Read more Streetwise Exclusives. . .
Source: The Gold Report (2/16/11)
including Bob Casaceli's recent interview, Cordillera del Condor.
The Gold Report: Bob, it seems like everyone knows you. How did you get your start in this business?
Bob Casaceli: I first became interested in geology through mountain climbing, which was an offshoot of my ski-racing career at the University of Colorado. My ski teammates would take me to areas to learn technical rock climbing, and I would study the geology of those areas.
I was always intrigued by the Andes. In graduate school, I was very interested in the mineralogy, tectonic origins and lithochemistry of the ore deposits. I studied isotope geochemistry as a methodology of determining the origin of ore deposits and was able to get some consulting work in Mexico, Central America and throughout the Andean region. I worked with some partners who were former colleagues at the Anaconda Copper Company and formed a consulting company called Annapurna Exploration. It was a great springboard to understanding the systems of gold, copper and silver mineralization in the Andes.
TGR: Didn't you later do some geology work with royalty company Franco-Nevada Corp. (TSX:FNV)?
BC: In the 1990s, I was president and chief operating officer of L.A. Nevada, which was the Latin American subsidiary of Franco's sister company, Euro-Nevada Mining Corp., which is a subsidiary of Newmont Mining Corp. (NYSE:NEM). My job was to look for royalty opportunities throughout Latin America. I covered the ground quite thoroughly then and worked in every Latin American country. Later, beginning in 2008, I worked with the new Franco-Nevada U.S. Corporation as its chief geologist.
TGR: Did you ever visit Aurelian Resources Inc.'s (TSX:ARU) Fruta del Norte deposit in Ecuador?
BC: I crossed over what's now part of the property when I was working in the area with my consulting company. We were working in the Nambija and Chinapintza Districts and covered that area when it was even more remote than it is now. I haven't seen it since the recent development.
TGR: It's been about two-and-a-half years since Kinross Gold Corp. (TSX:K; NYSE:KGC) paid roughly $1 billion for Aurelian and the Fruta del Norte gold deposit. Could you tell our readers about the region and why it's highly prospective for high-grade gold deposits?
BC: The primary reason is that it sits atop the main subduction zone of the Andes. A subduction zone is where the oceanic plates from the eastern Pacific Plate are pushed underneath the South American continent and melted. Magmas are generated, which rise and melt the lower crust.
Based on the work I did with isotope geochemistry in graduate school, it appears that the majority of the metals in the melts actually come from the lower crust with a lesser contribution from the mantle. They're incorporated by the magmas rising above the subduction zone and spending what's called "residence time" to allow for more melting of the lower crust and further incorporation of the metals that are contained therein. The magmas come up to the surface through fractures in the upper crust and are expressed as volcanoes. They formed a range along the continental margin in the Late Jurassic period about 150 million years ago in the area of Fruta del Norte. The continental margin was evolving from what's called an "island arc," where volcanoes are separated into distinct islands and later compressed to form the continental mass we see now—the high Andes, lower coastal ranges and the coast itself.
The magmas, or molten rocks, form the volcanoes—usually stratovolcanoes—for the most part, which are the tall, cone-shaped volcanoes. Subsequent to the formation of the stratovolcanoes, there is time for gases and waters to mix with metals, which partition off into a fluid phase. That fluid phase is the source of the metal deposits. A subduction zone that's active for many millions of years has a lot of time to generate metal-rich hydrothermal deposits. They deposit upon and enrich each other. That's the main reason there are many deposits along the South American Cordillera mountain ranges.
There are cross-structures that create open spaces and better intersections that are more permeable. There is oblique subduction, which occurs when a subduction slab doesn't meet the continental margin at 90 degrees, but rather meets it at an angle and creates what's called "strike-slip faulting" as a result. That strike-slip faulting causes the rocks to move horizontally past each other and jump in their movement. When they jump, they create these small areas of extension within the jump—or jog—and that creates the open space. Any time there's open space created above a magmatic source, such as a subduction zone, it facilitates the creation of ore deposits at the surface along the open spaces.
TGR: The biggest gold deposit found to date in that area is Fruta del Norte, which is close to 14 million ounces (Moz.) of high-grade gold. That was the biggest story in the mining industry for years. Something like that would usually spawn a staking rush, but that didn't happen. Why?
BC: Political reasons, but that's my bias. The president of Ecuador, Rafael Correa Delgado, has said he is dedicated to nationalizing certain industries, including the mining industry. The reality is that Correa is of the political persuasion that minerals are a part of the realm of the state, but more than just simply through royalty ownership or payments. He has made statements that he would consider nationalizing oil, gas and mining. That definitely put fear into exploration companies and kept many out.
TGR: What role do the indigenous tribes play in keeping development at bay?
BC: Aboriginal people are concerned about the exploitation of their ancestral lands. That's certainly true in the Amazonas region of northern and northeastern Peru, which borders Fruta del Norte. This movement has been exacerbated by support from Venezuelan President Hugo Chavez and his supporters. I believe that it's become a more difficult situation because of Hugo Chavez's financial support, but I have no direct evidence of that—I've only heard rumors. The movement has received other support; for example, a leader of the aboriginal movement in Peru was given protection in an embassy in Nicaragua to avoid his capture.
TGR: It's taken a little while, but some companies are coming to the Fruta del Norte area and exploring again, especially on the Peruvian side of the border with Ecuador. Could you tell us about some of those companies and what they're doing?
BC: The largest, most obvious one is Newmont Mining Corp., which has been active in that area. However, I believe the company that's had the best success is Dorato Resources Inc. (TSX.V:DRI; Fkft:DO5). It owns options on claims that are directly on the border, about 25 kilometers to the south of Fruta del Norte and directly across from Chinapintza and Santa Barbara, which are known areas of excellent gold mineralization.
TGR: Dorato has a few targets it's working on. One of the more promising ones is the Lucero target, where some drilling intersected copper/gold mineralization, including roughly 30 meters averaging 2.85 grams per ton (g/t) gold and 0.37% copper. Could that be a copper-gold porphyry deposit?
BC: I think it is; it has all the earmarks of a copper-gold porphyry deposit from the chemistry that's exhibited by the mineralogy and alteration at the surface and in the drill holes.
TGR: Those types of deposits are favorable because they could be of interest to major gold and copper producers. Given the political issues in the area, this would have to be a substantial target in order for companies to be willing to get it off the ground.
BC: True, but Dorato's properties are on the Peruvian side of the border. It's right on the border, but it's still Peru. I've worked there for many years and have a high regard for the Peruvian people and their support of mining. It is a mining-mentality nation, though there have been some inconsistencies over the years. Recently, legislation was proposed to double the royalties from a 1%–3% range to a 2%–6% range, as well as to put up to a 10% gross sales revenue royalty on gold and 5% on copper.
Nevertheless, Peru is firmly a mining country. I've seen many properties develop there. Newmont has made great profits on its mining efforts in northern Peru. The country is a more secure investment than Ecuador. I'm very skeptical of Correa's administration.
There are, however, other discoveries on the Ecuadorian side, such as the former Corriente Resources Inc.'s Mirador copper-gold porphyry deposit [now owned by Tongling Nonferrous Metals Group Holdings Co. Ltd. (SZSE:000630)] and Dynasty Metals & Mining Inc.'s (TSX:DMM) Jerusalem deposit.
TGR: Do you think Dorato's Lucero target has the potential to reach the size of Exeter Resource Corp.'s (TSX:XRC; NYSE.A:XRA; Fkft:EXB) Caspiche copper-gold porphyry project in Chile?
BC: Caspiche is a very special area. I had the opportunity to work on the property in the very early days—well before Exeter got there. I've followed the work that Yale Simpson has done as executive chairman of Exeter. The company has done a great job. That's a huge system in a belt of other very large systems. Lucero is the same type of deposit, but I don't see anything yet that clearly makes Lucero the magnitude of Caspiche. Nevertheless, I have little doubt in my mind that it will be a mine. I don't know yet if it has the potential to be the size of Caspiche, because that would be tens of millions of ounces of gold.
TGR: You did some due diligence on these projects on behalf of Franco-Nevada, which now has a royalty on the property that's being optioned by Dorato. How long ago was that and what exactly did you do?
BC: The first deal was a private placement investment in 2008 with an option to purchase a royalty in the future, which hasn't yet been exercised. In 2009, a second private placement investment expanded the area over which Franco-Nevada's royalty option would apply. I worked on the second royalty option deal.
TGR: Was Franco-Nevada more interested in Taricori, Lucero or both?
BC: It was initially interested in Taricori because the hope was that it would fit a Fruta del Norte model. It doesn't, exactly. Fruta del Norte is an intermediate-sulfidation epithermal deposit of Late Jurassic age and Taricori is considerably younger and formed in a sub-epithermal environment.
TGR: It's in the pull apart basin, correct?
BC: Yes, but the pull apart basin is a complex basin. I believe it was originally part of a back-arc continental rift or extension zone graben formed by upwelled magma. The oblique nature of the subduction slab to the coast created left-lateral strike-slip movement on the north-south structures, which I believe were originally extensional structures that formed from magmas that created the core of the Andes. Pre-existing northwest-southeast crosscutting structures then were pulled apart by the strike-slip movement. It's a complex mechanism to create open space, but that's one of the critical things necessary for developing these ore deposits. It's what created Fruta del Norte.
Lucero, Taricori and Cobrecon, another Dorato property, are on the same regional feature. In Fruta del Norte's case, it happened in the Late Jurassic. However, in the case of the Dorato properties, it appears that the mineralization is of Late Cretaceous or Tertiary age, possibly some 40–65 million years old. It's also not truly epithermal, as it is formed at deeper sub-epithermal zones with somewhat higher temperatures in the mesothermal range, more like a porphyry-type system.
It's still unclear whether these are going to be as big as some of the porphyry gold deposits in Chile, but the Dorato properties still host sizeable deposits that will likely prove very valuable. The grades are excellent, there's a bit more sulfides, copper and molybdenum involved than in the system in Fruta del Norte, but gold is there, as well.
TGR: What's the next step for Dorato?
BC: The company has a lot of work ahead developing these large porphyry-style systems and precious metal-zoned deposits. Dorato has discovered three excellent centers of mineralization. There are also other geophysical anomalies that remain to be tested. The company should get some excellent hits in the lower part of the true porphyry system, which is most likely centered beneath Lucero. It has a lot of drilling left to do and a lot of groundwork, but there is a lot of encouragement.
TGR: Do you foresee Ecuador becoming more mining-friendly in the future?
BC: It can and likely will. There are political cycles. Ecuador is endowed with a lot of mineral wealth. It's a marvelous place to explore and develop mines under the right political circumstances. Eventually, such circumstances will come about. Rafael Correa is no idiot. He allowed the government to give enough assurance to Kinross to make purchases and develop mines. He will allow certain levels of development.
However, the real development of Ecuador and the ultimate realization of its mineral wealth will only come under a different philosophy, one similar to those in Chile and Peru. Companies need encouragement because these are rugged areas—jungle that is difficult to traverse and explore, and there aren't many roads. Companies need mining laws that will encourage them to take the difficult steps to explore the area. I think that will come, and it will probably be driven by economic necessity.
TGR: Bob, thanks for your in-depth explanations.
Robert J. Casaceli holds a master's degree in geology from Oregon State University and a bachelor's in geology from the University of Colorado. His mining career spans 36 years and has involved every facet of mineral exploration for precious metals, base metals and uranium. He is currently president and CEO of Creso Exploration Inc. (TSX.V:CXT; OTCQX:CRXEF). Until recently, he served as chief geologist for Franco-Nevada Corp., the world's most-respected royalty acquisition company. He has also been president and chief executive of a TSX-listed resource company for more than 12 years and has been involved in the design, funding and implementation of numerous reconnaissance, advanced-stage exploration projects and prospect/mine evaluations in some 50 countries. He was previously president and COO of L.A. Nevada, a subsidiary of Euro-Nevada Mining Corp., for two years. His primary function was the identification and acquisition of royalty interests from mining properties located throughout Latin America and elsewhere in the world. Casaceli has published numerous technical and scientific papers. His technical skills are enhanced by his extensive experience in negotiating mining deals, structuring legal agreements and establishing companies in many countries.
Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page.
1) Brian Sylvester of The Gold Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Franco-Nevada, Dorato Resources and Exeter.
3) Bob Casaceli: I personally and/or my family own shares of the following companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this interview: None.