MEDELLIN, Colombia – The governmental unit that controls the pension-troubled yet historic and productive Frontino Mine in Colombia says it continues to negotiate for the sale of the property to a Canada mining company.
This week, concluding my second gold and energy tour of Colombia in five weeks, I have learned – on the record – that Medoro Resources (TSX: V.MRS, Stock Forum) and the liquidator of the Frontino Mine are nearing a $120 million or more transaction to rescue the property and the pensions of more than 1,000 miners.
“In order to refute the different versions about a hypothetical contractual relationship between (name deleted) and FRONTINO GOLD MINES LIMITED ELO, I inform you in my capacity as liquidator and legal representative designated by Colombia's Government by the Superintendencia de Sociedades, that those negotiations do not have any basis,” Luis Fernando Alvarado, a government-appointed negotiator for the bankruptcy trust that holds Frontino, tells me Friday.
The Frontino Mine produces about 25,000 ounces of gold each year yet is beset by cash shortages, illegal miners and thefts. The fate of at least two generations of Frontino miners has hung in the balance of the mine’s woes for much of the past 10 years or more.
“It’s a mess – one that we think we can fix,” Vicente Mendoza, VP of Exploration for Medoro, tells me as we tour the town and mines of El Marmato, another lush yet troubled gold district of which Medoro Resources owns partially and is in negotiations to control.
Frontino and Marmato are front and center in the Colombian government’s efforts to show the rest of Latin America that it can return to its status as No. 1 gold producer in that part of the world – perhaps as soon as the year 2020.
“Frontino and Marmato are toxic in terms of pollution, they are beset by generations of illegal mining and they have generations of families that refuse to move away from their homes,” Robert Carrington, a Nevada geologist and longtime Colombia operator, tells me. “And there is the pension bankruptcy, one of the last black eyes for a Colombia president with a 97% approval rating.”
Mr. Carrington, president of Colombia MinesCorp. (TSX: V.CMJ, Stock Forum), continues (as we tour the property of Titiribi controlled by legendary European and South American mine operator Georges Juilland): “But Marmato and Frontino also are the two properties in the country that are most likely each to produce several hundred thousand ounces of gold per year, or more,” says Carrington, who has, as have I, seen the properties and studied them.
The liquidator for Frontino Mine tells me Friday (today) that the council of assessors appointed by President Alvaro Uribe’s government, plus the Superintendencia de Socidades (as a judge) and the Ministry of Mines and Energy “are developing some negotiation with Medoro Resources, who has proposed acquiring all enterprise actives in conditions that we are putting in a promise to purchase and sale contract that we are going to celebrate soon.” This once again is Luis Fernando Alvarado speaking with me today (Friday.)
The breaking news on the Colombia front comes in response to assertions by a separate Vancouver company, whose name I have blocked out above, related to what the company says is an agreed contract to “manage” the mine in exchange for 5% of Frontino’s production. (I have blocked out the name of the separate company at present to allow it to demonstrate its contract claim, which the company made to me after reading the most recent issue of Ticker Trax, a subscriber service distributed by Stockhouse.)
Says Mr. Fernando Alvarado, “Another version about other negotiations doesn't have any value and recognition.” Mr. Alvarado’s statement is rare in its directness and velocity. His information as the negotiator for Frontino Mine matches what I have gathered in my most recent three visits to Medoro’s operations at El Marmato, some two hours’ drive from the city of Medellin.
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Parts of the report that follows were first transmitted to TickerTrax™ subscribers Thursday morning, January 7, 2010.
I met someone this week whose biz savvy during a 40-plus-year career put him, and still puts him, at the peak of this nation’s money and talent pyramid.
Augusto Lopez is the civil engineer whose steady hand guided dozens of beverage, energy and mining efforts in Colombia. Dr. Lopez used to run Grupo E. Bavaria., essentially Colombia’s beer monopoly. As a director, he helped Pacific Rubiales (TSX: T.PRE, Stock Forum) become a market-cap miracle in oil discovery and production.
He also is guiding a transaction that might go down in history as one of the most important gold mine transactions in the history of this recovering nation of Colombia. It is the sale of the historic Frontino Mine in Segovia – almost surely to Medoro Resources (TSX: V.MRS, Stock Forum), a company whose shares I have owned, in one non-performing form or another, since April 2008.
On the energy
, as they says in Spanish, specifically the Pacific Rubiales process, Dr. Lopez and several well connected whirlwinds, including Iacono Serafino in Bogota and a cadre of Vancouver merchant bankers (Gordon Keep’s EDV), delivered to many people in government and private industry a pipeline of money and actual barrels of oil. Quickly.
“Capital in oil happens rapidly,” Dr. Augusto Lopez tells me just hours into a visit to his suburban finca. We are taking a break from touring several real estate properties in and around Llanogrande outside Medellin, where I am searching for a home base. Mr. Lopez and I hopscotch in my spirited Spanish and his earnest English.
Augusto Lopez’s home here includes a package of residential land that is for sale to prospective home developers. His Pradera, the name of his estate, is a scant kilometer or two from the finca of President Uribe, just across from the Llanogrande Police Station.
With us is his son-in-law, a successful acciones trader in the commodities futures market. Mr. Edgar Coulson operates out of Medellin, and father-in-law Augusto spends weekdays in Bogota and weekends here just outside the gold booming city of Medellin.
Edgar Coulson, as it happens, also is a successful trader of ETFs. He and I discuss FAZ, the short-sell ETF on banks. This security is selling for $17, down from the stratosphere of $100-plus as banks regain their capital foothold. Guess which way Senor Coulson is situated on this trade. (The bank stocks are going bajo-bajo. Entonces, FAZ is going alta, alta.) Feel free to use your Internet babelfish translator for that one.
Senor Coulson also sees natural gas (NYSE: UNG, Stock Forum) rising another 5% or so in price in coming weeks. “Nothing is sure,” he says. “But how can it not with the shortage in gas stocks and the cold weather up there.”
Speaking of lower and upper, father-in-law and Colombia titan Dr. Lopez is the newest director of Medoro Resources (MRS).
Augusto Lopez is a business colleague of Medoro’s VP of Exploration, Vicente Mendoza. (He is pictured here overlooking Marmato three weeks ago. All photos by Thom Calandra.) (Please see previous Ticker Trax reports.) He is also a colleague of Serafino Iacono in Bogota. Mr. Iacono was instrumental in the success of Pacific Rubiales’s oilfields and market-cap stratosphere-shoot, as he will be – I believe anyway – with Medoro. (This is not a recommendation to purchase Medoro as it is very expensive in terms of market cap. And in my opinion, about to become explosively dear to investors and to the government of Mr. Uribe. Medoro in our estimation one day shall own two or three gold districts in their entirety – including Frontino in Segovia, the upper and lower halves of Marmato, Echandia and most importantly, if my geology is empanada-proof, some or all of the assets of Colombian Mines (CMJ), a Planetary Prospect of this Ticker Trax service.)
Listening to Augusto Lopez on this January summer day in Colombia, I can tell you this:
- Medoro almost certainly will purchase the troubled (bankrupt pension fund) Frontino Mine in the historic mining town of Segovia. The cost might seem prohibitive, Augusto Lopez says. (Some put the price tag to clean up the pension shortfall and purchase the many veins and mines of Frontino, perhaps the most productive Colombia gold mine ever, at $150 million or more.) “”But believe me, there is much more gold there than anyone can imagine.” (This is, by the way, the opinion of one director and not a corporate edict. Still, in my meetings with New York University-educated and Venezuela ex-pat Vicente Mendoza and other Medoro executives this past month, we stand at the Frontino front. Mr. Mendoza and his team have operated in Colombia and in Venezuela since the mid-1970s.)
- Medoro also will consummate its efforts to bind the lower and upper halves of Marmato, the amazing gold disaster in Antioquia and Caldas departments. To do this will require more capital, Dr. Augusto Lopez says. In fact: as much as $30 million that shall be paid in the coming 4 to 6 weeks to Mineros Nacionales, which owns the lower half of gold-dusted Marmato. Marmato, as I have reported since May 2007, will become a textbook lesson in how to excel at community relations (MOVING THE TOWN), environmental contributions (FIXING THE LANDSLIDES, CLEANING UP THE TOXIC SPILLS AND IMPROVING THE FILTHY RIVER CALCA) and capital efficiencies (RAISING MONEY VIA ENDEAVOUR FINANCIAL AND-OR OTHER CANADA ENTITIES).
- Finally, Augusto Lopez sits on the board of a Pacific Rubiales offshoot, Petroamerica Oil Corp. (TSX: V.PTA, Stock Forum). See Stockhouse details on this small and emerging energy company. Enough said.
More to come from this neck of the woods in coming days. My take: the president of Colombia, Mr. Alvaro Uribe, stands poised to clean up both Marmato and Frontino before his term concludes in May. As inflation in the country hits its lowest point since the 1970s, Mr. Uribe as much to celebrate at that finca in Llanogrande.
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AtColombia Mines (TSX: V.CMJ, Stock Forum), President Bob Carrington, in my estimation, is about to blow the cover off rock-chip and other copper-zinc-gold samples from his El Dovio project in northern Colombia. In addition, Mr. Carrington and CEO Nate Tewalt have identified four prime holes on La Escuela portion of Yuramalito in Antioquia, not more than an hour by rocky road from El Marmato
Bob is pragmatic. “Some may say we are doing too little drilling to test the Yuramalito target. Nate and I want to do success-oriented drilling at La Escuela. Four holes over 1,200 meters. If we see good results on those, we continue drilling. If not, we re-evaluate.”
As for about 3,000 hectares at CMJ’s Rio Negro just north of Bucaramanga, the concession is “on trend with the California district and we expect sampling results in the near future. (Rock chips from outcrop.)” Bob says.
On EL Dovio: “El Dovio has had a geologic team on-site taking surface channel samples … and as soon as we can plot map points we shall have a press release,” he says.
For those who know, as I acknowledge, that I am no geologist nor am I a metallurgist, I quote my friend Rodrigo, who has joined me today in a hunt for commercial and residential real estate in a suburb of Medellin not from the president’s finca. The quote: “I do not know how to make empanadas, but I know where to find 
them.”
El Dovio in the Department of Valle del Cauca presents the possibility of a besshi class of deposit that can be potentially intensely high gold. Samples are due as we write and speak from an SGS lab in Lima.
Says Carrington, a geologist who has been in Colombia since 1993 or so, “The rocks at El Dovio look the same as Windy Craggy in British Columbia.”
CMJ holds a 100% ownership interest in mineral exploration contracts covering 5,000 hectares situated along the border of the Department of El Valle and EL Choco in the Western Cordillera of Colombia and centered on the El Dovio VMS deposit.
Photo of Georges Juilland, forefront, and Carrington, middle, above – at Titiribi. Snapped by Thom Calandra with a Droid Motorola. Photo of Thom Calandra, also at Titiribi seven days ago – taken by Robert Carrington. Also a Droid. Motorola that is.)
I shall have more for Ticker Trax subscribers in due course. (CMJ is a Planetary Prospect of our subscriber service.)
Coming in January 2010
Vancouver Resource Investment Conference, Jan. 17-18. I’ll be up there with two Ticker Trax workshops and plenty of material from Colombia, Peru, Mexico… AND Colombia tambien. Companies and individuals wishing to participate in a Friday evening dinner before the conference’s official start, an annual affair I help arrange with our myth busters, Bill Murphy and Chris Powell from Gold Antitrust Action Committee, and two extra-celebrity guests, please ping me or send a note to GATA.Org’s Chris Powell at www.GATA.org.
Donations to GATA gladly accepted. The Cambridge conference itself is free for those who register at www.cambridgehouse.com.
Of note regarding South Africa: I am officially protesting the decision of the operator of the famed INDABA conference in Cape Town to issue comped media passes to the Wall Street Journal and other accredited organizations and not to Internet journalists, newsletter writers and other secondary media. The NDABA conference begins in early February. Shame on them.
Ticker Trax™
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HOLDINGS:Thom’s stock holdings are listed for all Stockhouse members on www.Stockhouse.com under the “portfolio setting” for user TCALANDRA. It is public and free to view. He also owns recently minted gold and silver coins and shares of two private companies, one of them a nickel and platinum prospector in South Africa & DRC (Congo) operated by Robert M. Friedland. Thom does not do private placements – with the one exception this year of Titiribi-Sunward … nor does Thom accept payment in return for coverage. Thom participates in select company-sponsored and company-paid tours of mining sites after examining the properties off-site for many months and in some cases, years.
(All photos by Thom Calandra. Thom owns shares of 12 of the 12 Planetary Prospects in Ticker. He also owns Medoro Resources and has for at least 18 months via a stake in now merged Colombia Gold Fields. Thom does not own Focus or Antioquia Gold or any of the other companies in this and other articles.)
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THOM CALANDRA of Ticker Traxhelps his audience find value in a quagmire of investment choices. Thom co-founded and was executive VP of news for CBS MarketWatch andMarketWatch.com. As the voice of Thom Calandra's StockWatch and The Calandra Report, Thom pegged $300-ounce gold as a long-term hold and dyed his hair blonde multiple times as gold surpassed $400, $500 and $600.
Ticker Trax™ is published by Stockhouse Publishing Ltd. Ticker Trax is an information service for subscribers and neither Stockhouse nor Thom Calandra is a broker or an investment advisor. None of the information contained therein constitutes a recommendation by Mr. Calandra or Stockhouse that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Ticker Trax does not purport to tell or suggest the investment securities subscribers or readers should buy or sell for themselves. Subscribers and readers of Ticker Trax should conduct their own research and due diligence and obtain professional advice before making any investment decisions. Ticker Trax will not be liable for any loss or damage caused by a reader’s reliance on information obtained in the reports. Subscribers and readers are solely responsible for their own investment decisions. Opinions expressed in Ticker Trax are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in Ticker Trax should be independently verified. The editor and publisher are not responsible for errors or omissions or responsible for keeping information up to date or for correcting any past information. Ticker Trax does not receive compensation of any kind from any companies that may be mentioned in the report. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities that are discussed in Ticker Trax. PLEASE DO NOT EMAIL THOM SEEKING PERSONALIZED INVESTMENT ADVICE, WHICH HE CANNOT PROVIDE. Copyright 2010 all rights reserved.