If the best place to find a new mine is right beside an existing one, then there may be few better places to look than in the vicinity of the Pueblo Viejo mine in central Dominican Republic.
It is a theory that Everton Resources Inc. (TSX: V.EVR, Stock Forum) is banking on as it prepares to crank up the drill rigs on its Ampliacion concession near the soon-to-be producing Pueblo Viejo mine, which is owned by Canadian gold mining giants Barrick Gold Corp. (TSX: T.ABX, Stock Forum) and (NYSE: ABX, Stock Forum) Goldcorp. (TSX: T.G, Stock Forum) and (NYSE: GG, Stock Forum).
Ottawa-based Everton has a basket of properties that are scattered around this bustling Caribbean Island. But in the next few months, the company will be focusing heavily on concessions that are located within spitting distance of the Barrick-operated Pueblo Viejo mine.
They include the 4,045-hectare Ampliacion concession, which is located to the west and north, and is held under an option agreement with Brigus Gold Corp. (TSX: T.BRD, Stock Forum) and (AMEX: BRD, Stock Forum), entitling Everton to earn a 70% interest.
Even by the standards of Barrick Gold, the world’s leading producer of the yellow metal, Pueblo Viejo is a very large operation indeed.
With capital costs forecast at $3.5 billion, the open pit mine is expected to start production early next year, churning out at least one million ounces of gold annually.
Expectations are that with 24 million ounces of gold reserves and 5 billion pounds of zinc already outlined, Pueblo Viejo will be in production for at least 25 years, providing jobs for roughly 4,000 during the construction phase and direct employment for roughly 1,000 Dominicans when operations begin.
Cash costs of between US$275 and US$300 an ounce suggest that the mine will be highly profitable with gold trading at US$1,408.70 an ounce on Friday.
When a Stockhouse reporter took a tour of this rural belt about 100 kilometres northwest of the capital city of Santo Domingo, Pueblo Viejo was a veritable hive of activity.
For its part, Everton is gearing up to spend about $4 million in the Dominican Republic this year.
Of that amount $3 million, will be used to fund a 20,000-metre deep drilling program on the Ampliacion concession.
The aim is to demonstrate that mineralized zones which will sustain the Barrick/Goldcorp operation extend across the border in sufficient quantities to interest either Barrick or another major mining company.
“All we have to do is show that we have an extension of the geology,’’ said Everton Chairman and chief executive officer Andre Audet.
A 50-year-old former investment banker with BMO Nesbitt Burns, Audet has been involved with a handful of junior companies, including Majescor Resources Inc. (TSX: V.MJX, Stock Forum), Adventure Gold Inc. (TSX: V.AGE, Stock Forum) and Mazorro Resources Inc. (TSX: V.MZO, Stock Forum).
But after previous forays in diamond and metals exploration in Canada, Audet has decided to concentrate his efforts on the Dominican Republic, an island that is enjoying something of a revival of its centuries-old mining sector.
In the Central Cordillera where Pueblo Viejo is located, Xstrata Nickel recently restarted its (Falconbridge Dominicana S.A.) ferronickel complex after a two-and-a-half year hiatus caused by falling nickel prices in 2008.
While ramping up to an initial production rate of 14,000 tonnes-per-day (50% of capacity), Xstrata is also bidding to reduce its energy costs by switching from bunker oil to natural gas.
Meanwhile, Chinese metal interests have taken a foothold in the Dominican Republic by acquiring control of the Cerro de Maimon copper-gold mine which is located in the same mining district as Falcondo and Pueblo Viejo, about four kilometers east of the town of Maimon (population 25,000).
Globestar Mining Corp., which owns Cerro de Maimon was recently swallowed by Australian miner Perilya Ltd., which in turn is 52%-owned by Chinese non-ferrous metals producer Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd.
Mining activity within the boundaries of the Pueblo Viejo boundary dates back to 1505. During a 24-year period after the mine was acquired by the Dominican Central Bank in 1979, it produced 5.3 million ounces of gold and 24.4 million ounces of silver.
“This was the easy-to-process oxide ore,’’ said Barrick spokesman Andy Lloyd.
But Audet’s enthusiasm for the region is driven in part by the progress that has been made since Barrick got control of the operation via its acquisition of the former Placer Dome Inc. in 2006.
In the last four years, the Toronto-based mining giant has added 10 million ounces of gold reserves, marking an increase of 77%. It has also added circuits that aim to recover about three billion pounds of zinc from the ore.
When a Stockhouse reporter donned a hard hat and drove past the new processing facilities and open pits, the touring party had no trouble seeing the boundaries of Everton’s Ampliacion project which lies about 300 metres from one of the Pueblo Viejo open pits.
At the time of writing, Everton is betting that a geological structure known as a lithocap is concealing epithermal-type mineralization on the Ampliacion property that is similar to Pueblo Viejo.
The junior will test that theory by undertaking a 20,000-metre drill program. It will be performed in two phases and probe to a vertical depth of 1,200 metres.
“The indications are that we have similar mineralization, but at depth,’’ said Audet, who is hoping to have four drills running on the property by the end of April.
He said the purpose is either to prove the extension of Pueblo Viejo or show that Everton resources are a mirror to that of neighbours Barrick and Goldcorp.
On Friday, Everton shares rose 7% to 37 cents, giving the junior a market cap of $38.4 million, based on 104 million shares outstanding. The stock trades in a range of 18.5 cents and 41 cents.
With about $2.5 million in cash, the company has sufficient funds to carry out its programs this year. Audet said the company can also generate exploration funds from the sale of assets, including about six million shares of Focus Metals Inc. (TSX: V.FMS, Stock Forum), which Everton received as payment for the sale of properties in Quebec.
Prior to venturing onto Barrick ground, Stockhouse took a bumpy truck ride through agricultural ground to the nearby La Lechoza target where Audet and exploration manager Hugo Dominguez are hoping to outline a National Instrument 43-101 compliant polymetallic resource.
La Lechoza is a developing volcanogenic massive sulphides target, which is also located on the Ampliacion concession. In January, the company said it planned to continue drilling at La Lechoza and test at least eight new targets in the next four months.