Few countries have as sad a tale to tell as Nicaragua. Ravaged by a decade of civil war and strangled by a U.S. trade embargo in the 1980s, her economy was just beginning to recover when Hurricane Mitch hit in 1998. The storm killed thousands, racked up US$1.5 billion in damages, washed out roads and bridges, and plunged the country back into economic stagnation. Gross domestic product per capita is estimated to be US$450, rendering Nicaragua the poorest country in Central America.
One small saving grace — and an important factor, still — has been Nicaragua’s rich mineral endowment. Fifty years ago, the country was among the top 15 gold producers in the world. By 1999, it was still producing about 140,000 oz. annually when low gold prices sent most foreign miners home. That year, Canada’s Greenstone Resources, owner of the Libertad and Bonanza gold mines, collapsed under a heavy debt load.
Now that gold has recovered to US$400-per-oz. levels and the Nicaraguan government is sending pro-mining signals, Canadians are starting to invest in the country again. Over the past few months, several companies, including
The main targets are low-sulphidation epithermal vein systems that can be tricky to delineate but have the potential to host high-grade ore shoots and significant resources. Most of the historical gold production in Nicaragua came from bonanza gold veins carrying more than one million ounces of gold (the Bonanza and El Limon mines, for example), but little modern exploration has taken place.
“In its recent history, Nicaragua has suffered from civil war, lack of investment, and horrible infrastructure, and a lot of people would see that as a negative,” says Ralph Rushton, vice-president of corporate development for Radius. “But from an exploration standpoint, it can be seen as a strong positive. Once you get off the beaten track, you’re going to find stuff.”
A new mining law is also helping attract investment. Until last year, the government lacked any mechanism to withdraw mineral concessions if companies did not pay the annual licence fee. As a result, most of the prospective ground in the country lay idle, tied up by a handful of companies. Under a new “use-it-or-lose it” policy, companies must pay a steep fee to keep claims in good standing. The fee ranges from 25 per hectare in the first year to US$1.50 per hectare and more in subsequent years, and this policy has opened up ground for those serious about exploration.
The new law increases the government’s net smelter return royalty on production to 3% from 2%. The additional 1% will go directly to the local government, helping dispel the anti-mining sentiment that sometimes brews in communities near mining operations.
Rain, rain . . .
The main challenge for explorers is the poor infrastructure, exacerbated by significant rainfall from May to November. “Once you get off the Pan American Highway, there are really no roads, and those that are there are really bad,” says Simon Ridgway, president of Radius. “When the rainy season comes, you can spend five hours trying to get a hundred kilometres.”
Another potential obstacle is a backlash led by environmental groups unimpressed with the legacy of previous miners. Organizations such as Friends of the Earth have launched anti-mining campaigns in the country, though they are not as advanced in Nicaragua as they are in some other mining jurisdictions in Latin America.
RNC Gold, an emerging mid-sized gold producer created by the takeover of Tango Mineral Resources in 2003, is expected to be the biggest gold producer in Nicaragua in 2004. The company is restarting its wholly owned La Libertad mine, east of Managua, and has an 80% interest in the Bonanza mine in northeastern Nicaragua — both former Greenstone assets. La Libertad is expected to produce 80,000 oz. this year at a cash operating cost of US$208 per oz., whereas Bonanza is on track to produce 31,000 oz. at US$265 per oz.
Both mines are centred on low-sulphidation epithermal gold deposits and surrounded by large land positions. RNC has budgeted US$1 million in 2004 to convert an estimated 500,000 oz. of resources (12.1 million tonnes grading 1.51 grams per tonne) into reserves at La Libertad and identify high-priority targets for drill-testing on both properties.
“The big potential at Bonanza is the exploration,” says Thomas Lough, vice-president of finance for RNC and a former Greenstone executive. “The mine produces sufficient gold to generate enough cash to hold the large land position [2,050 sq. km] at zero cost to the company.”
Glencairn
The other Canadian producer is Glencairn Gold, 95%-owner of the Limon mine, 100 km northwest of Managua. Like Bonanza, El Limon is an old mine that has been in continuous production since the 1940s. Expected to produce 53,000 oz. gold at US$228 per oz. in 2004, it has rarely had more than two years of reserves ahead of it. Glencairn hopes to add several years of production with an intensive exploration drive this season.
Preferring to stick to grassroots exploration, Radius has staked hundreds of thousands of hectares in central Nicaragua, where the company is finding evidence of a new high-grade vein system. A $5-million program, including airborne geophysics, soil and stream sediment sampling, and drilling, will identify and test targets this year.
“We look for major structural intersections and then acquire large blocks in that area and prospect within them,” says Ridgway, who is credited with discovering the San Martin deposit in Honduras. “We’re working in the central part of the country because we could see from Landsat [satellite imagery] that there were some major structural intersections there. We staked about 5,000 square kilometres over that area and just started prospecting. We had quite a bit of success, so we increased our land position.”
At El Pavon, a new discovery along a road cut, Radius has sampled intersections of up to 21.7 grams per tonne over 8 metres within veins hosted by a series of intermediate-to-felsic volcanic rocks. Like most of Nicaragua, the area lacks outcrop, so Radius is using trenching or pitting to trace the mineralization.
Ridgway says Radius tries to win over local communities in the areas where it works by employing local talent, including geologists, and doing most of its trenching and road-building by hand instead of using mechanized equipment.
Meanwhile, about 75 km northeast of Managua, First Point has launched a 2,000-metre, 15-hole program designed to test depth extensions of several vein systems identified over a strike length of 8.8 km on its Rio Luna property. Thirty-four surface trenches on the Paraiso vein, for instance, returned values as high a 21.1 grams gold per tonne over a width of 2 metres and an average grade of 2.5 grams per tonne over 2.6 metres. Seven trenches on the El Rodeo system carried an average grade of 4.4 grams gold per tonne over 2.1 metres. Based on the geochemistry of the quartz veins, First Point believes higher grades can be found at depth within these vein systems.
Also quietly tying up ground in Nicaragua is
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