THE INSIDE STORY: Brazil-focused gold exploration play Orinoco Gold (ASX: OGX) is poised to become a developer much quicker than it, or the market, anticipated.
Taking the company into the development stage is a recent deal struck with Troy Resources (ASX: TRY) to acquire Mining Leases encompassing the Sertão gold mine in central Brazil.
“The Sertão gold mine is an important piece of the development puzzle for us, which really only works because of what we have already got,” Orinoco Gold managing director Mark Papendieck told The Resources Roadhouse.
Orinoco already has its 194 square kilometre Faina goldfields project in the Faina Greenstone belt, located in the central Brazilian state of Goiás, centred on the large, high-grade Cascavel system.
The Faina Greenstone belt is located approximately 100 kilometres southwest of AngloGold’s Serra Grande mine and Yamana Gold’s Pilar mine.
Troy Resources successfully operated the Sertão mine, producing over 250,000 ounces of gold at 25 grams per tonne.
Since acquiring Cascavel in September 2012, Orinoco has completed a swathe of exploration work including high-grade drilling, channel sampling and bulk sampling.
This work quickly identified a gold-bearing structure at Cascavel, covering an area of 1,600 metres by 700 metres which remains open along strike and down dip with three mineralised zones ranging in width from 2m to 25m.
Drilling also resulted in the discovery of the Tinteiro polymetallic target with the discovery hole returning:
17.56m at 1,292.4 grams per tonne silver, 11m at 0.25 per cent copper, 16.41m at 1,400g/t tungsten from 101m.
A subsequent follow-up drill program encountered:
4.38m at 760.27g/t silver, including 1.05m at 2,510g/t silver from 156.95m.
The company is concentrating on a two-pronged strategy as it progresses towards establishing a mining camp in the region.
The first part of this strategy is focused on achieving short-term production from the high-grade Cascavel and Sertão projects.
Orinoco anticipates utilising the cash flow it generates to continue growing these mines and further exploration at its large Tinteiro project.
“Short term production from our high-grade assets is first on the agenda,” Papendieck said.
“We can then use the cash flow they generate, instead of having to tap the market, to grow our assets because we believe mines are built, not discovered.
“We believe, the style of deposits we have, including the Sertão project we have acquired from Troy Resources, are perfect for growth in this manner.
“We think we can get them off the ground for a very low amount of capex and then continue expanding the mine from there.”
The second part of the Orinoco strategy involves exploring large-scale, long-life mine assets, which is where its Tinteiro project comes into play.
Tinteiro is situated very close to Cascavel, but is different in that it is a very big IOCG target where Orinoco has already defined around seven kilometres of strike, along which it encountered the high-grade silver hits mentioned above.
“Our strategy is reasonably simple,” Papendieck said.
“One: generate cash flow from high-grade assets in the short term.
“Two: use that cash flow to grow the production profile of those assets at Faina and to explore for large-scale, long-life assets, like Tinteiro.”
Obviously the purchase of the Sertão project slips in as a perfect fit for the first part of Orinoco’s strategy, especially as it brings with it two important elements.
The first of these is that it delivers the company a fully-permitted mining lease on a site that has had operations on it before.
It comes with grid power connected to site and the usual site infrastructure completed, so all the work that usually entails spending both a lot of money and time has already been spent bringing the project to its current advanced stage.
“To get a full-scale mining lease can take up to two years sometimes, which also entails environmental licencing,” Papendieck explained.
“With the Sertão project we walk into a full environmental and mining permit so it saves us so much time and money.
“We already have Cascavel permitted to extract ore, not to process it on site, however we are currently in the phase of applying to advance that to a full-scale mining lease.
“At the moment our only option for processing ore is by means of a toll treating agreement with Cleveland Mining (ASX: CDG).
“That’s a very good agreement and one we intend on utilising, however the addition of the Sertão project means we now have the option of spending a small amount of money on constructing our own gold circuit on site.
“It basically provides us with an instant gold mining lease, from where we will be able to process ore we mine from Cascavel.”
The second aspect the Sertão project brings to the game is a bank of historic drilling data from previous campaigns conducted by Troy and Western Mining before them, beneath the existing open pit, which highlighted Cascavel-style strike and dip extensions to the mineralised zone which remain largely untested.
0.7m at 48.2g/t gold approx. 100m down dip from Sertão open pit; and
0.33m at 119.6g/t gold approx. 750m down dip from Sertão open pit.
Orinoco believes this drilling clearly demonstrates extensions to the ore body mined by Troy with the deepest hole intersecting mineralisation at depth from the bottom of the pit.
The mineralisation at the Sertão project is only 18km along from Cascavel and Orinoco is confident it is part of the same geological event as at both sites it is very similar in style and structural controls.
Comparing the knowledge Troy gleaned from its time at Sertão and the work it has completed at Cascavel to date has allowed Orinoco combine years of geological thinking.
“We feel Sertão has the ability to add resource ounces in the short to medium term, enabling us to keep adding to our resource base and maybe even a second front of production,” Papendieck said.
“We have just over 200 square kilometres of ground in the greenstone belt now and there are plenty of opportunities for us to keep making new discoveries within our portfolio.”
Orinoco Gold considers its acquisition of the Sertão project has bought time and will also save it valuable capex dollars and provide the ideal start to the company’s ambitions of being recognised as developer rather than a junior exploration play in the region.
“This is a pivotal moment for Orinoco Gold,” Papendieck said.
“We have just completed a placement, which positions us to conduct a quick campaign involving an exploration decline, generating high-grade stockpiles, and carrying out infill drilling which will give us our maiden Resource over an area covering just 10 per cent of Cascavel.
“Once we have that Resource we will complete a Scoping Study, which will look at toll treating with Cleveland and also at how little it may cost to put a gravity treatment plant at Sertão.
“We believe we can quickly add resources at Sertão as well as from other areas of Cascavel.
“When we finalise our recently announced rights issue we now have a very clear path to Resource growth and to low cost production and we are fully-permitted to do all that, we have all the right pieces we need falling into place to get us underway.
“We are now developing a gold mine.”
Orinoco Gold Limited (ASX: OGX)
…The Short Story
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