Building a commercial-scale mine in Colombia is no small task.
Despite the wave of optimism that washed over foreign investors just a few years back, the country’s violence continues to obstruct its mining future, as investors wait for it to get its first large-scale modern gold mine into production.
One company that has been operating, albeit on a pilot scale, is Continental Gold (TSX: CNL). With its mining licence in hand and a small-scale gold mine operating on its Buritica project in the Antioquia department, the company has been a contender to become one of the earliest to have a commercial gold mine up and running.
But getting to that point is looking more difficult, as a clash with local artisanal miners erupted in November, leaving two dead.
The conflict began when police, with the support of the local government, moved in to evacuate illegal miners from sections of the site.
According to Colombian newspaper El Tiempo, two miners were killed after clashing with police. In addition, various reports claim that between five and 11 people were injured, including as many as seven police officers.
The news source quoted the Secretary of the government of Antioquia, Santiago Londono, as saying 500 police and 200 soldiers arrived at the San Antonio area of Buritica on Nov. 22 to evict the 3,000 illegal miners working there.
According to the government, the eviction notice given to the illegal miners from the area was triggered by a landslide at the San Antonio area of Buritica in late October. San Antonio is in an area separate from Continental’s pilot mine site, and while no one was hurt in the landslide, the potential for more trouble pushed the government’s hand, so the decision was made to remove the illegal miners.
Those miners, however, disagree with the decision.
While there are varying reports on how the conflict began, the government says it is investigating the cause of death of the two artisanals.
The government says the illegal miners were given a month’s notice to evacuate, but many ignored the order, necessitating the involvement of the police and the military. There are reports that water and electricity were cut off, and this stoked tension within the artisanal mining camp.
The conflict has, for the time being, abated and 1,700 people are reported to have left the area on their own.
The turmoil was one reason that Scotiabank Mining analyst Mike Hocking downgraded Continental’s stock to “sector perform,” and cut his price target to $4 per share from $5.50.
Since the news of the deaths came out on Nov. 22, the company’s shares have fallen 8%, and were trading for $2.79 at press time.
Continental got a 30-year mining licence for Buritica in March. A tiny operating mine on the property has been producing from five veins continuously since 1992. Last year it processed 6,000 tonnes of ore with a head grade of 18.01 grams gold for 2,988 oz. gold produced. This year, up to the end of September, it had processed 5,100 tonnes grading 25.41 grams gold for 3,838 oz. gold produced.
The project is home to measured and indicated resources of 3.7 million tonnes grading 13.6 grams gold, 38 grams silver and 0.7% zinc. It also has 13.3 million tonnes of inferred resources grading 8.8 grams gold, 33 grams silver and 0.5% zinc.
By 2017 Continental wants to be processing at least 1,000 tonnes per day and then scale up to higher throughput rates.
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