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VANCOUVER (miningweekly.com) – The acquisition of the fully permitted Cerro Blanco mine, in Guatemala, presents a “game-changing” opportunity for junior explorer Bluestone Resources.
Under the leadership of veteran geologist, chairperson and CEO John Robins, who most recently oversaw the sale of Kaminak Gold to Goldcorp for more than C$500-million, the acquisition from Goldcorp represents the continuation of the companies’ reciprocal relationship, with Goldcorp maintaining involvement with the project for at least the next three years after closing.
“Cerro Blanco represents a unique and transformational acquisition for Bluestone. The project has the discovery risk taken out, is fully permitted for production, designed and developed to world-class standards and hosts very high gold grades, with strong potential to expand existing resources,” Robins told Mining Weekly Online in an interview.
According to Robins, Cerro Blanco is very likely Guatemala's next low-cost, underground gold mine.
Under the terms of the deal, Bluestone will pay for the asset with C$18-million in cash, a 1% net smelter return royalty on production and with common shares representing 9.9% of the issued and outstanding stock. Goldcorp will also receive a payment of C$15-million in cash upon Bluestone declaring commercial production at Cerro Blanco.
UNIQUE ASSET
Goldcorp has been unloading assets as it streamlines its portfolio to focus on core low-cost operations, and with the imminent depletion of the Marlin gold mine, which once was a cornerstone asset for Goldcorp, the major has taken the decision to pull out of the country as the comparatively much smaller, yet robust Cerro Blanco does not fit its investment criteria.
“While at Kaminak, I’ve spent a good deal of about 11 years looking for discoveries, and after finding a suitable project (Coffee, in Canada’s Yukon Territory) to take it to the feasibility stage. Cerro Blanco puts us ahead of where we were with Kaminak,” he states, adding that when a larger company moves out of a region, it opens opportunities for smaller players.
The construction-ready Cerro Blanco project is located 160 km by road from Guatemala City. Since 2006, more than $170-million has been spent advancing the project, including two underground declines from surface; 3 km of underground development; two alimak vent raises; significant dewatering infrastructure and an operating water treatment facility.
Goldcorp's most recent public resource statements outline historical resources of 2.05-million tonnes grading 12.69 g/t for 840 000 oz of gold in the indicated category, as well as 750 000 t grading 9.34 g/t for 230 000 oz of gold in the inferred category. However, Robins cautions that the resource estimates are not considered compliant under National Instrument 43-101, and immediately upon closing the transaction, Bluestone will embark on a feasibility study for the project, to formalise parameters.
Bluestone will be spending C$26-million in up-front costs. Upon completion of the transaction Bluestone will be seeking C$40-million in financing through a combination of institutional and retail investors lead by Cormark Securities.
“The beauty of the project is that because it is fully permitted, in a perfect world, we could potentially be in operation two years from closing,” he says.
Importantly, Robins notes that under the terms of the deal, Goldcorp has also granted Bluestone a right of first refusal on certain assets and equipment at the Marlin mine, also located in Guatemala, which is winding down operations as it nears depletion. These include a mill and other mining equipment, which if the timing dovetails appropriately, could prove to be a significant cost-reducing boost for Cerro Blanco.
REGIONAL POTENTIAL
The Bluestone team will also gain access to Goldcorp’s vast exploration dataset in Guatemala, including around Cerro Blanco, adding to the “tremendous exploration upside” for the project and for further discoveries on a regional scale.
“There is lots more gold to be found if you spend the exploration dollars,” he says.
Goldcorp has agreed to participate in all future equity financing undertaken by Bluestone regarding exploration and development at Cerro Blanco, to maintain its 9.9% stake. As long as it maintains a 5% stake in Bluestone, Goldcorp has the right to nominate one director to the board.
As part of the deal, Bluestone will also be acquiring a separate Goldcorp subsidiary holding the Mita Geothermal project, near Cerro Blanco, on which about $60-million has been invested to date to explore and advance the project.
According to Robins, third-party studies envision production capacity from these wells alone of about 7 MW, with the project having sufficient pressure and entropy at exploitable levels to support the fully licensed capacity of 50 MW. Bluestone is evaluating various options to monetise the geothermal assets, Robins advises.