Gold Blossoming in Colombia: Paul Harris
Source: Brian Sylvester of
The Gold Report
Impressed by Colombia as a country and as a setting for
exciting mining and geological opportunities, Paul Harris
relocated from England, by way of Chile, and hasn't looked back.
In an exclusive interview with
The Gold Report
, the publisher of the
Colombia Gold Letter
offers hope for the near future.
The Gold Report:
Colombia's mining and energy sectors received about $12 billion (
) in foreign direct investment (
) in 2011, making it the largest recipient of FDI relative to
gross domestic product of any country in Latin America. Although
there are excellent geological potential and dozens of junior
mining companies exploring Colombia, not one of those juniors has
successfully permitted a mine. Does the country risk losing some
of that free-flowing capital if it doesn't start to permit
No. The majority of that $12B you mentioned is in the oil and
coal sectors. Gold is still in its infancy. Colombia enacted a
mining code in 2001, so the mine permitting provisions within
that code haven't been tried and tested before, but there is
apprehension about how those provisions will perform when
companies do put them through their paces. A couple of projects
are rapidly approaching permitting.Continental Gold Ltd.'s
(CNL:TSX) Buriticá is one of those as is theAngloGold Ashanti
Ltd. (AU:NYSE; ANG:JSE; AGG:ASX; AGD:LSE) /B2Gold Corp. (BTO:TSX;
BGLPF:OTCQX) Gramalote joint venture.
The Colombian government has done away with Ingeominas, the
state's geological service, and has replaced that body with the
National Minerals Agency (
)-tell us about that.
The Colombian government was unprepared for the level of interest
it received when it opened its arms to the gold mining sector in
2005. Ingeominas was greatly underfunded, and it was overwhelmed
with concession applications and there were a lot of problems and
delays. The geological survey function is now with the Colombian
Geological Service, and the administration function is with the
NMA. One of the key tasks the NMA faces is to implement a
workable and transparent concession application and
A concern is that the government plans to create what it is
calling strategic reserve areas, which total about 12.1 million
hectares. The government plans to conduct its own exploration
work on these areas to determine their geological prospectivity
and then auction these areas off much like concession blocks in
oil and gas exploration. Is that a good summation of what's going
Unfortunately it is, and many in the mining sector, from the
junior explorers to the major international mining houses, do not
think this is a good idea. When this idea was mentioned publicly
for the first time in November 2011, a mining sector meeting was
convened the following day. The product of this meeting was a
five-page letter to the Minister of the economic, social,
technical, geological and legal reasons of why this is a bad
Auctioning may work very well for the oil and gas sectors, but
it's not a good plan for the mining sector and shows the
government's real lack of understanding of it. The conditions of
the gold mining sector are very different. This is a big concern
for explorers who, generally speaking, don't trust the
exploration results of another party. An exploration company is
effectively an intellectual property company. It owns its
exploration model, its way of looking at geology to work out
what's there. When an exploration company takes over a project,
the first thing it does is verify all the data, perhaps drilling
parallel holes and generating its own information. The
government's setting itself up to spend time and money doing
something the sector doesn't want and will ultimately tie land up
unproductively for years.
You talked earlier about how the mining industry is in its
nascent stage of development. But just about everybody in this
space has heard about Greystar and its troubles getting its
Angostura project permitted. It even changed its name last year
to Eco Oro Minerals Corp. (EOM:TSX) in order to change its
perception. What's the update on that story, and are other
companies wary as a result or do they see Greystar's experience
as the exception to the rule?
It's a little bit of both. Aspects of the law that Greystar was
trying to comply with weren't clearly defined. For example, the
mining code said you can't build mines in páramo ecosystem areas,
but it didn't define what the páramo areas were so old Greystar
was trying to put a plan together against a target that hadn't
been defined. And there may also have been internal issues in the
way the company was advancing. But as we've seen, the company has
tried to reposition itself and brought on a new board of
directors and a new executive team, and it has changed its plans
from trying to develop an open-pit mine to an underground
Let's get to the good news. Raymond James recently launched
coverage of three Colombian mining plays: Continental Gold, which
you've mentioned,Batero Gold Corp. (BAT:TSX.V) andGalway
Resources Ltd. (GWY:TSX.V) . What does it mean to Colombia's
mining sector to have North America's respected brokerages paying
attention to what's happening there?
It's definitely a positive. It allows the sector as a whole and
the other companies here to catch some of the more advanced
projects. The more information that is generated about
exploration projects in Colombia, the more the message of what
Colombia offers investors gets out, and the better for all
companies active here. That was one of the fundamental reasons
behind starting the
Colombia Gold Letter.
A number of companies have defined an initial resource, among
themBellhaven Copper & Gold Inc. (BHV:TSX.V) ,
Batero,Seafield Resources Ltd. (SFF:TSX.V) and Continental Gold,
and so Colombia is starting to deliver on the promise of that
geological potential. Another wave of companies is also coming
through and exciting people's interest by advancing very rapidly.
For example, bothCuOro Resources Corp. (CUA:TSX.V) andRed Eagle
Mining Corp. (RD:TSX.V) listed about a year ago and both have
advanced to drilling and reporting drill results within a
Colombia Gold Letter
index was up in January and February, almost 25% in February.
What's March looking like?
I think March is going to be flat. The markets in general have
been relatively flat and no single stock has really had any
decent growth in the last month.
And we had a bit of bad news from Batero.
I've spoken to many people as to what's happened there, and the
consensus seems to be that the company overpromised and
underdelivered. It had talked for months about having its maiden
resource out in the first quarter and at a certain number of
ounces, and obviously it stuck to that. It seems to have opted to
go for a high-ounce number and perhaps sacrificed on the quality
of the ounces to get there. Many people think it should have
postponed the release of the resource statement until it had done
more infill drilling to improve the quality of the resource. The
stock's been punished.
In those first two months of the year, when the index was on the
rise, what was responsible for that?
Following the tax-loss selling at the end of 2011, a lot of
people came back into the stocks. Red Eagle Mining has been a
good stock recently as has Galway Resources, Continental Gold and
In a recent edition of
Colombia Gold Letter,
you noted that a number of major gold mining companies had taken
significant positions in companies exploring for Colombian gold.
What do you believe is behind that strategy?
Colombia is a very attractive destination for geological
potential, and the major mining companies are aware of that. For
them, partnering with juniors is a cheap way to get exposure to
Colombia without having to commit to starting up in a new
jurisdiction. IAMGOLD Corp. (IMG:TSX; IAG:NYSE) made headlines in
October 2011 by taking positions in not one, but three Colombia
juniors: a 10.2% position in Bellhaven Copper & Gold, 14% in
Colombia Crest Gold Corp. (CLB:TSX.V; EAT:FSE) and 10% in Tolima
Gold Corp. (TOM:TSX.V). Yamana Gold Inc. (YRI:TSX; AUY:NYSE;
YAU:LSE) has a 9.9% position in Quia Resources Inc. (QIA:TSX.V).
Hudbay Minerals Inc. (HBM:TSX; HBM:NYSE) took a 10.8% position in
CuOro Resources and 5% in Waymar Resources Ltd. (WYM:TSX.V).
Kinross Gold Corp. (K:TSX; KGC:NYSE) took a 9.9% position in
Solvista Gold Corp. and most recently Teck Resources Ltd.
(TCK.A:TSX;TCK:NYSE) took a stake in Colombian Mines Corp.
Let's talk about some of those companies in a little bit more
detail. Bellhaven has the La Mina project, which is copper-gold
It definitely has a very good team, very knowledgeable. I
interviewed Patrick Highsmith, the new CEO of Bellhaven, a month
or so ago and have since visited the project. The indications
there are very positive and it is immediately obvious that the
project is being advanced by people with a big mining background.
I think we are going to hear a lot more from Bellhaven.
Seafield Resources is the largest concession owner in the
Quinchia District, and management has been talking about
fast-tracking its two deposits, Miraflores and Dosquebradas, into
I'm not sure how you can fast track two sub-1-gram-per-ton gold
deposits like those into production. Many people think Seafield
and Batero, which are adjacent to each other, or someone else,
will end up combining their projects to develop the entire
Quinchia district. Combined, that's currently between 5 and 10
million ounces, at about one gram per ton gold. At current
prices, one could buy both companies and pay a good premium on
the share prices and still have considerable change from US$100
). There's still a lot of exploration to be done, but I think
realistically there's just one mine in that district.
Red Eagle is trading at about $0.60. It has Pavo Real in Tolima
Department and Santa Rosa in Antioquia Department. Which one of
those is the flagship project?
Santa Rosa definitely has the more advanced project. Red Eagle is
already drilling there. I've visited the project. It's in a zone
where there's good infrastructure, and most of the mineralization
is near the surface. The company's getting good drill results and
I could see that becoming a mine if it can prove up more
Ross Beaty's Lumina Capital owns about 10% of Red Eagle. What do
you make of that?
When a junior gets a good partner on board, that's a sign of
confidence in the project, the company and the management, so
this is a very good sign for Red Eagle. A good source of advice
and someone who can potentially open doors and help in the
marketing and promotion of the company and the project are as
important as the geology.
Continental Gold is the crown jewel of junior mining plays in
Colombia. Its flagship project is Buriticá. It currently has a
market cap of $830M. The management team has had success
withColossus Minerals Inc. (CSI:TSX; COLUF:OTCQX) and its Serra
Pelada project in Brazil. What's next for Continental?
Buriticá is an incredible high-grade project. It is the
exploration project that people dream of being involved with or
investing in at an early stage, because of its high grade gold
veins and the fact that there are so many of them. Continental is
also a great example of the value a good management team brings
to a company. CEO Ari Sussman had success with Colossus Minerals
and he has very good connections with key funders and banks. As
he has made a lot of money for people before, he was able to fund
Continental very well and get a lot of institutional support into
the stock. Very sensibly, when the stock had shot up to about
CA$7.50 in mid 2010, he did another financing that means the
company's very well funded and, therefore, able to focus on the
job at hand, which is exploring, defining a resource and
discovering more gold. Many people think that Buriticá will be
the first gold mine in Colombia, and the company's starting to
advance with some of the early-stage work, such as putting in
roads to the site. It expects to be in production as early as
2014 or 2015.
One of the incredible things about Continental Gold is that it
has other highly regarded projects as well, including Berlin
north of Medellín that looks like it has all the indications of
potentially being another big mine. The company just has to get
out there, drill it and prove up the resources.
Are there any other companies you want to talk about?
Cliffmont Resources Ltd. (CMO:TSX.V) has high-grade gold veins at
its San Luis project in Huila. It is in an area in Colombia where
other explorers haven't gone yet, so it has a certain first-mover
advantage. It seems to have picked up a good project. I'm eagerly
waiting to see what results come out of the work there.
Do you have some parting thoughts for us on Colombia?
The Colombia story is very much alive and kicking. It's a great
place to do business. There are some very good, exciting projects
here. Companies are a little unfortunate at the moment in terms
of the market conditions under which they are operating. But this
year there are going to be a lot more resources published, some
consolidation and some shaking out of some of the weaker
Thank you for your insights.
Paul Harris is a mining information expert with over 12 years
of experience as an analyst, journalist and researcher about the
mining industry, of which he has spent nine years in Latin
America, including four years in Colombia and five in Chile.
Harris has written for leading industry publications and business
newspapers around the world and produced reports for leading
consultancy firms prior to starting the
Colombia Gold Letter .
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1) Brian Sylvester of
The Gold Report
conducted this interview. He personally and/or his family own
shares of the following companies mentioned in this interview:
2) The following companies mentioned in the interview are
The Gold Report:
Continental Gold Ltd., B2Gold Corp., Red Eagle Mining Corp.,
Bellhaven Copper & Gold Inc., Seafield Resources Ltd.,
Colossus Minerals Inc. Streetwise Reports does not accept stock
in exchange for services.
3) Paul Harris: I personally and/or my family own shares of the
following companies mentioned in this interview: Continental Gold
Ltd., Batero Gold Corp., Seafield Resources Ltd., Colombian
Mines. I personally and/or my family am paid by the following
companies mentioned in this interview: None. I was not paid by
Streetwise Reports for participating in this story.
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