By: Reuters

12th January 2010

Updated 5 hours ago

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BUCARAMANGA - Canada's Greystar Resources said it will start construction of its gold and silver mine in Colombia late this year, aiming to become the country's largest precious metals project in production.

Greystar plans to invest $600 million at its Angostura gold and silver mine with output beginning in the second half of 2012, Frederick Felder, Greystar's executive vice president told Reuters in an interview.

"Once this project reaches an average of 511 000 ounces of gold per year, it would become the country's largest gold mine in production," Felder said recently in Bucaramanga, where Greystar has its Colombian offices.

Angostura is also expected to produce an average of 2,3-million ounces of silver per year over a 15-year mine life.

The mine is slated to produce 214 000 ounces of gold and 1,1-million ounces of silver in 2012. But the mine would reach its peak capacity in 2014 when it hits 682 000 ounces of gold.

Angostura has 10,2-million troy ounces of measured and indicated gold reserves and 3,4-million of inferred resources. Additionally, it has 74-million ounces of silver reserves and resources, according to preliminary feasibility studies.

Greystar plans to invest an additional $300-million to run the mine through 2026 and spend as much as $2-billion in operating costs during the mine's life.

To help finance Angostura, Greystar recently secured around $100-million through an equity placement that comprised shares and warrants. The International Finance Corp, the private arm of the World Bank, invested around $11,5-million for a 13 percent stake in the company.

The company will soon hire investment banks to advise the company on how to keep securing more capital.

"We will be looking to having a financial advisor on how to move forward a combination of equity and loans depending on what the market says and how the project is received," Felder said.

Angostura is the country's most advanced gold project under way, said Arturo Quiros of the country Miners' Association, Asomineros, noting the company invested over $100-million in exploration studies.

Soaring gold prices and potentially rich unexplored gold areas are encouraging international mining companies to invest in Colombia, where President Alvaro Uribe has sent troops out to push back rebels still fighting in Latin America's oldest surviving leftist insurgency.

Greystar has applied to secure additional hectares potentially rich in minerals in four different Colombian provinces.

Greystar, which has been present in Colombia since 1995, halted its activities in Colombia in 1999 when a contractor was kidnapped. But the company did not leave and restarted its operations in the country in 2003 as security improved.

The country Miners' Association, Asomineros, says the Colombian gold industry could attract as much as $3,3-billion in investment over the next three years.

Key among the gold projects under way in Colombia is the AngloGold Ashanti's <ANGJ.J> mine La Colosa in Tolima province. The company announced it had found unproven reserves of 12,3-million ounces in La Colosa.