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Peru’s President’s Prudence

July 27th, 2011

Sulliden’s Shahuindo Project is Safe For Now

By Ted Niles

Investors quailed when economic nationalist Ollanta Humala was elected President of Peru June 5. Peru ranks first in the world for production of silver—second for copper and zinc, sixth for gold—and Peruvian mining stocks were hit hard June 6. For example, the country’s largest precious metals producer, Compania de Minas Buenaventura, plunged 11.7%. However, Humala’s recent cabinet appointments of moderates, and his decision to retain economist Julio Velarde as Central Bank President would appear to have turned the tide of world opinion.

“Our stock price has been negatively affected by a lot of uncertainty with the new President,” says Scott Moore about Sulliden Gold Corporation’s flagship Shahuindo Gold and Silver Project. But, the VP of Corporate Development adds, “At the end of the day, the pro-leftist candidate has to fund the social agenda, and that means they have to have good economic drivers. In Peru mining is the economic driver.” He declares, “It would seem that Humala’s policies are trying to address the concerns of the market.”

Sulliden's Shahuindo Project is Safe For Now

That’s good news for Sulliden, as Shahuindo—located in Cajabamba Province and consisting of approximately 8,000 hectares—goes from strength to strength. In June, Sulliden announced an updated mineral resource estimate of 1.97 million ounces gold and 27.98 million ounces silver indicated, with inferred resources of 1.44 million ounces gold and 38.58 million ounces silver—increases to the original gold resource of 121% and 397% (in the indicated and inferred categories) respectively. But this isn’t surprising given the project’s neighbours. Thirty kilometres south of Shahuindo is Barrick Gold’s Lagunas Norte Mine, which produced 808,000 ounces gold in 2010. Newmont’s Yanacocha Mine is 80 kilometres to the north—it is the second largest gold mine in the world. Moore says of Shahuindo, “This is a mine. At the end of the day, it’s just a matter of how big it’s going to be.”

He continues, “We’re in the midst of a 70,000-metre drill program in 2011—we’re about half way through. We’ll do another 35,000 metres this year and probably another 70,000 or 80,000 metres in 2012. In conjunction with that, we’re doing all the engineering studies, and hopefully we’ll be in a position to have a mine permit and mine construction in 2012 with a one-year mine build.”

July 21 Shahuindo assays include 1.17 grams per tonne and 21.6 g/t silver over 104.6 metres, 1.2 g/t gold and 19 g/t silver over 52.5 metres, 1.55 g/t gold and 6.2 g/t silver over 34.5 metres and 1.52 g/t gold and 64.1 g/t silver over 12.9 metres. Moore comments, “The average grade of our deposit is 0.5 to 2 g/t. So 100 metres of 1.17 g/t is quite substantial and a nice big chunk, both in grade and in thickness. Also, we’re getting some exciting results in the East Zone, where we looked at lowering the oxidation front by about 50 metres deeper than we had originally interpreted the geology to be. That will, of course, bring more oxide mineralization into the resource, which will be positive for a mining scenario.” Moore says that the company is currently undertaking a feasibility study, which he expects to be released in late fall.

This is a mine. At the end of the day, it’s just a matter of how big it’s going to be —Scott Moore

Sulliden is currently the top holding of investment company Aberdeen International, whose COO David Stein recently told Mining Weekly that, in light of Shahuindo’s proximity to Barrick and Newmont, he believes the company “will most likely be taken out.” Be that as it may, Moore says that Sulliden is prepared to take the project to production itself: “Our team has built a number of mines around the world, and this would be a very simple mine. It’s going to be a good, low-cost, heap-leach gold project.”

He concludes, “Our management team has run mines in Brazil when Lula [da Silva] got elected and in Nicaragua when Daniel Ortega got elected. We think ultimately that this thing could be somewhere in the neighbourhood of 4 million to 6 million ounces of oxide. So it’s going to be a substantial project. Hopefully, we’ll start construction sometime in 2012. And we’re still expanding the resource. We’ve got targets outside of the central corridor that continue to be drilled, and it’s just going to continue to get bigger.”

Sulliden Gold has 212.5 million shares currently trading at $2.03 for a $431.3 market cap. Its other project—the East Sullivan Property—is located southeast of the city Val d’Or in Quebec’s Abitibi region and is still in the early stages of exploration.