Alder Resources’ (ALR-V) chairman Don Dudek and CEO Joseph Arengi, who were persistent in pursuing the past-producing copper-gold-silver Rosita project in northeast Nicaragua, are hoping their perseverance will soon pay off with a big discovery.
The two, familiar with the project’s potential, tried to buy Rosita seven years ago while working together at Aur Resources, but their efforts fell short. It wasn’t until a year and a half ago that Dudek got his hands on Rosita through an option arrangement with Calibre Resources (CXB-V) using Alder as the vehicle.
The Toronto-based explorer is now earning a 65% interest in the 33-sq.-km Rosita D concession, located 275 km northeast of Managua, the country’s capital.
The project is in the town of Rosita, one of the three towns that form the historic Rosita-Bonanza-Siuana mining triangle in the country’s Region Autonoma Atlantico Norte (RAAN) province. Each town is serviced by daily flights from Managua, which are roughly an hour long. Once in Rosita, the drive to the namesake mine, 25 km away, takes about 30 minutes.
The project hosts the historic Santa Rita pit that was mainly responsible for producing an estimated 245 million lbs. copper, 160,000 oz. gold and 2.61 million oz. silver from 1959 to 1975, before closing due to falling copper prices. That output is based on roughly 5.4 million tonnes averaging 2.06% copper, 0.92 gram gold and 15.08 grams silver per tonne.
To complete the earn-in, signed on August 2011, Alder needs to spend $4 million and issue Calibre 1 million shares, both within four years. Currently, it has invested $2.5 million and issued 400,000 shares.
A month after Dudek joined Alder as chairman in August 2011 he asked Arengi — who was formerly employed as a contract geologist in Nicaragua’s mining triangle in the late 1990s before heading up his own private exploration company in the early 2000s — to steer Alder forward.
Arengi recalls that he visited the Rosita project several times while working for Greenstone Resources and then for RNC Gold, one of Rosita’s former owners.
“I’ve always liked it,” Arengi told The Northern Miner in a recent interview at his Toronto office. “It was a skarn deposit that was mainly mined in the 1960s… but I always felt — and a lot of other people also have felt the same — that this is part of a much larger porphyry system because skarns typically sit off the shoulders of a porphyry system. So our feeling was that there’s a porphyry somewhere here that would warrant a lot more work and a different style of exploration.”
The mining executive, with over 35 years of exploration experience under his belt, explains most of the exploration done at Rosita in the late 1990s consisted of reverse-circulation (RC) drilling for a gold deposit, noting very little core drilling has been completed on the concession since the late 1960s.
When the Toronto-based junior arrived on the scene it achieved two critical tasks: it first punched 1,575 metres into the historic Rosita stockpiles to compute a compliant inferred resource, and then drilled 5,900 core metres mainly on the past-producing Santa Rita and R-13 deposits to test for mineralization under and around the pits.
Rosita was a high-grade deposit, boasting an average copper grade of 4-5% during its first three to four years, Arengi says. The deposit was exploited for its high-grade material at surface, while the lower grade material was largely dismissed.
“What they did was they left low-grade stockpiles that they didn't put through the mill because the copper price was low and it wasn’t worth their effort at that time. So the stockpiles were sitting at surface and we all recognized they had potential, so what we did is we drove 55 RC holes in the stockpiles and generated a resource,” Arengi says.
Out of the many stockpiles on the property, Alder tested six, with four returning a total inferred resource of 8 million tonnes grading 0.62% copper, 0.46 gram gold, 9.2 grams silver for 108 million lbs. copper, 118,500 oz. gold and 2.4 million oz. silver. The estimate was published last May.
After that, Alder put 18 diamond drill holes or 5,500 metres in the Santa Rita and R-13 pits and below the old workings that were not mined to test several historic mineralized intercepts and to get a better sense of the geology and how the mineralization was occurring.
The efforts uncovered a 1.1-km long and 200-metre deep zone of copper-gold-silver mineralization at Santa Rita, which remains open along strike and down dip.
Some notable holes include: 15 metres of 0.57% copper, 1.52 grams gold and 5.93 grams silver; 8 metres of 29.54 grams gold; and 10 metres of 1.42% copper, 0.18 gram gold and 20.45 grams silver.
Following a much closer look at the assays, Alder’s geological team discovered that there was a gold-rich zone transecting the mineralization along the pit’s western end.
“Our geochemistry was showing us there were two styles of mineralization. There was a copper system that had gold and silver in it, but then there was also a later system that had gold only in it.”
The company’s geologists found the mineralization was associated with a much later, cross-cutting, epithermal gold only system.
“So we have this skarn system that was previously mined and trending to the northeast that is transected by a northwest trending gold zone where we have only drilled three holes in it,” Arengi says, adding there’s evidence suggesting other similar trending gold-only systems on the property.
As part of its drill program that started in November 2011, Alder punched two holes or 400 metres on a prospective area it calls Bambana to locate targets that could add tonnage and complement the existing stockpile resource. Bambana sits 4 km northwest of Santa Rita and hosts several copper-gold-silver porphyry prospects, including Tipispan and T3.
Those two holes targeted an exotic copper-oxide zone Alder discovered through trenching on the T3 prospect. The drill results returned 13 metres of 1.23% copper, 0.36 gram gold and 10.63 grams silver, and 18 metres of 1.74% copper, 0.09 gram gold and 16.65 grams silver, confirming “the presence of shallow, high-grade oxide copper and silver mineralization,” the company says.
Alder plans to continue assessing the targets at Bambana once it finalizes the ongoing $1-million financing. To conserve cash, it stopped drilling last July.
As part of the recently amended private placement, the firm is offering 20 million units priced at 5¢ per unit for net proceeds of $1 million. Each unit comprises one share and half a warrant, with each full warrant allowing a holder to buy one share at 10¢ apiece within 2 years of the offer closing. The financing should wrap up around March 31, 2013, with the proceeds going towards Alder’s 2013 exploration efforts and general corporate expenses.
This year, Alder aims to confirm the porphyry targets at Bambana and tackle the metallurgy and economics of processing the stockpile resource along with additional ore from nearby targets.
“So we want to look at a bigger picture for the stockpiles without losing sight of the fact we are really targeting a big porphyry system and we’re starting to get some indications that we are tapping into something up there,” the 62-year-old CEO says.
Arengi predicts production from the stockpiles and additional resource could start within the next two to three years. A scoping study for that small-scale operation is slated to begin in the fourth quarter and would evaluate the cost of building a mill to potentially produce 1 million to 3 million lbs. copper a year.
Meanwhile, Alder is trying to better understand the geological model at Rosita. Arengi says the trenching the company has done so far has helped reinterpret some of the geology at Rosita that now fits the porphyry model. The latest grab samples, published on Feb. 14, from the Tipispan copper-gold porphyry prospect returned 4.46% copper, 10.84 grams gold and 97.4 grams silver, and 3.99% copper, 6.52 grams gold, 114.1 grams silver, 1.53% lead and 2.59% zinc, among other results.
“At the Tipispan prospect our geologists believe we are probably seeing, at least in part, a tropically weathered porphyry copper system with well mineralized, high-grade transecting structures. You have a typical leached iron cap, where all the metals have been leached out. Underlying this, we have the supergene blanket where we get some very high-grade base and precious metal mineralization — we have those in our trench results – and we think this may represent the high grade structures. Below the supergene blanket is the lower-grade hypogene mineralization in the porphyry and we have that in some of the historic diamond drill results,” Arengi explains later in an email.
Alder hopes the work it’s putting into understanding the system will help it locate “the elephant” or the big porphyry system. Arengi says he believes the firm is well-situated to make that discovery, noting the region hosts a long history of mining, favourable geology and three current producing gold mines.
The firm is one of the four companies in Nicaragua’s prolific mining triangle, which has a historic production of more than 5 million oz. gold, 4 million oz. silver, 158,000 tons of copper and 106,000 tons of zinc. The other players include Calibre, B2Gold (BTO-T) — Nicaragua’s largest gold producer and the operator of the La Libertad and El Limon gold mines — and Hemco Nicaragua SA, a private company that runs Bonanza, the third gold mine in the country.
Along with the history of mining, Nicaragua is also ranked as the safest country in Central America with a stable government and tax regime. Companies have to pay a 3% net smelter return royalty and a 30% tax on net profits.
Some 7 km away from the Rosita project, Calibre and B2Gold discovered the Primavera porphyry copper-gold target last January. Calibre says the 25-sq.-km project is geologically similar to Newcrest Mining’s (NM-T, NMC-A) Cadia-Ridgeway porphyry gold-copper mine in Australia.
Arengi points out what’s great about Rosita and other deposits in northeast Nicaragua is the intrusive-hosted copper mineralization is associated with high precious metals content. For instance, Primavera contains gold, while Rosita hosts silver and gold mineralization.
Commenting further on the jurisdiction and geological environment, Arengi says: “It’s one of the best, it really is. It is a metallogenic region that has just begun to reveal its true potential.”
Alder has a team of 20 on the ground, including a country manager, two geologists and local personnel. It has an office in Managua and an exploration house in Rosita, along with a main office in Toronto.
It recently closed at 5¢, within a 52-week range of 4.5¢-25¢. It has 72.7 million shares outstanding.
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