierra Energy, which will create another mid-tier Colombia focused player.  The consolidation in the Colombian energy sector is driven by considerable reserves potential combined with a pro-development attitude by the Colombian government.  

What investors do not often hear about is Colombia’s mining industry.  It is in fact quite substantial.  Colombia has the largest reserves of coal in South America, and coal production represents around 13 percent of the country’s exports. The El Cerrejón mine is the largest open pit coal mine in the world, and it controlled by BHP Billiton, Xstrata and Anglo American. 

Behind coal, the company is also a notable producer of iron ore, silver, gold, nickel and copper.  BHP Billiton also operates the Cerro Matoso ferronickel mine which produces over 50,000 tonnes of nickel in ferronickel per annum. Colombia is also the largest exporter of emeralds in the world, and is the only country in South America that produces Platinum Group Metals (PGMs).  

Gold production in Colombia is largely the realm of an estimated 200,000 artisanal miners, focused on high grade narrow veins or alluvial mining in the rivers. However, some notable international players have entered the country, including AngloGold Ashanti, and gold production is anticipated to increase from around 20 tonnes per annum in 2002 to north of 100 tonnes per annum by 2020, thanks to a combination of company-friendly mining legislation and a crackdown on rebels.  Cambridge Minerals is one of the companies that have spotted an opportunity. 

Unlike AIM- and TSX-listed Greystar Resources, which has focused solely on drilling out its large, but low grade gold deposit, Cambridge opted for bringing modern techniques to small gold mines to get cash flow in the door quick.   In light of the current market turmoil, this now looks like a very shrewd decision.

In all, Cambridge took out options on five mines situated in the Frontino Gold Belt in Antioquia.  The first mine, Quintana, commenced production this month, and is projected to produce 15,200 ounces of gold and 6,000 ounces of silver per annum for at least five years.  Quintana is pretty typical of what Cambridge is looking for: a small, high grade underground gold mine with excellent cash flow potential. The mine was previously operated by local miners.

Cambridge has stepped in, invested around US$5 million upgrading and equipping the mine and defining a small resource (86,700 ounces of inferred, indicated and measured gold).  A tailings dam was also built, roads have been improved, and a processing plant completed to produce gold Dore.

Cambridge expects the mine to operate at an exceptionally low cash cost of US$131/ounce over the mine life, and produce around US$5 million in pre-tax profits per annum based on gold at $600 per oz.

The current operation was designed to operate at 50 tonnes per day, but Colin Andrew hinted that this could be surpassed, as the kit can actually handle up to 120 tons per day.  Around 20 percent of the gold produced will be used to repay the financing facility.  
Cambridge has a further US$10 million of financing in place on similar terms, and plans to replicate the same plan with two further gold mines.

Cambridge is also in joint-venture negotiations with a “major gold producer” regarding two of its other gold mines.  Colin Andrew did not elaborate, but confirmed to Proactive that the company hoped to be in a position to update the market soon, and hinted that El Cinco and Las Pepas may be larger than initially thought. Cambridge Mineral Resources’ stated goal is to reach a production target of 100,000 ounces per annum by the end of 2011.

Cambridge has an additional project in Peru; a silver mine that was initially developed by Teck Cominco, but never put into production. The economics of the project are not very compelling at $10 silver, but Colin Andrew believes the project could be quickly put into production if silver prices were to climb again.  There is also certainly some value in the group’s projects in Europe, where it retains free carried interests, but the market is currently attaching no value to them.

Undeniably the company’s reputation in the near to medium term will be decided solely by its ability to move into production and generate profits. The stakes are high for Cambridge Mineral Resources in 2009, and so too is the reward.

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