Colossus Minerals Update and New Canaccord Target $ 11

Gold :: Locality: Serra Pelada (Serra Leste) Au-(Pd-Pt) deposit, Curionópolis, Carajás mineral province, Pará, North Region, Brazil (Locality at mindat.org) :: Size: miniature, 4.3 x 2.3 x 1.2 cm (39 grams) ::;Gold :: A large and important nugget for the locality! Gold nuggets from Brazil are quite hard to obtain. This one shows minute crysatllization in the pockets, as well. (Photo credit: Wikipedia)

Following a benchmark year in 2012, Colossus Minerals is in buoyant spirits as it prepares to bring its Serra Pelada gold and platinum group metals (PGM) project in Brazil’s Pará state on stream by mid-2013.

The final furlong was reached on December 31, with Colossus announcing that the collection of a bulk sample from Serra Pelada’s central mineralised zone (CMZ) had started. The material is now being sorted at surface on the stockpile pad. The 1 500-ton bulk sample will assist with the project’s metallurgy and also help Colossus formulate a national instrument (NI) 43-101-compliant figure of reserves and resources for the first 12 months of operation.

“The bulk sample will confirm some of the previous metallurgical test work, although recovery [methodology] should be relatively simple given the nature of the rock. We’re also on track for publishing a NI 43-101-compliant reserve and resource estimate for the first year of production,” Colossus VP investor relations Ann Wilkinson told Mining Weekly Online.

The CMZ lies near a historic openpit operation. Discovered in 1979, this site witnessed one of Brazil’s greatest mining rushes that, at its height, hosted around 80 000 artisanal miners. A pit measuring 400 m x 300 m x 100 m was dug by hand, with about two-million ounces of gold, platinum and palladium produced. However, recovery rates were poor and the operating conditions notoriously grim. By 1986, the rush had abated and the Brazilian authorities decided to close the operation down.

“Fast forward 20 years [and] the Brazilian government granted permission for an artisanal group, Cooperativa de Mineração dos Garimpeiros de Serra Pelada [Coomigasp], to operate on the property. They were entitled to extract gold from the down-plunge extension of the deposit exploited in the late 70s and early 80s. However, the government stressed Coomigasp would not be allowed to use the previous working methods,” Wilkinson said.

“Coomigasp soon realised they needed a partner that had the financial wherewithal to complete environmental impact studies and have the necessary technical expertise. It was at this point Colossus earned an interest,” she said.

The current ownership structure stands at 75% Colossus and 25% Coomigasp. Permitting for Serra Pelada was achieved in mid-2010, the same year Colossus unveiled its underground development plans for the project and extended the property size to 874 ha.

Exploration of the CMZ revealed that it runs 600 m from the edge of the historic pit and is open at depth. It is a sediment-hosted, fully oxidised, high-grade gold-platinum-palladium deposit. Over 100 000 m of drilling has been completed so far, with underground drilling now playing an important role.

Indeed, the first underground drill hole results that were unveiled on October 16 have been encouraging; hole SPUD-011 intersected 3.67 g/t gold, 1.13 g/t platinum and 2.93 g/t palladium over 33.9 m in the upper portion of the CMZ. Hole SPD-175 secured 273.47 g/t gold, 18.82 g/t platinum and 62.67 g/t palladium over 1.2 m in the Lower Limb zone.

With underground development has also come focus on dewatering, with additional high-volume pumps installed to take water directly from one of the deeper sumps to surface. The first underground electrical substation was commissioned in the third quarter of 2012, while the company has also carefully analysed the equipment needed for full-capacity production, including the number and types of trucks required.

Meanwhile, the project’s surface is also a hive of activity. “The processing plant is being built, with foundations being laid for the primary crushing area, the thickeners, the gold room, the reagent building and the mill building proper. The ball mill is being refurbished in São Paulo and will be transported to the site soon. The gravity processing equipment is at Port Belém and will arrive on site shortly. We’re going at full steam ahead,” Wilkinson said

“The ball mill’s nameplate capacity is 1 000 t/d,” she added. “With the mill’s commissioning expected in early July, we expect it will take about six months to reach this rate.”

One of Colossus’ key agreements is with Sandstorm Gold. “Sandstorm has purchased a PGM stream from Colossus for $75-million, through which it will secure 35% of the platinum and palladium from the project, and 1.5% of the gold. The $75-million will be paid back as we deliver gold in the first year and then gold equivalent in the second year.

“We’ll be delivering platinum, palladium and gold by 2015. Over and above the express minimum in the Sandstorm deal, we’ll be paid $400/oz for gold, about $200/oz for platinum and about $100/oz for palladium,” Wilkinson said.

For $48.75-million, Colossus has the option to buy back up to 50% of Sandstorm’s obligation by April 1, 2015. This can be made either as a single purchase or through 10% increments.

Meanwhile, Colossus continues its exploratory efforts. Focus is currently centred on the Lower Limb zone, extending back from the CMZ, and the Elefante zone. The latter is about 2 km southeast of the Serra Pelada mine development.

On January 10, the company released results of a four-hole diamond drill campaign at Elefante. Highlights include hole EL-12-001, which intersected 5.41 g/t gold, 0.04 g/t platinum and 0.29 g/t palladium over 5.70 m, and hole EL-12-002, which obtained 0.45 g/t gold, 1.27 g/t platinum and 2.04 g/t palladium over 5.10 m.

“In addition, 13 km south-east of Serra Pelada is our secondary project called Cutia. [Here] you have silver and gold veins in quartz … We’ve identified the fault zone in which these vein structures lie in for about 2.5 km across the property,” Wilkinson said.

Cutia was acquired in January 2012. “The property is also a 75-25% joint venture, but this time with Cooperativa Mista do Garimpeiro de Cutia [Coomic], another local artisanal mining group,” she added. “We have some drilling plans this year for Cutia property.”

“However, our main focus is getting Serra Pelada into production in a safe and timely fashion, and mindful of our budget,” she added.