I wanted to pen a quick update on a junior I've been following since 2007 that had significant news over the past week that didn't get grab any headlines ... but should have. Here's the quick and dirty:
Barrick had its first Investor Day in five years on Monday, Feb. 22, where they detailed 4 projects that had made their cut and will advance based on new tightly controlled economic hurdles that Barrick management has set.
One such project is the Lagunas Norte Refractory Ore Mine Life Extension project in Peru (see pages 114-124 here) which -- based on Barrick's PFS -- shows exceptional returns. Barrick is running out of oxide ore to heap leach but have a few million ounces of sulfidic material to process, hence the refractory ore mine project. Barrick will be running the remaining oxide until the new mine is up and running in 2021. Keys to success, as outlined by the Barrick presentation slides, include:
- Extending the mine life enables exploitation of regional sulfide opportunities;
- Development of neighboring targets has potential to add medium-term production.
Page 23 shows neighboring targets and a $4.6-million exploration budget on these targets for 2016.
One of the targets shown is Tres Cruces, which already has 2.6 million gold ounces measured and indicated and 600,000 ounces inferred. Mostly sulfides but some oxide. Metallurgical testwork indicated a baseline recovery of 85% for oxidized mineralization plus 80% for sulphide components of mineralization.
This project immediately becomes a target for the Lagunas Norte refractory ore operation and to extend the oxide life. It's just 12 km south, so ore could be easily trucked to the new mine to the north. Barrick has been paying $250,000/year since 2003 to keep their option on the property, which ends in 2020.
Who owns the property? New Oroperu Resources - ORO.V in Canada and NOPUF in the US. The option calls for 70% ownership by Barrick and 30% New Oroperu. Importantly for New Oroperu investors, Barrick must finance New Oroperu's costs through to production and must pay New Oroperu a 2% NSR. New Oroperu has 20 million shares outstanding and trades at $.29, for a market cap of $6 million CAD. When I wrote up New Oroperu in 2007, they had 15 million shares outstanding - no rollbacks since. They've used Barrick's annual payment to fund most of their annual costs.
Investors should not only be excited by the 3.3-million ounce project that just got life but also by the exploration potential. One of the final and best holes drilled by Barrick in 2008 ended in mineralization and assayed 228 meters grading 2.95 g/t Au down to 265 meters and is open to depth. It also contained silver mineralization with a notable 13-metre zone grading 67.7 g/t silver near the bottom. The low-grade gold envelope and alteration is open to depth. Mineralized breccias containing fragments of the Cretaceous sedimentary rocks which underlie the Tres Cruces deposit also suggests depth potential.
No drilling has been done on the project since 2008 because of the wait for Barrick's decision to move forward on a refractory mine. That came this week.
What is the value of New Oroperu's 30% fully financed interest in Tres Cruces through to production plus a 2% NSR? That's up for debate. But remember, New Oroperu's current market cap is $6 million. One year's worth of just the 2% NSR -- assuming 200,000 ounces per year at $1,250 gold prices -- could be worth $5 million.
After waiting nearly 10 years, it's now GAME ON.
