Eric Coffin Pinpoints The Mining Companies With Resources That Are Right For Today's Market

EC: Columbus Gold Corp. (CGT:TSX.V; CBGDF:OTCQX) put out a new resource estimate on its flagship Paul Isnard gold project in French Guiana. It didn't have a huge impact but it brought the grade up to 1.44 grams per ton (1.44 g/t) in a 4.5 million ounce (4.5 Moz) resource, and moved about 75% of that resource from the Inferred to the Indicated category. That's important because if a company is doing feasibility-level studies, the engineers can't configure anything below Indicated. All of that Inferred material may be quite real and eventually become part of a mine but it can't be included in a feasibility study. I expect Columbus to put out a PEA in less than a month.

TGR: How is Columbus Gold going to finance further development? Will it sell or option assets in Nevada?

EC: I don't think management has decided yet. Columbus has an option agreement on Paul Isnard with Nordgold N.V. (NORD:LSE), a successful, mid-sized Russian gold miner. In order to get 50.01%, Nordgold has to bring Paul Isnard to feasibility and spend $30 million ($30M). It will probably spend $30M to finish the feasibility study, but once that's done there is a fairly complex formula to determine who pays what; Columbus could end up with as much as a 20–30% carried interest.

If the feasibility economics are strong enough, I wouldn't be shocked to see Nordgold make an offer to buy Columbus. That may turn out to be a cheaper option for Nord if it wants 100% of Paul Isnard. Columbus certainly has a lot of projects in Nevada and management wants to option some of them, but it has raised money and is waiting on drill permits for a large, yearlong drill program on its Eastside property in Nevada. Andy Wallace, a former director, stepped aside to run that drill campaign. He is credited with the discovery of several gold deposits there. He obviously rates Eastside very highly.

TGR: What are some other companies with news?

EC: Another company that just put out a PEA is GoldQuest Mining Corp. (GQC:TSX.V). As my readers know, I've been pounding the table on that one over the last few months because I really like the project and have known GoldQuest Chairman Bill Fisher and CEO Julio Espaillat for about 14 years. I saw them take the Cerro de Maimón copper-gold volcanogenic massive sulfide project in the Dominican Republic and improve it to the point where it went into production and got taken out by Australia-listed Perilya Ltd. (PEM:ASX) for about $190M. Cerro de Maimón is still in production and remains profitable.

GoldQuest discovered Romero a few years ago, quickly proved up 3 Moz gold equivalent and put out a PEA last year that the market basically dumped on. But what the company is doing now at Romero is exactly what I saw Fisher and Espaillat do at Cerro de Maimón. The company put out a new PEA in late April that focuses on mining the higher-grade material. The deposit is kind of a blob and well suited to highly efficient, low-cost underground mining. The capital cost is under $150M, including $20M in contingencies. The after tax internal rate of return is 34%; the after tax net present value is about $220M. GoldQuest was a $0.06/share stock three weeks ago. It's $0.17/share now. With a decent gold market it will probably go higher because it looks financeable.

TGR: What's the next step for GoldQuest?

EC: The company will move to the prefeasibility stage. The Romero resource is fairly closely drilled so most of the resource in the mine plan is already in the Indicated category. The company would only need a few holes of resource drilling to have enough for a prefeasibility study. That means it can get through the prefeasibility for perhaps $2M and probably get it done before the end of the year. At some point GoldQuest will want to raise money because it wants to keep working the rest of the Tireo Belt. Precipitate Gold Corp. (PRG:TSX.V), a company I helped found, is next door, and it has a new discovery that's the same model. The Tireo Belt has never really been fully explored there.

TGR: You follow a handful of companies with projects in the Yukon. What are some newsworthy stories there?

EC: Kaminak Gold Corp. (KAM:TSX.V) put out a PEA last year on the Coffee project, and it is a pretty impressive document, a lot stronger than many people expected because when you think Yukon, you think high capital and operating costs. The key to that project is good metallurgy and near surface geometry. In early May, Kaminak published an extensive metallurgical study that's being done as part of its feasibility study. The numbers are very good with average recoveries in the range of 85–95%. For something north of 60 degrees, the metallurgy is quite amazing.

TGR: If Kaminak could heap leach the Coffee ore, how would that change the economics?

EC: Even coarse material has 90%+ gold recoveries. If you have to do less crushing, you need less equipment and require less power, which is big because power costs are not cheap in the Yukon. And if you can get 90% recoveries instead of 70%, that's going to massively improve the bottom line.

TGR: Are there other stories you're following there?

EC: The other main one that I'm following in the Yukon is Rockhaven Resources Ltd. (RK:TSX.V). I visited its Klaza property last year and quite like it. You can drive to it without a big 4x4, and there is little tree cover where the company is drilling. Late in 2014 Rockhaven announced a 1.3 Moz gold equivalent resource at a cutoff grade of 1.5 g/t gold on its Klaza property. It's still open at depth and is now considered a "carbonate-base metal" style deposit. This deposit type often has big dip lengths, so you can go fairly deep and still stay in the bonanza zone. Continental Gold Ltd.'s (CNL:TSX; CGOOF:OTCQX) Buriticá project in Colombia and the Porgera mine in Papua New Guinea are the same model. I think Rockhaven still has a lot of room to expand Klaza.

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Disclosure: Brian Sylvester conducted this interview for Streetwise Reports LLC, publisher of more

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