W A W O R L D G O L D S T N A L Y. The Colombian Gold Mining Industry. World Gold Analyst Special Report O R L D G O L D

Transcription

1 W A O R L D N A L Y G O L D S T Colombia The Colombian Gold Mining Industry World Gold Analyst Special Report W O R L D G O L D

2 CB Gold A Golden Opportunity in the Vetas Mining District COLOMBIA CB Gold is an emerging gold and silver explorer in the 20M+ Oz district of California Vetas. Currently drilling around and under the existing high grade mines of Vetas. TSX.V-CBG

3 The Colombian Gold Mining Industry World Gold Analyst Special Report W O R L D G O L D

4 2 W O R L D G O L D A N A L Y S T GFMS World Gold would like to thank the following sponsors for supporting this project: SunWard Resources

5 W O R L D G O L D A N A L Y S T 3 Contents Editor: Paul Burton ACSM, MSc, MBA Contributors & Analysts: Paul Wheeler, Roger Ellis, Julian Emery, Oliver Heathman Design & Sub-Editor: Gavin Khanna, gavink@mac.com Published by: GFMS World Gold Ltd Hedges House Regent Street London W1B 4JE. UK Tel: +44 (0) Fax: +44 (0) paul.burton@gfmsworldgold.com Marketing & Subscriptions: emma.hastings@gfms.co.uk Printing: Latimer Trend & Company Ltd., Plymouth GFMS World Gold Ltd 2011 World Gold Analyst is an independent publication committed to providing subscribers with factual information on selected publicly traded companies, business and economics. World Gold Analyst, its publisher, editor and writers do not own or trade in shares of any of the companies mentioned. All statements and expressions are the sole opinions of the editor and are subject to change without notice. A profile, description, or other mention of a company in the newsletter is neither an offer nor solicitation to buy or sell any securities mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy or completeness thereof, nor the statements made herein. World Gold Analyst shall have no liability for any representations (express or implied) contained in, or for any omissions from, this presentation or any other written or oral communication transmitted to the recipient whether or not World Gold Analyst knew or should have known of any such errors or omissions or was responsible for or participated in its inclusion in or omission from the publication. World Gold Analyst has full editorial control of this publication and all other information and analysis it prepares in connection with the companies mentioned herein. The profiles, critiques, and other editorial content of the World Gold Analyst may contain forward-looking statements relating to the expected capabilities of the companies mentioned herein. The reader should verify all claims and do their own due diligence before investing in any securities mentioned. Investing in securities is speculative and carries a high degree of risk. The information found in this profile is protected by copyright laws and may not be copied, or reproduced in any way without the expressed, written consent of the editors of World Gold Analyst. GFMS World Gold Ltd is authorised and regulated by the Financial Services Authority, UK. The research in this report is intended for professional advisers and institutional investors. It is not intended for retail investors.. Chapter 1 Introduction 5 Chapter 2 Overview 7 Chapter 3 The Geological Overview of Colombia 19 Company Reports 23 AngloGold Ashanti Ltd 25 Gran Colombia Gold Corp 33 Greystar Resources Ltd 41 Batero Gold Corp 49 CB Gold Inc 51 Colombia Crest Gold Corp 55 Colombian Mines Corp 57 Continental Gold Ltd 61 Galway Resources Ltd 65 Medoro Resources Ltd 69 Mercer Gold Corp 73 Miranda Gold Corp 75 Red Rock Resources plc 77 Sunward Resources Ltd 79 Ventana Gold Corp 83 Index 87 W O R L D G O L D

6 FOLLOW THE TREND... find out who s hitting the seam with World Gold Analyst The Gold Mining Industry s Leading Independent Information Source and Investment Aid For more information paul.burton@gfmsworldgold.com W O R L D G O L D

7 WO R L D G O L D A N A L Y S T C O L OM B I A Chapter 1 Introduction This report presents a review of current gold exploration and development initiatives in Colombia, one of the most active exploration regions on earth. Fifteen mining and exploration companies supported this study and their projects are discussed in depth in individual reports following the body of the report. We are grateful all their support on this project. In recent years, Colombia has swapped its somewhat tarnished image for a golden gleam as those in the mining industry can testament to. It has become one of the exploration hotspots for gold exploration and development worldwide and seen many millions of dollars spent as a raft of gold exploration companies have flocked in through Bogata international airport. Approach Data collected from company presentations and discussions was augmented by published data in the form of press releases, financial reports, presentations and technical reports, the latter, in the form of NI documents, were used extensively as the main source of independent information. This gold rush of foreign companies into the country started as a trickle in 1995 with Greystar Resources discovering the Angostura deposit; gained fresh impetus in 2003 with AngloGold Ashanti entering and making a major discovery at La Colosa, and soared to a spectacular peak in late 2010 with the offer from EBX to acquire Ventana Gold that valued the company at US$1.5 billion. The report was written by a team of two analysts and edited by Paul Burton ACSM, MSc, MBA. The sponsored reports were written independently and reviewed by the sponsoring companies for factual accuracy only. All Investment Comments were made by GFMS World Gold. The aim of this study is to present the investment community with a review of a selection of the exploration and development activity being undertaken on a company-by-company basis, while at the same time providing an opportunity for a number of exploration companies to promote the merits of their projects to investors. D L D W GO L D OR L L DGO R L D DGO L O D T W WO R G WO R L S T O L Y A N A L Y S Y S T L YASN A LD A N A A N A L T G F M M D C O G O L R L D S WO ldgold.com swor rldgold.com Colombia Extract from Onta rio/q a 2010 West Afric 2011 bian The Colom ning Gold Mi Industry 2010 frica Report lyst Special WestWoA rld Gold Ana Vol 11 uebec 2009 No 2 June World Gold The Mex ic Mining an Gold & Silv Industri er es 2011 ldgold.com ; $400/oz ase ough US cre costs thr sting a 2% de w: Cash s the by po Q1 Revie bucks trend e Mines remain Gold Extract agl ck from WoNewm on t rri o-e Ba nic r; rld Gol ; Ag stslyst Ana cer, both produce h dco cascial inspe est cost gest gold produ Rep s low ort industry rld s lar basis. s the wo d 12-month remain an arterly on a qu ldgold.co Mau /Quebe dore c 2009 Ontario m Eye London London: comes to world s ing the Silver giant to ded in attract producer has succee y silver ets ny of results & Mark largest primar Mexican compa Review Metals und in s, t as ires playgro its marke in six month lists; Billiona at Polyus and but up 13% ise. rer Fresnillo. struggles Gold volatile stocks fail to capital es Sukari Gold Explo gold Russia: Power min upgrad World whereas Centa etal; Polym Ghanaian t fears as w the curren Gold Coast intimates that ter Revie may be nment 2008 Quar h regime Gover Marc taxation on PMI analysis royalty and but Keegan and ny ent and up, of comm quarter joins Harmo tightened rest pages. Newc silver the March top gold press ahead adds 30 Moz results for world s Chinese Orko y of the earnings, in PNG; for sevent Gold boosts Milligan t ction, costs, Sino projec Produ Mt ces, equivalent; to build, resour producers. Terrane capitalisation reserves; market Mine. update. s Producer new section : and Chile Argentina er Focus: Copp te More Than two elonga the and Chile, ours, are Argentina can neighb copper South Ameri known for their t, but better gold outpu perhaps Moz) than their 40 t (1.4 production ces around there are each produ year. Moreover being each of gold ation dollars gold of explor t of millions in pursui the region spent in its. depos d looks and silver Des Cliffor l Focus activity In this Specia exploration the of companies foreign at some taken by ce basis. being under ce-by-provin on a provin World Gold ANDINA al Report Analyst Speci swor swor London L D WO R D GO L Mexico 2008 Silver D WO R L GO L D WO R L DGO L D A N A L Y S T WO R L D GO L D Analyst Spe cial Report WO R L D GO L D 5

8 6 W O R L D G O L D A N A L Y S T Scope Chapter 2 is an Executive Summary detailing the status of the gold industry in Colombia and presents a discussion of the economic, political and mineral law environment. The chapter concludes with some observations about the distribution of exploration efforts around the country and the status of project development. The status of sponsor company projects is presented in a summary table at the end of the section. Projects are categorised by World Gold Analyst s 6-D notation, which identifies at which stage in the mining life cycle a particular project. The model, in order of decreasing risk, is shown below. 6-D Model Description Detection Discovery Definition Design Development Depleting Reconnaissance mapping, geochemical and geophysical work underway Mineralised targets identified and drilling underway Deposit is being defined through a resource estimate and /or a pre-feasibility study Feasibility study underway Construction decision made Mine is producing Chapter 3 describes gold geology of Colombia. Finally, there are detailed individual reports on the fifteen companies who were involved in sponsoring this major report. The Editor of Mines in 1975 as a mining engineer and subsequently obtained an MSc in Mining Engineering and an MBA, from the University of the Witwatersrand, South Africa. World Gold Analyst World Gold Analyst has its roots back in the 1950s when its predecessor, the Mining Journal Gold Service, first started analysing and providing commentary on South African gold shares. In the 1970s, a monthly newsletter covering the activities of gold companies around the world at all stages was added to complement the quarterly stock analysis. In 1998, the current editor redesigned and rebranded the publications under the banner of World Gold. In 2002, after a management buyout, World Gold became an independent publication, and in 2006, the name was changed to World Gold Analyst to reflect a more analytical and selective approach to reporting. In 2008, World Gold Analyst formed a joint venture with GFMS, the world s foremost precious metals consultancy, to continue to publish the quarterly publication as well as the series of regional investment reports. The new joint venture company is called GFMS World Gold World Gold Analyst s long history of sound reporting and independent analysis has given it a reputation as a trusted and expert commentator of all aspects of the gold industry. The publications are read throughout the mining investment world and its subscriber base includes mining analysts, fund managers, private investors and mining company executives. Based in London, Paul Burton is Editor of World Gold Analyst, a position he has held for over fifteen years. Before joining the Mining Journal in 1996, Paul spent over twenty years in various positions within the mining industry. After initially working as a mining engineer he spent much of his career in mineral economics and minerals marketing in South Africa. Paul graduated from the Camborne School

9 W O R L D G O L D A N A L Y S T 7 Chapter 2 Overview Pablo Escobar was Colombia s most powerful drug baron. Here, his pet hippo tells the paradoxical story of the country s struggle with drug trafficking. BBC website, Jan It was not so long ago that Colombia was famous (or rather infamous) for its drugs trade and terrorist attacks on oil pipelines. The rather bizarre BBC headline above is indicative of how synonymous Colombia and drugs have been viewed, although the reference to a pet hippo brings a level of absurdity that helps put the situation into perspective. In recent years, Colombia has swapped its somewhat tarnished image for a golden gleam as those in the mining industry can attest to. It has become one of the exploration hotspots for gold exploration and development worldwide and has seen many millions of dollars of inward investment as a raft of gold exploration companies have flocked in through Bogata international airport. This gold rush of foreign companies into the country started as a trickle in 1995 with Greystar Resources discovering the Angostura deposit; gained fresh impetus in 2003 with AngloGold Ashanti entering and making a major discovery at La Colosa, and soared to a spectacular peak in late 2010 with the offer from EBX to acquire Ventana Gold that valued the company at US$1.5 billion or over US$350/oz of Inferred resource in the ground. In this chapter, we discuss why foreign gold companies have been attracted to the country and summarise the findings of this report into the activities of fifteen of the most important players there. Colombian Gold Production Colombia has a long history of gold production that stretches all the way back to 1500s and, in fact, up until 1937, Colombia was the largest gold producer in the Americas. According to figures from GFMS, in the last 10 years production has edged up from 21 t in 2000 to 27 t in In 2010, GFMS s estimate of gold production in Colombia was 32 t (just over 1 Moz), making it 19th in the world and 5th in South America. Much of the country s gold production comes from informal, often illegal mining. The largest formal producer is Mineros SA, which mainly extracts gold from alluvial dredging operations. In 2010, the company produced around 99 koz of gold, up almost 10% on the previous year. In 2009, the company sold its interest in small hard rock producer, National Mining Company, to Medoro Resources Inc. Mineros SA recently opened the La Ye mine, which is projected to add about 30 koz to 2011 production of 120 koz. The company will invest around US$25 million in 2011 in exploration in seven projects in the departments of Antioquia, Caldas and Tolima. Another of the country s principal mines, Frontino, was acquired in 2010 by Gran Colombia Gold, which is listed on the TSX. The three Gran Colombia underground mines produced 58 koz of gold in Gran Colombia restarted production in early September 2010, with an initial aim of restoring production to the 100 koz/y level. The minerals industry in Colombia Although gold may have grabbed many of the headlines in the past year or so, the country is rich in natural resources and has an established minerals mining industry. It is a major producer of emeralds, platinum, silver and coal and possesses substantial oil reserves. Colombia is the world s leading producer of emeralds, and South America s second largest gold producer and only platinum producer. Colombia also boasts the largest coal reserves, second largest oil, and third largest natural gas reserves in South America. The coal producer, Cerrejón, demonstrates the commitment of some of the world s largest mining company. This private company is a joint venture in which BHP Billiton plc, Anglo American plc and Xstrata Coal each own a one third stake.

10 8 W O R L D G O L D A N A L Y S T Colombia has a skilled workforce and a mining heritage Located in North-East Colombia, it produces high quality thermal coal favoured by the US power generation market due to its low ash content, low sulphur dioxide emissions profile and high calorific value. BHP Billiton is also invested in base metals in the country, through its Cerro Matoso nickel laterite mine. The Attractiveness of Colombia In this section we consider the factors that make Colombia a favourite destination for exploration dollars and the recipient of US$3.24 billion of foreign direct investment in mining in Stable government Politics of Colombia take place in a framework of a presidential representative democratic republic, whereby the President of Colombia is both head of state and head of government, and of a multiparty system. Executive power is exercised by the government. Legislative power is vested in both the government and the two chambers of congress, the Senate of Colombia and the House of Representatives of Colombia. The Judiciary is independent of the executive and the legislature. In 2010, the U Party was elected for its third consecutive term of office, with President Santos newly elected to continue the work of his predecessor President Alvaro Uribe. Business Environment The business climate in Colombia is stable and friendly to foreign investment. The country is classed as one of the emerging countries of the world and is a member of the new BRIC economies, the so-called CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa). During the past five years, the Colombian economy grew by 4% per year. In 2009, Colombia s GDP registered an increase of 0.4%, a positive growth during global recession. As the oldest and most stable democracy in South America, Colombia has never defaulted on a foreign loan or expropriated foreign assets. In the 2011 Doing Business Report, The World Bank ranked Colombia as the third most business friendly country in Latin America and the first country in the region that best protects investors and its rank fifth worldwide. Educated workforce Colombia s population of 43 million has a welleducated and growing middle class. According to the IMD, Colombia s labour regulations hinder business activities in Latin America the least, the lowest Index on rigidity of employment in Latin

11 W O R L D G O L D A N A L Y S T 9 America and the second most qualified labour available in the region. Personal safety The country has witnessed a huge improvement in personal safety since President Alvaro Uribe s election in Geological prospectivity and mining culture The country has good gold geology with numerous occurrences of epithermal and coppergold porphyries. It has a long mining history and a modern Mining Act promulgated in 2001 with 30-year renewable mining concessions. Geological Context Colombia s geological history has been controlled by its tectonic location, on the northern edge of the subduction boundary between the Nazca oceanic plate and the South American continental plate, with the Caribbean plate lying close to the north. The western third of Colombia is therefore underlain by accreted oceanic terranes; while the bulk of the country sits mainly on continental, cratonic terrane of the Guiana Shield. A long geological history of subduction has given rise to numerous and extensive phases of magmatic intrusion and regional deformation and metamorphism. Major, crustal- scale faulting is prevalent throughout the north and western portions of the country, with regional faults breaking the continental plate into a series of tectonic blocks; most notably the North Andes block and the Maracaibo Block. Metallogenic belts Four major gold belts or districts are recognised in the northern Colombian Andes, trending north to north-easterly. From west to east, these are: Choco belt, Middle Cauca belt, Segovia belt and the California-Angostura district. The Choco belt is a zone of predominantly placer deposits formed from erosion of the epithermal and porphyry related gold mineralisation in the Western Cordillera. The most significant Colombian placer deposits occur, however, to the east of this belt, along the Rio Nechi river system. The Middle Cauca belt is characterised by porphyry gold deposits, most significantly La Colosa (AngloGold Ashanti); although associated intermediate epithermal gold deposits also occur, as at Marmota (Medoro Resources). Mineralisation is closely associated with finegrained, porphyritic diorite and dacite stocks of Miocene age (7-26 million years old). Oxidised, pluton-related gold deposits define the Segovia belt in the northern part of the Central Cordillera, although a significant proportion of historic gold production has also come from placers derived from these deposits. The late Jurassic age (c.150 million years old) Segovia batholith is of calc-alkaline composition, dominated by hornblende diorite and tonalite intrusives. In the California-Angostura district, a number of high and intermediate -sulphidation epithermal deposits occur in the Santander Massif of the Eastern Cordillera. The northeast trending Rio La Baja fault zone is considered to be a splay of the crustal-scale Rio Cucutilla fault and is the principal control on alteration and mineralisation at Angostura (Greystar), La Bodega (Ventana) and Norte de Santander (CB Gold). Mineralisation styles Porphyry gold, porphyry copper- gold, highand intermediate-sulphidation epithermal and placer gold deposits are all significant types of mineral deposits in Colombia; as are oxidised pluton-related vein deposits. As a group, the term oxidised, pluton-related deposits includes porphyry and high-sulphidation mineralisation, but it also encompasses skarn, manto and mesothermal vein styles of mineralisation that are spatially, if not temporally, related to intermediate-felsic (calcalkaline) porphyritic intrusions Unlike some of its South American neighbours to the south, Colombia has yet to fully explore its porphyry potential. There is strong geological evidence that Colombia may host porphyry gold/ copper deposits similar in grade and size to those found in Chile and Peru Fraser Institute findings One of the most authoritative reports on mining investment moods each year is conducted by Canada s Fraser Institute. The Fraser Institute surveys companies worldwide and compiles a Policy Potential Index, which, as the Institute explains, serves as a report card to governments on how attractive their policies are from the

12 10 WO R L D G O L D A N A L Y S T Colombian Gold Belts C O L OM B I A point of view of an exploration manager. The Policy Potential Index (PPI) is a composite Miocene belt in Colombia s central index that measures the effects on exploration cordillera policies including uncertainty of government concerning the administration, interpretation, Major gold deposits include La andcolosa enforcement of existing regulations; & Marmato environmental regulations; regulatory duplication only just andcountrywide inconsistencies;exploration taxation; uncertainty concerning native land claims and protected beginning areas; infrastructure; socioeconomic agreements; political stability; labour issues; geological database; and security. N PANAMA Segovia Belt VENEZUELA Buriticá Marmato Antioquia Batholith Choco Belt COLOMBIA Middle Cauca Belt As the Institute notes in its introduction, In today s globally competitive economy where mining companies may be examining properties located on different continents, a region s policy climate has taken on increased importance in attracting and winning investment. La Colosa Western edge of the craton METALLOGENIC BELT AGE Jurassic Late Cretaceous Early Tertiary Eocene (?) Miocene DEPOSIT TYPE Porphyry Gold Intermediate Sulfidation Oxidized Pluton Related In the 2010/11 survey, released at the beginning of March 2011, in the composite index scoring, Colombia came 40 th out of 72 countries, and Kilometres the third most attractive country in Latin America ECUADOR (behind Chile, which ranked 7th worldwide, and The main metallogenic belts of Colombia (Courtesy of Continental Gold) 8 Mexico). This marks a significant improvement on 2009 when the country was ranked 48th worldwide and it is noteworthy that it has overtaken such notables as Peru and Brazil. INGEOMINAS (Instituto Colombiano de Geología y Minería): The MME has delegated Breaking down the PPI into its component factors the administration of mineral resources to reveals some interesting observations. INGEOMINAS and some Departmental The Current Mineral Potential Index is based Mining Delegations. INGEOMINAS has two on respondents answers to the question about departments, the Geological Survey (Servcio whether or not a jurisdiction s mineral potential Geológico), and the Mines Department under the current policy environment encourages (Servicio Minero) responsible for all mining or discourages exploration. Colombia scored high contracts except where responsibility for 16th out of 79. the administration has been passed to the Departmental Mining Delegations. The area where Colombia s case is not seen as strong concerns the security situation (includes Departmental Mining Delegations physical security due to the threat of attack by (Gobernaciones Delegadas). It administers terrorists, criminals, guerrilla groups, etc.), where mining contracts in the Departments with 82% of respondents stated that it was a mild, the most mining activity, including Caldas strong deterrent or total deterrent. and Antioquia. Mining Legislation Mining authorities The main mining authorities in Colombia are: Ministry of Mines and Energy (Ministerio de Minas y Energia, MME): The highest mining authority in the country. Mining Energy Planning Unit (Unidad de Planeación Minero Energética, UPME): Provides technical advice to the MME regarding planning for the development of the mining and energy sector and maintains the System of Colombian Mining Information (Sistema de Información Minero Colombiano, SIMCO).

13 W O R L D G O L D A N A L Y S T 11 Mining Law Mining in Colombia is governed by Mining Law No 685, adopted in Under this Mining Law all mineral resources belong to the state and can be explored and exploited by means of concession contracts granted by the state. There is a single type of concession contract covering exploration, construction, and exploitation, which is valid for 30 years. Up until 2010, this could be extended for a further 30 years but the passing of amendments in Law 1382 of 2010, the extension period is now reduced to 20 years. The concession contract has three phases: Exploration Phase. This starts once the contract is registered in the National Mining Registry (Registro Minero Nacional, RMN) and is valid for three years, with an option to extend for eight years (increased from two years in 2010). That to ensure equal access and transparency to stakeholders, through Decree 2345 of June 2008, the Government adopted the technology platform called the Colombian mining cadastre as one of the mechanisms for submitting proposals concession contracts by mining proponents, which has been operating since then. In February 2011, the MME passed a resolution temporarily suspending cadastre applications for six months while it audits and updates the database. Construction Phase. Permission under this phase is valid for three years, with a 1-year optional extension. An Environmental Licence is issued on approval of Environmental Impact Study. Exploitation Phase. Valid for 30 years minus the time taken in the exploration and construction phases, which means that it is 21 to 24 years, and is renewable for 20 years. Annual Environmental Mining Insurance Policy required. Royalty payments to the state are 4% of gross value at the mine output for gold and silver, and 5% for copper (Law 141 of 1994 modified by Law 756 of 2002). The Mining Law 685 of 2001 requires an Environmental Mining Insurance Policy for each concession contract. In addition, the Law states that a Social and Environmental Impact Study (EIS) has to be presented at the end of the Exploration Phase if the concession is to proceed to the Construction Phase. Review of gold activity in Colombia In this report we describe in some detail the activities of fifteen of the most prominent foreign players in Colombia s gold mining industry. These range across the spectrum of our 6D model, from those that are already in production, such as Gran Colombia Gold and Red Rock Resources, to those that are at the detection stage, like Miranda Gold. Also, this report considers some of the very largest companies, such as AngloGold Ashanti with a market capitalisation on tens of billions, to small cap companies such as Colombian Mines and Mercer Gold. Colombian Gold Rush As mentioned earlier, the gold rush of foreign companies into the country started as a trickle in 1995 with Greystar Resources discovering the Angostura deposit but became a fullyfledged rush in 2009 and 2010 with a number of new entrants.the timeline of the rush is shown below Greystar 2003 Anglogold 2006 Sunward, Ventana, Colombia Mines, Continental 2009 Galway, Medoro, Miranda 2010 Batero, Seafield, C8 Gold, Eaglecrest, Gran Colombia, Mercer, Red Rock 6D Model Status The 6D model of Colombia s gold industry exhibits the classic resource pyramid with many projects at the early stage and fewer making though the rigorous process to the Development stage. The diagrams on the next page show the 6D model triangles, in terms of number of projects and then in terms of the companies themselves.

14 12 W O R L D G O L D A N A L Y S T The mountain at Marmato, which hosts a 6.6 Moz resource on one side and an earlier stage exploration project on the other side. depleting Gran Colombia Red Rock design Greystar definition Anglogold, Batero, Continental, Medoro, Sunward, Ventana discovery CB Gold, Colombian Mines, Eaglecrest, Mercer, Galway detection Miranda

15 W O R L D G O L D A N A L Y S T 13 Definition projects One notable observation from this report is the large size of gold resources that those companies that advanced to the Definition stage have been able to delineate. The following chart shows total resources, all categories, for the main projects in Colombia Silver Gold La Colosa Angostura Marmato La Bodega Titiribi Titribi The only Design project included in this report is Greystar Resources Angostura project, more of which later. In the Definition phase, as can be seen in the chart above, there are a number of projects with significant resources. However, there is only one project which has undergone an independent evaluation and that is the La Bodega project, until recently owned by Ventana Gold, which was the subject of the recent takeover by EBX (see next section). In November 2010, Ventana published a scoping study based on an Inferred resource containing 3.5 Moz gold, 19 Moz of silver and 85 Mlb of copper. The scoping study assumes a capital cost of US$297 million for a mine life of 14 years at a production rate of up to 7.5 kt/d, with annual production of 347 koz/y AuEq for the first 6 years, at a cash cost of US$322/oz gold net of by-product silver and copper. Recent events In recent months, two companies whose core activities are focussed in Colombia, have hit the headlines and raised the profile of gold in Colombia. One event reinforces the attractiveness and prospectivity of gold in Colombia, but unfortunately the other may have rung certain alarm bells with international investors. The first event involves Ventana Gold. In mid- November, the EBX Group, already a 20% shareholder in Ventana, made an unsolicited, all-cash offer for the rest of the company at C$12.63/share, which represented a 30% premium over Ventana`s 30-day volume-weighted average trading price and valued the company at C$1.3 billion (C$1.5 billion on a fully diluted basis). In February 2011, EBX increased its offer to C$13.06/share in cash and this was accepted by shareholders. This acquisition highlighted the value that could be attributed to gold resources in Colombia and excited management of those other companies exploring in the vicinity of Ventana s La Bodega project with its 3.5 Moz gold resource. However, any excitement that neighbour Greystar Resources may have experienced would have been short-lived as the completion of the acquisition of Ventana coincided with an acknowledgement by Greystar that it would be very difficult to progress its open pit plan to exploit the almost 9 Moz of gold resources at its Angostura project. As envisaged as an open pit, Angostura contains one of the largest resources yet defined in Colombia and could support one of the world s largest gold mining operations, according to the pre-feasibility study. However, the project has encountered local opposition to an open pit mine, ostensibly on concerns over mining within the high-altitude PARAMO ecosystem. In mid-march, the company released an alternative underground plan, which is very much a sub-optimal plan for exploitation of the in-situ resources but is a serious alternative, which the company has clearly considered for some time as its fallback plan. It could still result in a long term profitable gold mine at Angostura. As Greystar continues to try to resolve matters concerning the opposition to the open pit plan, and progresses its underground plan, the other international companies developing projects within Colombia will, no doubt, be following events with great interest.

16 14 W O R L D G O L D A N A L Y S T The proximity of the Greystar, Ventana and Galway properties suggest that some rationalisation of this camp is on the cards The future The gold mining industry worldwide lacks good projects and quality resources. So, when a country such as Colombia opens up for business and exploration companies start to define world-class resources, the major players in the industry sit up and take note. The successful acquisition of Ventana Gold may be the first salvo in a stream of M&A activity. Certainly, in the short term there may well be some rationalisation and consolidation of the concession areas around the La Bodega project. In addition to the EBX property, Galway Resources is next door and CB Gold s properties are nearby in the California-Vetas locality. With uncertainty surrounding Greystar s project there may be a solution to exploitation of Angostura through cooperation in the area, either through a joint venture arrangement with its neighbours or through the amalgamation of properties and companies. Further south, in the Mid-Cauca gold belt, there is a situation where two companies Medoro Resources and Mercer Gold are exploring the same geological deposit either side of an artificial property boundary down the middle of a mountain. There will surely be a rationalisation here in future. Concluding Remarks Summing up the potential for investment in gold in Colombia: The country: Has a good investment climate Is highly prospective and underexplored Is Elephant country for gold deposits Has some established projects with large resources which are undervalued Is host to many foreign explorers at early stage getting good results Has investment opportunities at all 6D levels References: 1 Batero Technical report, Christopher Baldys & Darren Anderson, December 14, 2009; Guayabales Project Technical Report, Dean Turner, Exploration Geotechnologies Inc, June 17, 2010.

17 W O R L D G O L D A N A L Y S T 15 COMPANY SUMMARY Company Project 6D Status AngloGold Ashanti Ltd Gramalote Definition La Colosa Definition Quebradona Discovery Batero Gold Corp Batero-Quinchia Definition CB Gold Inc Vetas Discovery Norte de Santander Discovery Colombian Mines Corp Yarumalito Discovery El Dovio Detection Rio Negro Detection Cerro de Cobre Detection Anori Detection Venecia Detection Nus Detection Colombia Crest Gold Corp Fredonia Discovery Continental Gold Ltd Buritica Definition Berlin Discovery Dominical Detection Dojura JV Detection Santander Detection Frontino Detection Galway Resources Ltd California Definition Vetas Discovery Gran Colombia Gold Corp Gran Colombia Depleting San Pablo/La Bartola Discovery El Zancudo Depleting Mazamorras Detection Concepcion Detection Greystar Resources Ltd Angostura Design Los Laches Discovery Mongora Discovery La Plata Discovery Medoro Resources Ltd Marmato Definition Gran Colombia (5%) Depleting Mercer Gold Corp Guayabales Discovery Miranda Gold Corp Pavo Real Detection Cajamarca, Ibaque, Fresno Detection Santander Detection Anori Detection Red Rock Resources PLC El Limon Depleting Machuca Depleting Sunward Resources Ltd Titribi Definition Mande Norte-Murindo Discovery Ventana Gold Corp La Bodega Definition Cal Vetas Discovery

18 16 W O R L D G O L D A N A L Y S T Gold particles from sampling and metallurgical testwork at Continental Gold's Buritica project.

19 W O R L D G O L D A N A L Y S T 17 Comparative market data for Colombian companies (excludes AngloGold Ashanti and Ventana Gold) 800 Shares issued (millions) CMJ BAT MAD CLB MRGP GWy GSL CNL CBJ SWD MRS GCM RRR 1000 Mkt Cap (US$ million) MRGP CMJ CLB MAD GWy CBJ RRR SWD BAT GSL MRS GCM CNL 6-mth share performance (%) GSL CMJ MAD MRS MRGP CLB GCM GWy CNL SWD BAT CBJ RRR

20 18 W O R L D G O L D A N A L Y S T FOLLOW THE TREND... find out who s hitting the seam with World Gold Analyst The Gold Mining Industry s Leading Independent Information Source and Investment Aid For more information paul.burton@gfmsworldgold.com W O R L D G O L D

21 W O R L D G O L D A N A L Y S T 19 Chapter 3 Geological Overview of Colombia by Paul Wheeler, BSc ARSM Colombia s geological history has been controlled by its tectonic location, on the northern edge of the subduction boundary between the Nazca oceanic plate and the South American continental plate, with the Caribbean plate lying close to the north. Changes to the position of the subduction zone, formed as the Nazca plate slides under the South American plate, have resulted in a complex accretion of terranes onto the north western edge of the Guiana Shield which have been continually deformed to create the succession of mountain chains that define the northern portion of the Andes. Terrane accretion occurs when material is attached to one plate by the scraping of oceanic crustal rocks and sediments off another. The western third of Colombia is therefore underlain by accreted oceanic terranes; while the bulk of the country sits mainly on continental, cratonic terrane of the Guiana Shield. A long geological history of subduction has given rise to numerous and extensive phases of magmatic intrusion and regional deformation and metamorphism. Major, crustal-scale faulting is prevalent throughout the north and western portions of the country, with regional faults breaking the continental plate into a series of tectonic blocks; most notably the North Andes block and the Maracaibo Block. The Guiana Shield is made up of highly deformed and regionally metamorphosed granitic gneisses and granitoids, largely of early Proterozoic age (c million years old). Younger (mid- Palaeozoic) formations of dioritic gneiss are exposed in eastern Colombia. The age of the Shield terrane means that these basement rocks, which originally formed in the root zones (basement) of mountains, have been uplifted and deeply eroded to produce the current levels of exposure. The North Andes block can be subdivided into three major mountain ranges, the Cordillera Occidental (Western Cordillera), Cordillera Central (Central Cordillera) and the Cordillera Oriental (Eastern Cordillera). Where these three mountain ranges converge, near the border with Ecuador, they form the Colombian Massif (Nudo de Almaguer). The varying formation and age of each mountain range gives rise to distinct differences between them. They are divided from each other by deep intermontane basins; formed along major, crustal- scale fault zones; which are filled with a mix of siliclastic and calcareous sedimentary rocks, including erosional products from the surrounding mountains. The Central Cordillera is thought to have formed from the deposition, in the Lower Palaeozoic, of a volcano-sedimentary complex of rocks onto the basement complex of the north-western margin of the Guiana Shield. This package of rocks was subjected to orogenic uplift, deformation and regional metamorphism during the Caledonian orogeny (Mid-Palaeozoic) which represented the onset of the predominantly compressional tectonic regime which persists to this day. Subduction of the Nazca plate under the North Andes block, initiated in the Cretaceous, ultimately led to the accretion of the Western Cordillera terrane, thought to represent a former subduction-related island arc, in the Lower Tertiary. This accretion process was accompanied by development of the Romeral Fault Zone, the associated Cacau-Patia basin and extensive emplacement of calc-alkaline magmatic bodies. During the Andean orogeny the Western Cordillera was uplifted and intruded by further phases of calc-alkaline andesitic intrusive and volcanic activity. This volcanic activity has continued to the present day and is associated with porphyry copper and epithermal mineralisation throughout the Andes. The Eastern Cordillera is the most recently formed mountain range and developed towards the end of the Tertiary as a result of uplift and deformation of a pelagic, sedimentary dominated

22 20 W O R L D G O L D A N A L Y S T assemblage overlying Precambrian basement rocks. The Eastern Cordillera bifurcates at a point south of the Maracaibo Basin in north-eastern Colombia. The eastern branch maintains a northeast trend and continues as the Sierra de Merida in Venezuela, to the east of the Maracaibo Basin, while the western branch swings to the northwest. This western branch of the Cordillera includes the Santander Massif, which is comprised of Precambrian gneisses, schists, quartzites and migmatites of the Guyana Shield; with intermediate (diorite) to granitic intrusives emplaced during a period of uplift in the Jurassic-Triassic. Numerous younger porphyries are also found in the region. Within the Massif, regional faulting parallels the crustal-scale northwest trending Bucaramanga-Santa Marta fault and the northeast trending Rio Cucutilla fault zone. Tectonic reactivation has continued to the present and the intense faulting in the area has had a long and complex history. The emplacement of intrusives, with associated epithermal gold mineralisation, appears to have been controlled predominantly by these faults and north/northeast trending splays off them. Moving away from the Cordillera regions of Colombia, much of the south and east of the country is comprised of the undulating topography of the Llanos plains. These regions, and the lower-lying coastal regions, are underlain by Tertiary sediments, with extensive alluvial and colluvial deposits formed from the continued uplift and erosion of the Andes throughout the Quaternary. Metallogenic belts Four major gold belts or districts are recognised in the northern

23 W O R L D G O L D A N A L Y S T 21 Colombian Andes, trending north to northeasterly. From west to east, these are: Choco belt, Middle Cauca belt, Segovia belt and the California- Angostura district. The Choco belt is a zone of predominantly placer deposits formed from erosion of the epithermal and porphyry related gold mineralisation in the Western Cordillera. The most significant Colombian placer deposits occur, however, to the east of this belt, along the Rio Nechi river system. The Middle Cauca belt is characterised by porphyry gold deposits, most significantly La Colosa (AngloGold Ashanti); although associated intermediate epithermal gold deposits also occur, as at Marmota (Medoro Resources). Mineralisation is closely associated with fine-grained, porphyritic diorite and dacite stocks of Miocene age (7-26 million years old). Oxidised, pluton-related gold deposits define the Segovia belt in the northern part of the Central Cordillera, although a significant proportion of historic gold production has also come from placers derived from these deposits. The late Jurassic age (c.150 million years old) Segovia batholith is of calc-alkaline composition, dominated by hornblende diorite and tonalite intrusives. In the California-Angostura district, a number of high and intermediate-sulphidation epithermal deposits occur in the Santander Massif of the Eastern Cordillera. The northeast trending Rio La Baja fault zone is considered to be a splay of the crustal-scale Rio Cucutilla fault and is the principal control on alteration and mineralisation at Angostura (Greystar), La Bodega (Ventana) and Norte de Santander (CB Gold). Significant gold deposits also occur outside these main gold belts. The Colombian Massif, Western Cordillera and western flank of the Central Cordillera are host to porphyry copper and porphyry copper-molybdenum deposits, which contain variable quantities of by-product gold. Examples include the copper-gold porphyry deposits at Mazamorras (Gran Colombia) and Cerro Vetas (Sunward Resources). Mineral Deposit Types Porphyry gold; porphyry copper-gold; high-and intermediate-sulphidation epithermal ; and placer gold deposits are all significant types of mineral deposits in Colombia; as are oxidised plutonrelated vein deposits. As a group, the term oxidised, pluton-related deposits includes porphyry and high-sulphidation mineralisation; but it also encompasses skarn, manto and mesothermal vein styles of mineralisation that are spatially, if not temporally, related to intermediate-felsic (calc-alkaline) porphyritic intrusions. Although very similar in nature to porphyry style mineralisation, the mesothermal veins appear to be related to later tectonic and thermal re-mobilisation of gold-bearing fluids i.e. they post-date the main phases of pluton intrusion and cooling. In the Segovia district, gold mineralisation is associated with lead-zinc-copper sulphides in quartz-pyrite veins, vein swarms and stockworks that crosscut granodiorite-tonalite intrusives and other host rocks. Porphyry deposits are generally large tonnage, low- to medium-grade deposits in which primary ore minerals have a direct spatial and genetic relationship to felsic-intermediate porphyritic intrusions. Multiple intrusions are common, and the boundaries between magmatic phases are commonly brecciated. Mineralisation is predominantly structurally controlled; with styles varying from veins, sheeted vein systems and breccias to stockworks. In most deposits, the bulk of the mineralisation is hosted in stockworks and often extends into the host rocks into which the porphyritic stocks have been intruded. The mineralogy and hence metal content of porphyry deposits is diverse and reflects a wide spectrum of sub-types, although pyrite is typically the dominant sulphide mineral. In Colombia, gold may simply be a by-product of porphyry copper production but, more significantly, there are also porphyry gold deposits in which gold is the primary metal of interest. In porphyry copper-molybdenum-gold and copper-gold deposits the principal ore minerals are chalcopyrite, bornite, chalcocite, tennantite, molybdenite, native gold and electrum. In porphyry gold deposits native gold, electrum and gold-silver tellurides are the predominant ore minerals; chalcopyrite, bornite, and molybdenite may also be present but only in minor amounts. Hydrothermal alteration in porphyry systems is extensive and typically zoned on a deposit scale as well as around individual veins and fractures. Alteration assemblages are controlled both by

24 22 W O R L D G O L D A N A L Y S T the composition of the host rocks and by the composition of the mineralising fluids. In many porphyry deposits, the typical, deposit scale alteration zones consist of an inner potassic zone (characterised by K-feldspar ± biotite) and an outer zone of propylitic alteration (quartz-chloriteepidote). Zones of phyllic alteration (quartzsericite-pyrite) and argillic alteration (quartz-illitepyrite±kaolinite and other clays) may overprint parts of the potassic and propylitic zones. In a number of the porphyry gold deposits in Colombia s Middle Cauca belt, a significant role is played by early phases of sodic-calcic wall-rock alteration, which results in albite-actinolite-quartz assemblages. Epithermal gold deposits are commonly characterised as belonging to one of three subtypes: high sulphidation (alunite-kaolinite), intermediate sulphidation or low sulphidation (adularia-sericite). Although the latter type undoubtedly occurs in Colombia, most recorded epithermal deposits are of the high- or intermediate-sulphidation type. In high-sulphidation (HS) deposits, native gold and electrum are typically associated with pyrite, enargite, covellite, bornite and chalcocite. In addition to sulphosalts and base metal sulphides, tellurides and bismuthinite are present in some deposits. Total sulphide contents are generally higher in HS than intermediate-sulphidation deposits. Where base metals are present in HS deposits, the copper abundance can vary significantly (<0.1-5%), and typically dominates that of zinc. Principal gangue minerals include quartz ( vuggy silica ), alunite and barite. Many HS deposits are associated with large volumes of advanced argillic wallrock alteration, which formed pre-mineralisation through the mixing of acidic magmatic fluids and groundwater above mineralised porphyry intrusives. The variable nature of the host rocks produces variations in alteration assemblages and zoning patterns; but typically, the characteristic zoning ranges from proximal vuggy silica through advanced argillic assemblages (alunite-pyrophyllitedickite-kaolinite) to distal argillic alteration. High sulphidation epithermal gold-silver deposits predominate in the Santander Massif, Eastern Cordillera. Gold mineralisation occurs in sheeted, steeply-dipping quartz-pyrite veins, anastamosing, en echelon vein zones, and hydrothermal breccias hosted in pervasively sericitised and argillised intrusive rocks and basement gneiss. Mineralisation is characterised by the association of gold with silver, copper, arsenic, molybdenum, and tellurium. Economic gold grades are generally associated with the presence of disseminated, finegrained pyrite and chalcedonic or microcrystalline quartz, with variable amounts of alunite and vuggy, hydrothermal brecciation. Intermediate sulphidation deposits occur mainly in volcanic sequences of andesite to dacite composition within calc-alkaline volcanic arcs. Mineralisation occurs in veins,stockworks and breccias; repeated phases of brecciation are common. Gold is present as native metal and as tellurides, typically associated with banded or crustiform quartz, manganese-carbonates and adularia. Base metal sulphides and sulphosalts are often a significant component of the ore, mainly comprising chalcopyrite, tetrahedrite-tennatite, sphalerite and galena. Alteration minerals are zoned from proximal quartz-carbonate-adularia-illite through illitesmectite to distal propylitic alteration. Porphyry and epithermal deposit types can display spatial-temporal relationships between each other, with epithermal mineralisation stratigraphically above or over-printing porphyry style mineralisation. Across many of these different deposit types, supergene weathering and oxidation, often to considerable depths in permeable silicified rock, generates oxide gold mineralisation amenable to recovery by direct cyanide leaching in CIP/CIL or heap leach processing plants. Where basement complex rocks of the Guiana Shield are exposed there is the potential for greenstone-belt, orogenic type gold mineralisation to occur. Known deposits are poorly documented in Colombia, however, although placer gold in the southeast of the country may be derived from such sources. Placer deposits are widely distributed across Colombia, reflecting the widespread geographic location of primary gold deposits, and there are a large number of artisanal workings and small, mostly privately owned, mining companies. KEY REFERENCES INGEOMINAS Colombian Institute of Geology and Mining, (Government site, in Spanish). Sillitoe,R.H Major Gold Deposits and Belts of the North and South American Cordillera. Economic Geology,Vol.103, pp Society of Economic Geologists.