By Peter Kennedy
It was the unusually high grades that initially attracted a group of seasoned Canadian mining executives to the gold-enriched La Plata gold-copper-zinc volcanogenic massive sulphide deposit in Ecuador.
Laurence Curtis and colleague Nick Tintor secured an option to earn up to a 75% interest in the La Plata project for a company now known as Toachi Mining Inc. [TIM-TSXV, RBNDF-OTC] and brought it to the attention of Bay Street financier Jonathan Goodman.
Now that Goodman is CEO and his private equity firm Metaform Investments is a 17% shareholder in Toachi, the chances of development now rest with a Preliminary Economic Assessment that is expected to be completed later this year.
“We have an opportunity to create something special,” said Goodman during an interview with Resource World at the Cambridge House Vancouver Resource Investment Conference. “We hope to design a project that has very attractive economics that will allow us to get our invested capital back quickly.”
Having spent $6.4 million so far, Toachi recently published a maiden NI 43-101 compliant resource estimate for the La Mina deposit of 1.9 mllion tonnes grading 4.1 g/t gold, 49.4 g/t silver, 3.3% copper, 0.6% lead and 4.5% zinc in the inferred category at a gold equivalent cut-off of 4 g/t gold. That material should be enough to support a 500 tonne-per-day underground mining operation with a 10-year life span.
The property consists of two mining concessions, La Florida and Loma del Tigre, which cover 2,300 hectares. It is located 85 km southwest of the capital city of Quito. Driving time to the property is about three hours.
Previous operators, including Cornerstone Capital Resources Inc. [CGP-TSX, CTNXF-OTC, GWN-Germany], outlined a “historic resource” of 914,000 tonnes, grading 8.01 g/t gold, 88.29 g/t silver, 5.01% copper, 6.71% zinc and 0.78% lead. The property was also drilled by a Canadian company previously known as Cambior Inc. between 1996 and 2000.
But development was stalled for several years after the government of Ecuador imposed its infamous moratorium on exploration and mining in April, 2008, a move the prompted many foreign companies to either cut back on investment or sell their properties. Cornerstone declared force majeure and returned the property to the vendor Sultana Del Condor Minera S.A.
What followed was a chill on mining investment that lasted for six years. Mining companies only began tiptoeing back into the region after the regulatory climate improved and the government agreed to relax a punitive windfall tax on its richest gold project, Lundin Gold Inc.‘s [LUG-TSX, LUG-OMX] Fruta del Norte property, which it acquired from Kinross Gold Corp. [K-TSX; KGC-NYSE].
Toachi Mining, previously known as Ferrum Americas Mining Inc., announced on October 28, 2015 that it had signed a letter of intent with Sultana Del Condor Minera , giving Toachi the option to earn between 60% and 75% in the La Plata gold copper zinc project in Ecuador.
To earn 60%, Toachi needed to make cash payments worth US $2 million and spend US $4 million on exploration. When it reaches 60%, Toachi will have to right to fund the cost of a feasibility study over a two-year period, allowing it to acquire another 5%.Â That interest would rise to 70% if it raises less than US $60 million to build a mine. If the amount needed exceeds US $60 million, Toachi’s interest would rise to 75%.
Under the agreement, Sultana would be carried through to commercial production.
During the earn-period, as long as Toachi holds a minimum of 50%, it will have to right to remain as operator.
John Kaiser, principal of Kaiser Online Research in California, said efforts by Ecuador to fix its mining regime has presented Goodman and Toachi with an opportunity.
The challenge facing Goodman this year is to produce an economic study justifying redevelopment of La Plata as a mine.
“Not only would La Plata be a good starter project for his Metaform private equity vehicle, but turning La Plata into a successful mine would open new opportunities within Ecuador’s unexplored resource frontier,” Kaiser said.
However, Kaiser believes Toachi will need to refinance to fund a feasibility study which will not likely be attempted until after the market has reached to the preliminary economic assessment.
On January 23, Toachi mining shares were unchanged at 23 cents. The 52-week range is 62 cents and 19.5 cents.
When asked for his view of the current mining regime, he said earlier problems stemmed from the fact that the government had not set up a mining ministry to oversee the sector, preferring instead to have its oil and gas ministry take charge of oversight.
“It’s an easier country to deal with now,” Goodman said.