Apr
26
Edgewater Exploration tells Mineweb banks are receptive about debt and that it could break ground on the Corcoesto gold project in northwestern Spain next year.
Author: Kip Keen
Posted:
Thursday
,
26 Apr 2012
HALIFAX, NS (MINEWEB) –
By the sounds of it, Edgewater Exploration (TSX-V: EDW) is on the cusp of lowering capital costs on its Corcoesto gold project in Spain, homing in on open-pit mining to bring down costs and enticing banks to serve up some serious debt financing. It is coming progress Edgewater President and CEO, George Salamis, and its vice president of corporate development, Ryan King, described in an interview with Mineweb this week as they run Corcoesto through a feasibility study and environmental permitting.
Edgewater can’t claim to have discovered Corcoesto, which lies in the autonomous region of Galicia. Drilling on the project goes back decades and includes over 400 drillholes, about a quarter of which are now Edgewater’s. But it gets full credit for taking a humble 325,000-ounce gold deposit and quickly pushing global resources to some 1.5 million ounces at a grade just under 2 g/t gold.
Salamis said Corcoesto was a “cheap acquisition for us at the end of the day.” Last year it paid Lundin $8 million to get 100-percent ownership of it.
Lundin had envisioned – and permitted – Corcoesto as a standalone heap leach project years back when the gold price didn’t look so nice. It never went beyond that stage. But Edgewater in its relatively short tenure has re-imagined Corcoesto and in a scoping study outlined it as a 100,000-ounce gold a year operation with a 10-year mine life.
In that scoping study Corcoesto was seen as an open pit/underground combo. A new order is now in store, however.
Salamis said that in a coming feasibility study, to be out sometime later this year, Corcoesto will fall firmly into the open pit category. “Now we’re thinking 6,000 tonnes per day…and circumventing the need to go underground,” Salamis said. The throughput rate is the same as before, but the open-pit dominance is a new direction for Edgewater enabled by drilling that helped show more near surface gold mineralization.
The upside to more open-pitting is obvious. It should be cheaper to operate as a gold mine. While at this point Salamis won’t go public by how much capital costs might drop in the feasibility study, he was willing to say that they most probably would. “It’s safe to say…the open pit capital cost will come down,” Salamis said. At last count total capital costs were pegged at C$135 million for an open-pit/underground operation.
The 100,000 ounce a year production rate over a 10-year mine life is still the general goal. It has been a sweet spot for Edgewater, and according to Salamis, it is a sweet spot in the junior sector in terms of funding. Financing wise, capital intensive hogs in the hands of pee-wee juniors can be tough sells. But on smaller projects, Salamis said banks seem more willing to break out the cheque book. Edgewater has made preliminary inquiries about debt and Salamis said, “The response from the banks has been quite surprising.” – as in positive.
The scenario Salamis and King envision is fairly typical: a debt package that would cover 70 percent of capital costs. Edgewater would then come in with 30-percent equity, funded in a number of possible ways. They said nothing is off the table for Edgewater’s contribution – gold stream, sale of a direct equity stake or financing on the markets. That said, with Edgewater’s shareprice in a slump along with so many other juniors, the latter option may well be hard to pull off – for now. However, Salamis said he would re-assess that potential once (or assuming if) feasibility and permitting are in place. To help it raise funds, Edgewater has brought on board a finance veteran, A.J. Ali, who is chief financial officer at Avanti Mining, which just signed a mandate letter for debt to the tune of $640 million.
Then there is permitting. A Eurozone mining project associated with the words open-pit may might sound like a fearsome risk. Particularly virulent opposition has been known to build against such projects, seen as pollutive pariahs, even if the truth is different. But Salamis and King sound confident in the case of Corcoesto. First, Salamis stated, “There is no visible opposition to us.” Local politicians and bureaucrats have signalled support, he said.
Further Salamis noted Galicia is no stranger to mining. There are open-pit quarries in the region, already, and in the case of Corcoesto there will be minimal impact on people living near the project. As Salamis put it: “No people to move, no cathedral to move, no town to move…that’s a huge advantage.” Indeed Corcoesto is in the midst of going for its environmental permit, and it got a boost in that regard from the regional government. There is a new category available for certain projects in Spain – strategic status – and Edgewater’s King said Corcoesto is getting this preferential treatment. What it does is ensure a permit comes to the top of the pile, so to speak.
“They have to give us special attention,” he said.
Salamis and King’s confidence on the permitting front also stems from progress in mine permitting country wide. “Few people realise that Spain is a resource rich country,” Salamis said, “and that 10 mines have been permitted in 10 years.” In addition, Salamis said underpinning support for Corcoesto is the fact that people in Galicia and across Spain are suffering from astronomically high-unemployment rates. People are “very, very, hungry for jobs,” he said.
If all goes according to plan – permits, feasibility and then funding wrapped up in short order – then construction on the Corcoesto gold project could begin mid-2013. Production might come as early as 2014. If it does, Salamis reckoned it will be a “great little money spinner.”
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