Seafield Resources’ (SFF-V) Miraflores project isn’t in the same league as AngloGold Ashanti’s (AU-N) 24-million-oz. La Colosa gold deposit, or Sunward Resources’ (SWD-T) 11-million-oz. Titribi project — two deposits in Colombia that prove the country’s Middle Cauca belt is fertile ground for gold exploration.
Miraflores, in the Quinchia district of the Department of Risaralda, has a 1.9 million oz. global gold resource, with a preliminary economic assessment in April estimating an open-pit and underground operation at the project could recover a total of nearly 709,000 oz. gold over 14 years.
But the project’s smaller size may not be such a bad thing.
Whereas other projects have faced delays because their size and potential environmental impacts alarmed a country accustomed to small-scale mining, Miraflores’ more modest scale may give it an advantage in its goal of reaching production in early 2015.
Moreover, the project is not located in an environmentally protected area, like Eco Oro Minerals’ (EOM-T) Angostura deposit. And the development won’t require a relocation of any residents, like Gran Colombia Gold’s (GCM-T) 14-million-oz. Marmato deposit to the north.
The Colombian government is in the process of reforming the country's mining code and setting up a new regulator to handle permitting of projects. A previous attempt to update the mining code was deemed unconstitutional last May, because the government failed to consult with indigenous communities. Elina Chow, Seafield’s vice-president of corporate of corporate development says that at the PDAC this March, the government indicated it wants to start permitting operations under its new system in 2013. The country is a big coal producer, but doesn’t have any modern gold mines despite the phenomenal amount of gold exploration it’s seen in the past few years.
Seafield has one of the few planned open-pit projects in Colombia after Eco Oro (formerly Greystar) had to revamp its Angostura project from an open pit project to underground because of its location in an environmentally sensitive mountain area known as a paramo. Although Miraflores is located in hilly ground, it is located below the paramo elevation.
“I don’t know if we’ll be the first modern-day gold mine in Colombia, but we may be the first open-pit producer in Colombia,” says Chow, who adds that as the company moves into the feasibility stage, it is optimistic about the progress the government is making in its consultations with local communities over the mining code reform.
“Once they’re ready, we’ll be ready to go as well.”
Another plus for Miraflores is its low capex during a time when investors are wary of the huge capital cost escalation that has occurred at large, big-ticket projects.
A preliminary economic assessment released in April showed that with startup capital of $93.7 million, Seafield could build a combined open-pit and underground operation producing 71,000 oz. gold per year for eight years and a total of 709,000 oz. gold over a 14-year mine life. At a gold price of US$1,500 per oz., the project has a pre-tax net present value (NPV) of $249 million (at an 8% discount rate) and an internal rate of return (IRR) 50%. Gold recoveries were projected at 90%, based on metallurgical testing of the low-sulphide mineralization. Cash costs were pegged at US$527 per oz., excluding refinery costs and royalties.
The 100%-owned project has both power and water nearby, and is accessible via a paved road.
As for Seafield's next steps in advancing Miraflores, the latest results released from a 5,000-metre drill program finished in June have confirmed that the company needs to follow up with an underground 5,000-metre drilling program, slated for early next year.
Once results from that program are complete, Seafield will have 10,000 metres to incorporate into a resource update, and more data about the deposit to inform a feasibility study on Miraflores expected in the third quarter of 2013.
Currently, measured and indicated resources total 77.8 million tonnes grading 0.8 gram gold per tonne at a cutoff grade of 0.3 gram gold for 1.9 million oz. gold. Inferred resources add 5.5 million tonnes grading 0.6 gram gold for 103,000 oz.
However, the mineable portion of the resource is considerably higher grade: 1.38 grams gold per tonne for open-pit resources and 2.27 grams gold for the underground portion.
Chow says the company expects grades to improve with more drilling.
Miraflores is a low-sulphidation epithermal deposit, which is contained in a hydrothermal breccia pipe that measures 250 by 280 metres at surface, widens at depth and is open at depth (600 metres). Gold is hosted in the hydrothermal cement between breccia fragments, while higher-grade gold is hosted in deeper veins.
“Within the pipe, we found about nine high-grade veins,” Chow says. “The purpose of the infill drill program was to move a lot of the high grades that are currently in the indicated or inferred categories into measured. As far as the overall resource estimate goes, you’re likely not going to see a huge bump in that number (1.9 million oz.). However, the grade will likely pick up once we are able to move these higher grades into more advanced categories.”
Chow adds that the latest assays, from drilling completed in June, already show improved grades because the more tightly spaced holes are more hitting more of the veins.
The latest assays, from hole QM-DH-34, returned 161.2 metres of 3.23 grams gold starting 183 metres below surface, including 60 metres of 5.48 grams gold. The hole was drilled to 440 metres depth, and was started from just southeast of the breccia pipe and drilled toward the west.
Results from the last few holes will be released over the coming months. In the meantime, the company is extending an existing underground tunnel at Miraflores to allow the underground drilling that will better define the high-grade veins, and may lead to an increase in recoverable ounces in the final feasibility study.
Chow says “high-grade” at Miraflores means anything from 2 grams gold to 200 grams gold, (Seafield caps drill results at 20 grams gold) with vein grades averaging about 10 grams gold per tonne.
Seafield recently did some condemnation drilling in an area southwest of Miraflores, where under the PEA plan, a tailings dam was to be located.
However, the drilling turned up some “interesting” results, which Seafield is now following up with an induced-polarization survey, sampling and geochemical work. If the results are positive, the company will further investigate the target with drilling this fall.
Mindful of the need to stretch its existing treasury, the company has put the acquisition of surface rights at Miraflores on hold for now. Chow says the company has so far secured about 20% of the total area. In the meantime, Seafield has enough cash ($6 million) to last until the first quarter of 2013, by which time markets may have improved.
The company is headed by president and CEO Cesar Lopez, who joined the company last spring. Lopez was a founder of AQM Copper and Centenario Copper, which was taken over by Quadra Mining.
Seafield shares recently traded at 13.5¢ in a 52-week window of 9.5-28¢. The company has 169.2 million shares outstanding.
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