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TABLE OF CONTENTS May 26 - Jun 1, 2014 Volume 100 Number 15 - 0 comments

Latin American Minerals dreams big in Paraguay

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By: Trish Saywell
2014-05-21

One of South America’s most isolated countries — ruled by a series of authoritarian governments for most of the twentieth century — has seen virtually no modern mineral exploration.

But geologists believe that the landlocked nation, which is no bigger than the state of California, contains vast mineral wealth and that its politicians are eager to exploit it.

“There was no modern geology done in Paraguay until 1976, when a private company called ‘Anschutz Corp.’ went in to do large-scale reconnaissance for uranium deposits,” says Miles Rideout, president and CEO of Latin American Minerals (TSXV: LAT). “Since then there have been only a handful of exploration companies, about half of them looking for uranium and the other half for gold. The investment in exploration up to now has been modest and because this is essentially an unexplored environment, it’s been relatively easy to find discoveries.”

Latin American Minerals was first drawn to Paraguay in 2006 to investigate a reported gold discovery in the Paso Yobai district, 200 km southwest of the capital city of Asuncion. Its geologists confirmed epithermal gold mineralization, optioned the concession and called the project ‘Paso Yobai,’ and in 2012 produced the first gold doré bar from a pilot plant built on-site. Now the company is banking on becoming the first in the country to complete a National Instrument 43-101 compliant resource estimate on a mining project.

Soil sampling, airborne electromagnetic (EM) surveys and ground magnetics across the holding have demonstrated that the project is “notable for abundant gold, with anomalous values occurring in soils over 60% of the 150.2 sq. km property package,” Rideout says during a telephone interview from his home in Mendoza, Argentina.

So far Latin American Minerals has delineated two major gold features that lie 3,500 metres apart. The first, called the Discovery trend (where the pilot plant is located), has been traced for 10 km and contains a more or less continuous vein over 4.5 km — 3 km of which lie on the company’s mining concession. The second and larger X-Mile trend has been delineated by soil anomalies 3.5 km northeast. The X-Mile trend is comprised of multiple gold anomalies along a 14.8 km corridor. Due to its size and potential, it’s the company’s exploration focus.

Drilling at the original Discovery trend found gold mineralization occurring in lenses from surface to at least a 150-metre depth, but the company conducted open-pit extraction and bulk sampling, which allowed for continuous mapping and sampling of the pinching and swelling mineralization from surface to a 25-metre depth — the approximate limit of the soft, weathered surface saprolitic rock.

Over the last two years Latin American Minerals has conducted the sampling program to a 25-metre depth over 600 metres of the trend. Ore from the high-grade vein is processed at a gravity concentrator plant at the site, and the low-grade disseminated ore has been segregated and stockpiled.

Earlier this year, Latin American Minerals received a permit to expand its pilot-plant operation to include heap-leach processing of lower-grade ore, and Rideout says he expects to begin leach processing shortly. He estimates that heap leaching will double the company’s current gold production of 1,500 oz. per year.

On the X-Mile trend, Latin American Minerals has identified five new target zones. Last year it completed a controlled source audio-frequency magnetotellurics — a high-resolution magnetotelluric technique used in gold exploration — as well as 60 line km of induced-polarization surveys. The surveys allowed the company to image from survey to a depth of 600 metres, and helped identify multiple target structures below each surface gold anomaly. Now Rideout says the project is ready to drill.

“In terms of potential, Paso Yobai has a mineral footprint on the same scale as AngloGold Ashanti’s (NYSE: AU) Vanguardia mine and Goldcorp’s (TSX: G; NYSE: GG) Cerro Negro project, both in southern Argentina, with geology that is comparable,” Rideout says. “Our next step is to test for high-grade ore shoots at greater depths. Success will revolutionize the project, and the other gold prospects in the region.”

Rideout says that bulk sampling (and soon gold production from heap leaching) is paying for the company’s in-country costs, and demonstrates that mining companies can get mining projects permitted and into construction. The gold–silver doré the company is pouring (77% gold and 21% silver) is sold to refineries in North America.

Rideout, who had been a technical consultant to Latin American Minerals for several years before they chose him as their CEO in 2010, worked as an exploration and consulting geophysicist on 20 to 25 exploration projects in Chile, Argentina, Brazil, Peru and Bolivia over two decades, but had never been in Paraguay.

“People don’t know much about Paraguay and it has been largely overlooked by the mining industry, but the country has considerable and varied mineral potential,” he says.

Rideout recalls that one of the company’s partners in the country asked whether it had any interest in diamonds, and took the management team to a property 150 km north of Paso Yobai.

“Stream-sediment sampling returned abundant diamonds,” he says. “We have taken 380 samples and recovered 78 diamonds.” The company is looking for a partner to advance exploration on that property, and has found gold there. Latin American Minerals has a property where rare earth elements and niobium have been found at surface. But for now, management is advancing its gold exploration.

Rideout notes that although there has been little detailed geology in Paraguay, and the area is largely unmapped, it’s clear that the geology is different from mining regions in western South America. In Paraguay there is little rock exposed at surface, but soil sampling is easy and, so far, it’s been productive for the company.

Unlike the western part of South America, where the geology is dominated by volcanic events related to the subduction zone at the westcoast margin, he says, many of the mineralizing events in Paraguay are related to the rifting of the African continent away from South America. “The mechanics and the chemistries of the geologic events differ greatly,” he says. “Paraguay also has ancient Precambrian formations, which may have been mineralized at a much earlier time.”

But it’s not just the geology that makes Paraguay attractive, he says, it’s the government’s pro-investment, pro-business and pro-natural resources attitude. “It’s one of the easiest places to work and to get permitted,” he says. “Paraguay doesn’t yet have a mining history, but our experience has been positive. Business investment and economic growth in Paraguay over the last twenty years has been excellent, and it’s clear that modern Paraguay intends to make up for lost time.”

Rideout points out that compared with other countries in South America, the government is more likely to consult with industry on regulations and their implementation, and notes that authorities are implementing mining systems that have been modelled on other areas, and have sought feedback to ensure that implementation is practical.

The country also has a favourable tax structure and no restrictions on the repatriation of proceeds — which is a sore point for mining companies in neighbouring Argentina, for example. Under the mining code in Paraguay, companies can get mining leases for 25 years, with a 5% royalty awarded at the time a mining concession is granted. Corporate income taxes are 10%. When companies pay a dividend on net profit it’s taxed at 5%, and when the dividend is repatriated it is taxed at 10%.

“By the time you’ve repatriated your dividends, the total tax bill would be 25%, plus a 5% royalty,” he says. “But if you registered a US$5-million investment in Paraguay, for instance, you are excluded from paying the repatriation tax for a five-year period [saving 10% in taxes]. And you can repatriate any amount of dividends during the first five years — that is beyond the original investment of US$5 million.”

For the future, Rideout says, Paraguay should be considered “one of the bright lights” of exploration in South America. And on top of its pro-investment attitude toward mining, the country boasts an advanced road network and two large hydroelectric complexes. While the country’s economy revolves around agriculture, there is considerable scope, Rideout says, for resource and industrial development.

“There is quite a lot of new investment in Paraguay from Brazil, certain Asian and European countries, and also from Canadian agricultural interests,” he says. “I think we will soon hear more about petroleum and mining investment, too.”



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