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Orinoco teams up with Cleveland to speed up Brazil gold project

Orinoco teams up with Cleveland to speed up Brazil gold project

Photo by Bloomberg

28th July 2014

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

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PERTH (miningweekly.com) – ASX-listed miner Orinoco Gold and Cleveland Mining have teamed up to fast-track the development of Orinoco’s Cascavel gold project, in Brazil.

Under the terms of the agreement, Cleveland would assist Orinoco in mining, extracting, processing and selling gold ore from the Cascavel project, with the ore to be transported and processed at Cleveland’s Premier gold mine, about 120 km away.

The Cascavel openpit project would be capped at 50 000 t/y, with the profits from the gold produced to be shared on a 50:50 basis between Orinoco and Cleveland.

The Premier mine is currently undergoing a staged ramp-up, with the introduction of a cyanide circuit expected to boost recoveries and cash flow. Full-scale mining at Premier was restarted in the June quarter, and ore extraction was targeted for the current quarter.

Cleveland told shareholders on Monday that the agreement with Orinoco would enable the company to bring its extensive operational and mining expertise to bear on the near-term development of the Cascavel gold project, unlocking significant benefits for both companies.

This agreement was also consistent with Cleveland’s strategy of seeking quality growth opportunities in the gold sector in Brazil by acquiring or joint venturing in other gold resources.

“This is a great example of productive strategic cooperation between two ASX-listed gold companies operating in central Brazil, delivering what we believe to be a genuine win-win outcome for both sets of shareholders,” said Cleveland MD David Mendelawitz.

“This is consistent with our broader strategic vision for the Premier gold mine, which is to build on our growing production and cash flow base to capitalise on quality growth opportunities, whether these are organic, exploration-driven opportunities within our existing portfolio, or as in this case, quality external opportunities.”

Orinoco, in turn, told its shareholders that the agreement would enable the Cascavel mine to move into production sooner, without the company incurring additional upfront costs involved with advancing the project towards production.

“This will avoid additional dilution to existing shareholders in the current challenging equity market environment and enable it to focus its resource on value-adding exploration activities within the broader Faina goldfields project, including the newly acquired Sertao gold mine, where there is potential to delineate a Joint Ore Reserves Committee-compliant resource in the short-term, and the exciting Tinteiro iron-ore/copper/gold exploration project,” the company said.

Detailed parameters for the proposed mining at Cascavel would be developed over the next one or two months, with the overall objective of starting production in the fourth quarter of this year.

Contract mining and toll treatment of the ore would be undertaken by Cleveland, with the operating costs of these to be deducted from the proceeds of the gold sales prior to the profits being distributed.

Half of the agreed capital costs incurred by Cleveland in the establishment of the Cascavel operations would be repaid from Orinoco’s share of the gold sales. Orinoco would, in turn, split its share of the profits with its partner at Cascavel.

In consideration for Cleveland providing the up-front funding for the project, Orinoco would grant the miner 11-million unlisted options, at an exercise price of 12c each, and a nine-month term with a vesting condition of a minimum investment of A$1-million being made by Cleveland on the development of mining activities at Cascavel.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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