February 16, 2018

InvestorIntel: Para Resources’ Artisanal Gold Miner Model Delivers Results

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Para Resources Inc. (TSXV: PBR) has a two-step formula for gold exploration. One, search historic gold mining districts which for whatever reason weren’t fully mapped out. Two, if small-scale artisanal miners are currently on the site, it’s probably a good thing.

The El Limon property in Colombia is the perfect embodiment of Para Resources’ strategy for a number of reasons, CEO Geoff Hampson told InvestorIntel. One, Civil war, officially concluded in 2016 through a peace deal with the FARC guerrillas, meant that El Limon never got properly drilled to determine its full potential. Two, there are 500 artisanal miners extracting ore employing the dangerous alchemy of using mercury to separate gold.

Hampson’s partner, Randy Martin, found success of working with artisanal miners in Central America instead of kicking them off a newly acquired property – the traditional approach of a North American or European mining company in Latin America. Working with small-scale miners transforms social engagement with local communities, and correlates with the current difficulty of exploration companies getting access to equity financing, Hampson said.

“We didn’t upgrade the underground mine [that previously operated at El Limon] because our strategy is formalize the illegal miners and have them supply us with the ore,” Hampson said. “Our total costs for acquiring ore is about $750 an ounce so we can make good money, we create social peace and we don’t have to upgrade our underground mine.”

The underground mine came with the concession that Para Resources bought from a cash-strapped local operator in 2015.

Hampson points that this model does not involve a toll milling system that is used in many artisanal mining districts. The Vancouver-based company converts the illegal miners into contract miners, and provides them with better tools to mine ore without using mercury. Para Resources purchases the ore at $131 a metric ton, assuming 50% gold content and a 85% recovery rate. It’s a model that has been successfully proven at B2Gold Corp.’s La Libertad and El Limon mines in Nicaragua, and Group Mineros SA, which also operates in the Central American country.

Getting early cash flow from near surface mining allows the Para Resources team to focus on mapping out a district and potentially make a larger discovery. The company believes that the vein system extends for 12 kilometers (7.5 miles) through the El Limon property set over 22,000 hectares (54,363 acres) in northern Colombia. El Limon could hold 2 to 3 million ounces of mineable gold, Hampson said.

The company has invested $7 million at El Limon and commissioned a rebuilt mill in November. After producing 253 ounces in December and 437 ounces in January, Para Resources plans to get the mill up to nameplate capacity of 1,200 ounces/month by June. Breakeven is at $400/oz, Hampson said.

The company purchased an old gold mining concession in Arizona last year that also meets the company’s strategic criteria. Like El Limon, the Gold Road Mine site in Arizona consists of four old mine sites that exhibit classic volcanic epithermal gold veins that were mined until last year.

The last meaningful production at Gold Road ended in 1942 when gold mining in the Oatman mining district of northwest Arizona was considered non-essential for the war effort and abandoned. Like El Limon in Colombia, Para Resources hope to engage contract miners in Arizona to increase feedstock. This will in turn fund exploration in the wider area that shows samples of 25 grams a ton, Hampson said. This historic mining district could easily become a 100,000 ounce-a-year site, he said.

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