@ColGoldLetter No.

56 / April 2016

3 When Ulloa
Met CGL 4 Sports
Desk 5 Mining
Conflict 6 Cerro
Quema

Suiting up as Colombia says bye bye to acquired rights

Companies turn to international courts

C
olombia could experience a dram-
atic cessation of mining and explor-
ation investment as it faces an in-
creasing number of international
lawsuits for its failure to protect and hon-
our the acquired rights of mining con-
cession holders.
Seeing its acquired rights being whipped
away, Eco Oro Minerals (TSX: EOM) inform-
ed the government of the existence of a
dispute in March under the terms of the
Free Trade Agreement (FTA) between Can-
ada and Colombia. The company claims
that government measures and omissions
have directly impacted the rights granted to
it to explore and exploit its Angostura
project in Santander.
EOMs announcement was met be a
Image: Rene Elkin

tirade from NGOs including Canada’s

Mining Watch that generally adopted the
tone that the company wants to force the
government to allow it to dig up the San-
turban paramo, obfuscating the facts, and
painting the natural resource company as
the bad guy and not the government that
failed to live up to its promises.
The company claims unreasonable delay
by the government in clarifying the limits of
the Santurban páramo and whether it
overlapped with Angostura, and its persis-
tent failure to provide clarity as to EOMs
right to continue developing its mining pro-
ject in light of further undefined require-
ments and later as a consequence of a
February decision by the Constitutional
Court that broadened the prohibition of
mining activities in paramo areas.
Law 685, the 2001 Mining Code, pro-
hibited mining in paramos but as the
paramos were not legally delineated com-
panies had to make judgments as best they
could about where they could work or not.
Greystar Resources / EOM suffered for the
best part of this decade laboring under this
uncertainty and invested over US$120M
advancing Angostura in the thirteen years
to 2010. The Santurban paramo was finally
delineated in early 2015.
The Constitution Court ruling reiterated
that mining was banned in paramos but
also said that a transition period for miners
in paramo areas was unconstitutional. “The
Constitutional Court considered a transition
unconstitutional because the rights of the
miners were superseded by environmental
rights,” said deputy mining and energy min-
ister Maria Isabel Ulloa.
In a stroke, this undermined the first
pillar of the ministry’s six pillar strategy for
Eduardo Otoya (insert) , the alledged head of criminal Mining in Buriticá
mining, that of improving legal certainty,
but more than this, it struck in the heart of Without this certainty, few companies will
one of the tenants that make investment risk investing in exploration.
and development of natural resources poss-
ible that will create an alarming precedent
that could close the door on mineral explor-
‘Parking’ mad
Over 30% of Colombia’s territory has been
ation investment as well as that in other designated as Forest Reserve areas and
sectors such as agriculture, tourism and over 10% of the country is covered by
industry. National Parks. Colombia, and the environ-
The rights of the miners were superseded by environmental rights
Deputy mining and energy minister Maria Isabel Ulloa
ment ministry in particular, has shown itself
When the state grants a mineral explor- very willing to designate national parks and
ation concession, the recipient has the right forest reserve areas, although much recent
to develop a mine if it subsequently en- park creation seems to be focused more on
counters an economic deposit and complies banning mining than protecting various typ-
with the various legal, environmental and es of ecosystem as other activity such as
social requirements that will enable it to be cattle ranching, agriculture, housing con-
granted a mining license. The concept of tinues to degrade it. With Colombia now
acquired rights means that, once, granted, failing to recognize acquired rights, explor-
the rights contained in the concession will ers fear that any project could potentially
prevail over any subsequent legalization as be exposed to the fate of having an envir-
the right was established first in time. Nat- onmental protection area slapped over it in
ural resource investment is a long-term the future. “The acceptance of retroactive
endeavour and to undertake it and invest application of legislation is of serious con-
multi-millions of dollars over many years. cern, as it means that at the whim of gov-

© 2016 Colombia Gold Letter. All Rights Reserved. 1


Feature
ernment officials, parks or paramos can be
declared over valid mineral titles, annulling
the right of the latter,” said an explorer
with decades of experience in Colombia.
Compounding this worry is the apparent
lack of a technical basis behind such decis-
ions. Indeed, Article 34 of Law 685, the
Mining Code, states that any decision to re-
strict mining in national parks needs to take
into account technical and social factors in
addition to purely environmental factors.
“Apart from a lot of rambling of how imp-
ortant protection of water sources is, there
are no specific technical reasons in the rul-
ings evidencing that mining operations are
per se conflictive with protection of water
sources. There is not even an attempt to be
open to the possibility that under technic-
ally appropriate circumstances, you can do
mining and protect water sources at the
same time,” said a partner at an inter-
national firm of lawyers.
Show us your mettle
With the Constitutional Court stating that
acquired rights must be stripped away for
the greater good, Colombia will have to
show the world exactly what type of county
it is. Article 58 of its Constitution provides
that there shall be no expropriation of
property rights without compensation. “In
circumstances when the government be-
lieves that an acquired right must be sacri-
ficed for the greater good, it has the right to
expropriate such rights with opportune, fair
and complete compensation,” said the law
firm partner. If the Constitutional Court
eliminated any acquired right, that would
amount to an expropriation of such rights
and the state should have to compensate
the title holders. Eliminating such rights
without compensation, would be a con-
fiscation. Expropriating with compensation
versus confiscating without compensation
is the difference between rule of law
countries and lawless countries, such as
Venezuela, where rights of many people in
several sectors were terminated without
compensation. The result to the economy
and to the country as a whole is plainly
clear,” he continued.
The Colombian government spent much
of this millennia inviting the mining sector
to Colombia and the sector came but many
companies found that claims of legal stabil-
ity and the rule-of-law do not concur with
their experience on the ground.
With exploration companies having fail-
ed to find succour with the government
following years of delays and uncertainty, it
is a fair bet that the number of companies
seeking international arbitration will increa-
se and Colombia is likely to see more of this
action in 2016 than exploration.
Cosigo Resources (TSXV: CSG) and To-
bie Mining & Energy (private) filed suit in
February under the rules of arbitration of
the UN Commission on International Trade
Law claiming wrongful expropriation with-
out compensation, of its Taraira South con-
cession in Vaupes. In the suit, the plaintiffs
state that their application for a concession
contract received both technical and legal
approval from the government by April
© 2016 Colombia Gold Letter. All Rights Reserved.
@ColGoldLetter
Which way will President Santos turn in the face of international lawsuits?
2009 but it was never granted until Sept 16
and only signed on 29th October, the same
day that a resolution creating the Yaigojé
Apaporis Park was published. “The sub-
stantial delay was clearly for the improper
purpose of foreclosing the legal grant of the
mining concession,” states the suit.
CSG claims falsification and the creation
of fraudulent records by government offi-
cials and seeks US$16.5B compensation
based upon the value of the Fe and Au de-
posits underlying the concession and
US$11M for costs accrued in preparing the
site and obtaining the mining lease and
payments made to Colombia. “The place-
ment of the Yaigojé Apaporis Park over the
Taraira South mining concessions was an
illegitimate taking, both founded in fraud
and without compensation,” says the suit
and, “the course of conduct of Colombia, as
witnessed through its agencies, courts, and
representatives, makes clear that fair oppo-
rtunity before the law and due process of
law are not available.”
The course of conduct of Colombia, as witnessed through its
agencies, courts, and representatives, makes clear that fair
opportunity before the law and due process of law
Swiss miner Glencore, a shareholder in
the Prodeco coal mine, filed a demand
against Colombia under its FTA with Switz-
erland as a result of a fine Prodeco received
from the Comptroller General for non-per-
formance of contractual obligations. In add-
ition, Mexican magnate Carlos Slim’s Amer-
ica Movil company will seek compensation
under the FTA with Mexico for an alleged
rule changing in the telecoms sector.
Internationalism sours
Contextually, this comes at a very interest-
ing moment for the country creating a dil-
emma for President Juan Manuel Santos.
No.56 / April 2016
Colombia has been on the losing side of a
decision in a territorial dispute with Nicar-
agua before the International Court of Jus-
tice (ICJ) in The Hague that has seen it lose
economic and territorial rights over a part
of the Caribbean Sea.
This has ignited a wave of nationalism
and public opinion is all for being more ins-
ular and questioning the benefit of being a
signatory to international agreements, with
the law suits filed under international ag-
reements framed in the media as a chall-
enge to the country’s sovereignty.
President Santos will be under pressure
to protect Colombia’s sovereign rights and
also to limit its future exposure. The experi-
ences of EOM or CSG are not isolated and
there are many companies—and one can
assume—specialist international lawyers,
waiting in the wings to file suit or negotiate
compensation depending upon how these
cases pan out.
President Santos is concurrently seeking
international support for the peace deal his
are not available
government is negotiating with the FARC
guerrilla, both in terms of international
economic aid to help pay for the peace,
plus for Colombia to be left alone to decide
how to handle the FARC leaders, many of
whom have international arrest warrants
for terrorism and/or drug-trafficking. The
distaste of internationalism will only grow.
Having missed the March 23rd deadline for
a peace deal other things on the govern-
ment’s agenda are starting to bunch up,
including a tax reform that is expected to
see it implement changes to assuage the
credit ratings agencies to avoid a country
downgrade. CGL
2

Feature
Javier Cordoba, Minister of Energy & Mining, Ecuador
By Mat Youkee
E
cuador has made great strides to put
itself back on the mining map. CGL
talks with mining minister Javier
Cordoba.
CGL What indications does the Ministry
have regarding the mineral potential of
Ecuador?
JC We estimate that only around 10% of
the country has been explored in detail. We
need to do a lot more and this generates
opportunities. Even with this minimal ex-
ploration we have been able to generate
attractive projects such as Mirador, a
Photo: Everett Collection
copper project currently under construction
with a capex of US$1.5B. It will provide
3,000 direct jobs and has reserves of bet-
ween 6-7Blb of copper. The Fruta del Norta
gold project is a US$850M investment and
contains 7Moz Au. Another gold project,
Rio Blanco has an initial resource estimate
of 600koz. Ecuador lies in the same geo-
logical trend as Chile and Peru and we need
to incentivize junior companies to help us
define the true mineral potential of the
country.
CGL There have been no new exploration
licenses awarded since 2008 and the
constitution requires that licenses must be
awarded by auction. This doesn’t make an
attractive proposition for junior firms who
can deploy when access in easier.
JC We understand that auctions are not a
common or popular idea in the mining
sector, but it is required by the constitution.
However, we intend to make this as favour-
able as possible to juniors by introducing a
Swiss Challenge system. Our primary goal
is to avoid speculation on mining titles. Pre-
viously there were no work requirements
on mining titles and individuals could sit on
them for thirty years simply paying the
annual cannon. We won’t ask money for
concessions. Under the new system com-
panies will present an application for an
available mining area, outside of restricted
areas. Alongside the application they
should inform us of their company’s experi-
ence, background and specify their work
plan, detailing how much they will invest, in
what areas and over what time. The constit-
ution doesn’t allow us to deliver directly.
So, if we accept the proposal, we will
announce it on the website so that there
can be a competitive bid. This period will
last between 30 and 35 days. If a bidder
emerges with a better offer, we will give the
original applicant the opportunity to make a
counter bid.
CGL Does the government have any targets
in mind regarding exploration?
JC We don’t focus on the number of
companies coming into Ecuador but on the
© 2016 Colombia Gold Letter. All Rights Reserved.
@ColGoldLetter
amount of investment. In 2013 around
US$30B was spent on mineral exploration
worldwide and of that US$6.2B, around one
fifth, was spent in Latin America. Around
US$1.2-1.5B was deployed in Colombia and
Peru alone. We have seen exploration
spending on a continual increase, but in
Ecuador it has remained stagnant despite
being a lightly-explored country. Our ambit-
ious goal is to capture 10% of total Latin
American exploration expenditure in the
coming years. As discoveries in other
countries in the region, such as Chile, slow
down we think we can attract firms to enter
Ecuador.
CGL What is the ministry doing to convince
investors who are cautious of the coun-
try’s political risk?
JC Trust is easy to lose and very difficult to
regain. I understand that, particularly due
to the 2009 mining code, we lost trust in
the sector. For the last two years I have
visited major mining conferences around
the world and I have had some very difficult
meetings. Investors want to know why they
should believe us now, as is their right. I
think the Fruta del Norte project is import-
ant in this regard. It wasn’t just about Ecu-
ador convincing Lundin Gold (TSX: LUG)
that the conditions for the project were
appropriate. LUG has also convinced finan-
cers. They raised US$500M from the banks
and US$350M from the capital markets. In
addition Ecuador now offers fiscal stability
contracts, something that didn’t exist two
years ago. These contracts last for 15 years
and are renewable, whatever happens in
the next election, the new president cannot
change the terms of projects.
No.56 / April 2016
Minister Javier Cordova
CGL What has the ministry done to
improve the fiscal terms of contracts?
JC When investors hear the words windfall
tax and sovereign adjustment they don’t
want to talk. However, with the assistance
of Wood MacKenzie we have made changes
that make both taxes more rational and
logical for the mining sector. To qualify for
the windfall tax a company must first have
recovered its investment from a financial
perspective, then the tax is applied when
the gold price is a whole standard deviation
higher than the ten-year average calculated
on a monthly basis. Over the long term, the
windfall tax would be applied around 17%
of the time.
The sovereign adjustment is more com-
plicated, but we have adjusted the calcu-
lations of what constitutes company bene-
fits to make it more attractive to investors.
If we take this methodology and apply it to
other countries in Latin America we see
that the state often receives more than 50%
of benefits when calculated this way. In
essence, the sovereign adjustment will only
be applied should something extraordinary
happens to commodity prices and, in these
circumstances, it’s only fair that the state as
well as the company receives additional
benefit. It’s a reasonable and rational mea-
sure and should be seen as a source of
stability for mining contracts. We think the
current terms make Ecuador a competitive
mining jurisdiction, now we just need to
explain them clearly to investors. CGL
3
 @ColGoldLetter No.56 / April 2016

Feature

When Ulloa met CGL

A chance meeting on a rooftop leads to a few home truths

S
cene: The rooftop terrace at the
Thompson Hotel at the PDAC party
hosted by Red Eagle Mining.
Panning shot as Carmen Sylvain, Can-
ada’s Ambassador to Colombia, enters from
stage left and, clearly expert at working the
floor, approaches two people and greets
them with the stock-in-trade, “hello. Who
are you and what do you do?” which she
followed up with, “What do you think are
the problems with mining in Colombia?”
Close-up on the face of the hero/villain
(delete as applicable).
CGL There is not enough time to answer
that.
Photo: Everett Collection

CS Go on, what do you think?

CGL Government policy is killing explor-
ation.
CS (Concerned look on her face). Have
you told the mining ministry this? Hold on.
(Sylvain dashes back into the crowd and
emerges seconds later grasping the arm of
deputy mining minister Maria Isabel Ulloa.)
CS Tell her what you told me. Deputy Minister Ulloa and CGL at the Thompson Hotel
CGL Colombia has not had mines devel-
oped for thirty years, and once Red Eagle
and Continental Gold are developed, there Policy killing exploration Exploration not welcome?
will not be mines developed for another Deputy minister Ulloa said that she is an The above points lead one to the con-
thirty years because government policy has avid reader of CGL and so a few bullet clusion that government policy is not to
killed exploration. points about why policy in Colombia has have explorers. Indeed, government policy
MIU Mines can be built in Colombia. killed exploration, follow. Whilst there are is largely directed at large mining com-
Gramalote is a mine. many individual reasons, the crux can be panies, as evidenced by the decision to cre-
CGL Gramalote is not a mine. If you boiled down to a few main points that are ate a strategic reserve of concessions that it
were a public company and you said that presented here in an attempt to clarify intends to auction to large miners. To date,
you could be sued for issuing misleading rather than criticize for criticism’s sake: no tender processes have been convened
information. and the process is running approximately
MIU But it has a license.  Waiting kills juniors two years behind schedule.
CGL Having a license does not mean it Juniors have to raise equity to fund ex- Colombia was—past tense—successful
will become a mine. In most countries, once ploration and waiting causes this to tric- in attracting large miners and explorers
a project has a license a company is under kle away whether they do any work on alike but how well has that worked out for
pressure from the government to build it. not via the monthly burn rate. Admin- all concerned? Barrick Gold pulled out of
What Gramalote has is a three-year option istrative processes in Colombia are Colombia, Yamana Gold pulled out,
on whether to build a mine. But AngloGold many, long and arduous. The time to AngloAmerican is pulling out, Agnico-Eagle
Ashanti is looking to pull out of Colombia, process concession applications and get has pulled out, Teck pulled out, Kinross
despite the fact that B2Gold started in water usage permits for drilling, for pulled out, Hudbay Minerals pulled out,
Colombia it has spent hundreds of millions example, slowly kills exploration com- AngloGold Ashanti is looking to sell out,
building mines everywhere but Colombia, panies. IAMGold may well pull out given its frust-
and the 0.6 g/t Au grade means that it will  Economic assessment ration at not being able to advance the
only be built if the price jumps higher again. The July 2015 law that enacted amend- Caramanta project, and Codelco dallied
(Ulloa, a fighter, is not ready to concede ments to the National Development with entering but never officially did, but it
yet.) Plan added to this slow death by bring- has since entered Ecuador. Is there a mess-
MIU Antioquia Gold is building a mine. ing in an economic test for concession age here?
CGL Yes, but with all due respect, that applicants to assess the economic stren-
will be a small mine.
(Ulloa, still not willing to be beat, like gth of explorers before they have ob-
tained a property to raise money again-
Come again?
Tom Cruise swinging a wooden sword in To see how out of touch the government
The Last Samurai.) st. Poor government policy kills explor- agencies are with the market, when CGL
MIU Alicanto is building a mine. ation companies. mentioned this exodus of majors to an offi-
CGL Alicanto? If Antioquia Gold will be  Acquired rights cial from the National Mining Agency pro-
a small mine, Alicanto will be microscopic. This is the coup de grace: the Con- motion team, he said they are looking to
At this point, Ambassador Sylvain re- stitutional Court decision in February essen- target large funds that invest in mining! CGL
minds everyone that deputy minister Ulloa tially swept aside the concept of acquired
has a busy schedule and whisks her away rights. Without this, who will invest? This is
into the throng. Panning shot to the Toron- such a movement of the goalposts that CGL
to night skyline and fade. is preparing a long-form piece on it.

© 2016 Colombia Gold Letter. All Rights Reserved. 4

 @ColGoldLetter No.56 / April 2016
Sports Desk

Oops, I did it again

Santos needs yet another mining minister

P
resident Juan Manuel Santos sacked
accepted the resignation of yet an-
other mining & energy (MinMinas)
minister during the PDAC as Tomas
Gonzalez became the latest head to roll out
of that office.
President Santos was reportedly not in
agreement with the resignation (but he
accepted it anyway) and handed temporary
control of the ministry to the minister of
the presidency María Lorena Gutiérrez.
Gonzslez claimed his resignation was
due to the energy crisis facing Colombia
Image: JC Nowers ; Photo: El Tiempo

and water shortages caused by the El Niño

climatic phenomenon that impact the
country’s ability to generate electricity. The
majority of Colombia’s generation capacity
is hydro and there is the possibility of
rationing to prevent blackouts. The state
has asked consumers to reduce their con-
sumption and has threatened to impose
fines on those that do not do so.
Gonzalez was the longest serving Min-
Minas minister under President Santos,
lasting almost two years in office. But the
attorney-generals office opened an investi- Another one bites the dust: Minister Tomas Gonzalez leaves MinMinas
gation into him on the grounds that he
allegedly helped Connecta SAS, a company
owned by his family and that his wife, the El Niño drought, a stagnant/shrinking well-known natural resources lawyer.
Angela Baena, is the legal representative of, oil sector, and even more stagnant mining
obtain contracts. No charges have been
brought against Gonzalez and the investi-
sector, and potentially the defense of var-
ious investment lawsuits (see page 7).
Vargas on sabbatical
gation will seek to establish whether he After helping mining companies and those
violated the rules for contracts signed bet- of other sectors for the past fifteen years,
ween 2013 and 2015 with the company, PDAC Colombia day Fernando Vargas of the commercial section
reported El Pais. Colombia Day at the PDAC took a different of the Canadian Embassy in Bogota, plans
With President Santos having just a 25% approach this year. Instead of various gov- to take a one-year sabbatical.
approval rating in the polls, he is not about ernment members talking about how open
to risk his political capital when he will soon Colombia is for mining development (has
government finally realized that mining in-
New Ambassador
have to spend it trying to get his peace plan Canada has a new Ambassador in Colombia:
with the FARC over the line. vestors are not buying that story? Colombia Carmen Sylvain, and she is already rolling
day is attended by Colombians and very few up her sleeves to get to grips with the chall-
Canadians) it invited some of the compan-
The job no one wants ies active in country to talk about their ex-
enges that Canadian companies face in the
Filling the shoes of former Gonzalez is pro- mining sector (see page 2).
periences. To whit, Red Eagle Mining (TSXV:
ving a tough call for President Santos, be- RD), AngloGold Ashanti, Eco Oro Minerals
cause no one wants the job, according to (TSX: EOM) and Continental Gold (TSX: 1,600 consultations
local newspapers. As many as five potential CNL) participated in a session chaired by At the luncheon organized by the Colombo-
candidates have turned up their noses at Santiago Angel, executive director of the Canadian Chamber of Commerce, ANM
the opportunity, preferring to remain with- Colombian Mining Association. president Silvana Habib said that as a result
in the private sector and not have to handle The session seemed carefully choreo- of a Constitutional court decision the agen-
the litany of woes the ministry currently has graphed to be supportive and not too cy must now consult with communities be-
on its plate. These include the possibilities critical of the government until CNL CEO Ari fore awarding concessions and that it plans
of power cuts and/or rationing caused by Sussman broke ranks and told it like it was to undertake 1,600 consultations with may-
and the challenges the company has to ors this year.
advance its Buritica discovery to become a
mine.

No private sector help

Bad weather meant that the Air Canada
flight former minster Tomas Gonzalez was
Photo: Icarus Jet

due to take to Toronto for the PDAC was

cancelled, which meant he missed the
Colombia Day event in any case, as did the
president of the National Mining Asso-
ciation (ANM) Silvana Habib, despite them
Not for govt officials being offered a lift on the private jet of a Ambassador Carmen Sylvain

© 2016 Colombia Gold Letter. All Rights Reserved. 5


Feature
Mining Conflict
By Don Clarke, General Manager, CES
donclarke@black-river.ca
A
s a result of the mining boom and
an ever-increasing global appetite
for metals mining companies ven-
tured into non-traditional mining
jurisdictions and have not only discovered a
bonanza of new deposits, but they have
also encountered a wave of unprecedented
social opposition and conflict. As a result of
working in higher risk non-traditional min-
ing jurisdictions, coupled with the growth of
social media and anti-mining transnational
NGOs conflict for miners is not likely to go
away anytime soon. My experiences and
research show that social conflict is often
not just against a mining project, as there
Photo: The Northern Miner
are often sub-surface factors such as inter-
est and fear that mask the issues behind it.
I also learned that conflicts usually have
warning signs, over a period of time and
there is usually an event or issue that ignit-
es the issues/problems between the par-
ties. Once a conflict develops the costs to
mining projects escalate and this is usually
the point where miners ask ‘do we really
know what is going on in the project area?
Do we have the right people handling
relationships with key stakeholders? Do we
understand the expectations we created?
Could we have managed expectations more
prudently? Could we have avoided the
conflict? How can we solve this problem?’
By observing mining/community con-
flicts I have found that there are several
factors that contribute and if left unadd-
ressed or unchecked then conflict increases
in intensity. This is the point where it really
begins to cost a project. When you peel
back the layers of issues you realize that
there were several reasons, factors or incid-
ents that led to conflict, such as:
 The company lacked an effective strat-
egy to mitigate social issues and risks.
 The community relation’s team was
inexperienced, lacked direction and was
comprised of ineffective personnel.
 The company was ineffective negating
local corruption and political interest.
 There was little value or importance giv-
en by senior management in establish-
ing a positive relationship with the
community so no trust was established.
 The company was unaware of how de-
cisions were made in the community
and did not receive approval or consen-
sus for the project to advance.
 The company did not integrate social
risk management or consider stakehold-
er relationships as part of its core bus-
iness model.
 Initial social issues were poorly man-
aged and allowed to morph into a con-
flict that attracted external groups with
interests in larger-scale conflicts.
 Senior management did not properly
understand the social risks and lacked
appropriate social data in making decis-
ions concerning its stakeholder engage-
ment and relations efforts.
© 2016 Colombia Gold Letter. All Rights Reserved.
@ColGoldLetter
 The company did not adequately add-
ress community concerns about the
project particularly environmental, cult-
ural or rights-based in nature.
 The project moved onto the radar of
anti-mining groups as it advanced from
exploration (few impacts) to pre-devel-
opment (greater impacts) and became
vulnerable to attacks from outside agit-
ators that prey on the local capacity of
the community.
 The project development and commun-
ity timelines were not aligned or under-
stood clearly.
 There was a lack of participation by the
community in the project.
 People who never lived in the comm-
unity heavily influenced it but with little
real interest in its socio-economic well-
being or development.
 Communications between the company
and the community were poor.
 The field team did not reporting prop-
erly so senior management was un-
aware of issues within the project area.
 The company did not understand local
and external interests in the project.
 The community felt excluded from the
benefit process and believed that the
bulk of the wealth derived from mining
in terms of taxes, levies and fees would
remain with the provincial or national
governments.
 There was a lack of technical capacity in
the community in dealing with mining
companies and mining related matters.
 The community was consumed with
greed and wanted greater benefits than
the project could offer.
 Companies had staff that were dismiss-
ive or negative towards communities.
 Miners attempted to operate in areas
where mining was clearly unviable as
No.56 / April 2016
Anti-Mining protests
the community was against the sector
from the onset.
 The community did not have good past
experiences with mining and formed
negative attitudes towards it.
 The community and company had diff-
erent perspectives on development and
prosperity.
 There were ideological and philosoph-
ical differences between the parties that
could not be overcome.
 There were rich and powerful folks in
the area who’s privileged right was to
protect the environment against mining
or any other development even though
the majority of the community or region
lived far below the poverty line and
were in desperate need of work.
 The community had weak governance
and lacked leadership, which failed to
achieve consensus (support).
 The company made promises and failed
to deliver on them.
 The community decision-making process
was poorly designed, and/or ineffective,
which prevented the community from
making decisions about their develop-
ment and well being.
Mining conflict has become a very costly
for mining companies and according to a
Harvard Kennedy School study, conflict, can
cost upwards of US$20M/week for mining
projects that range in value from US$3B
and US$5B, up to US$10k/day during initial
exploration and up to US$50k/day during
advanced exploration. Miners who overlook
the importance of social due diligence,
community engagement and stakeholder
relations have increased exposure to social
risks and if not addressed early on they can
become an expensive and troublesome
issues. An ounce of prevention is worth a
pound of cure. CGL
6
 @ColGoldLetter www.ColombiaGoldReport.com No.56 / April 2016

Project Report

Cerro Quema
Analysis Future Catalysts
High-grade Au  High-grade Au Final permit soon

In Panama  Clear path to production Project financing

 Exploration upside Regional exploration

Pershimco Resources Ready to start building a high-grade gold mine

Looking over the La Pava orebody

T
he wind blows across the platform constructed to host
much of the mine infrastructure for Pershimco
Resources’ (TSXV: PRO) Cerro Quema project in Panama’s
Los Santos province, rattling the board where the
development plans are posted as CEO Alain Bureau gives an
orientation to the future mine site.
Located between what will be the initial pits, the La Pava and
Quema orebodies, Bureau highlights the close proximity of the ore
bodies to the platform where the infrastructure will be built and
overlooking where the company sees future exploration resource
growth that will bring a much needed boost to the local economy.
The project area is surrounded by barren-looking hills that were
Financial Model (US$1,275/oz Au)
NPV (5%) US$121.7M
IRR 41.4%
CAPEX US$94.7M
AISC OPEX US$652/oz
deforested decades ago by cattle ranching, a sector that is suffering
from the drought that El Niño has brought, and that the ranchers
themselves have amplified across most of the peninsula by cutting
down the trees.
Understanding that water is a crucial issue for local comm-
unities, one of the first acts of the company when it obtained the
project in 2009 was to start building sedimentation traps on the five
drainages from its project area so that eroded soils would not enter
and cloud the Quema river. “We built these with the people and
explained to them what they were for. People working to protect
their environment generated enormous civic pride and generated a
lot of support for the project as they could see that we cared about
the environment too,” he said.
The region could clearly benefit from the mine’s development
both economically and environmentally, with the mine develop-
ment providing an opportunity to reforest some of the denuded
hills and reestablish vegetation that would help maintain water
sources and prevent erosion.
A recent PFS optimization saw the company opt for contract
mining, to bring down capital costs to US$95M from US$117M and
in the process, boost the project’s internal rate of return from 23%

© 2016 Colombia Gold Letter. All Rights Reserved. 7

 @ColGoldLetter No.56 / April 2016

Project Report
and indications of a copper porphyry at depth as evidenced by Cu-
Au-Mo in some of the deeper holes drilled (see photo below).
Indeed, copper is likely to be the long-term future of Cerro
Quema once the gold oxides have been mined, which is partly why
the company recently acquired a package of concessions held by
Bellhaven Copper & Gold (TSXV: BHV) directly NW and along strike
from Cerro Quema. “We need to show that the copper element is
real so it is important to keep advancing this,” he said.
Exploration of the underlying copper potential will take time and
money and is something that will be tackled in earnst once cash
starts flowing from gold production. If PRO is able to define an
economic copper orebody, the next question will be who would
mine it? Would that be the time for PRO to be taken out by a larger,
copper specialist company? CGL

CEO Alain Bureau outlines the Cerro Quema mining plan

to 41.4%, at an attractive all-in sustaining cost of US$652/oz Au.

The new plans will see ore trucked from the two initial pits to the
platform for crushing before being conveyed to a nearby valley to
form heap leach piles. “We think we may be able to load run-of-
mine material on the leach pads but we will install a crushing circuit
anyway to have flexibility. We will also use this to produce rock for
construction,” he said.
With the plans in place, the company is only waiting for its
environmental permit before it can start mine development, which
it expects to receive it in the near future. Once the permit is
received it will look to complete a US$110-120M financing to fund
the project development and close out an existing US$15M bridge
loan. “We have term sheets out with five bankers and a backup list
too. We are looking at raising US$80-90M in debt and US$25-30M
via equity. We want to keep the number of shares outstanding
under 500M and we think half of the equity raise will be taken by
existing shareholders. Our target is that by the end of April we will
have all the finance in place,” he said. PROs shareholders include
Agnico-Eagle (18.5%) and The Sentient Group (18.5%).
The current plan with reserves of 488koz P&P anticipates a five-
year mine life and average production of 10,000 tpd using a heap
leach, CIL ADR plant to produce 78koz/y Au from 1Q17.

Exploration upside
PRO is confident that exploration will identify much more ore in the
future to extend the mine life and its geologists are ready to
commence a two-phase 20,000m drilling campaign to test several
targets identified through geophysics and mapping at Idaida, Cerro
Caballito and La Pelona targets. “There is not just five years mine life
here but something much bigger,” says Bureau. “We need to get
cash flow positive to be able to continue exploration without
depending upon the market and fund-raising.”
VP Exploration John Kapetas is also planning a 30 line kilometer
ground IP programme over regional Au-Cu targets that is just
waiting for a decision to proceed. “The production story that brings
cashflow allows us to go into a much larger exploration pro-
gramme,” says Bureau.
In addition to the Au oxide, there is a high-sulphidation system
Drill core showing the transition from Au-bearing oxides to Cu-bearing sulphides

© 2016 Colombia Gold Letter. All Rights Reserved. 8

 @ColGoldLetter
Exploration News
Cosigo Resources (TSXV: CSG)
Together with Tobie Mining & Energy filed suit against
Colombia under the rules of arbitration of the UN Comm-
ission on International Trade Law (UNCITRAL) claiming wrongful
expropriation, made without compensation, of its Taraira South
concession in Vaupes. The suit states that CSGs concession
application received both technical and legal approval from the
government by April 2009 but it was never granted until 16th Sept
2009 and only signed on 29th October 2009, the same day that a
resolution creating the Yaigojé Apaporis Park was published, and
even after the park was created the National Mining Agency
continued to receive annual canon payments. “The substantial
delay was clearly for the improper purpose of foreclosing the legal
grant of the mining concession,” states the suit.
The suit continues that the special administrative unit of Na-
tional Natural Parks of Colombia started a prior consultation
process as the mining concession approvals were being reviewed
that took no more than 20 days and contained many errors or
deficiencies that it says violates various articles of ILO 169 (relating
to prior consultation of indigenous communities). CSG claims falsi-
fication an creation of fraudulent records by government officials
and seeks US$16.5B based upon the Fe and Au deposits underlying
the concession and US$11M for costs accrued in preparing the site
and obtaining the mining lease and payments made to Colombia.
“The placement of the Yaigojé Apaporis Park over the Taraira South
mining concessions was an illegitimate taking, both founded in
fraud and without compensation,” says the suit, and, “The course of
conduct of Colombia, as witnessed through its agencies, courts, and
representatives, makes clear that fair opportunity before the law
and due process of law are not available.”
Eco Oro Minerals (TSX: EOM)
Notified the government of a dispute under the FTA be-
tween Canada and Colombia. EOM says the dispute has
arisen out of the government’s measures and omissions that have
directly impacted the rights granted to it to explore and exploit its
© 2016 Colombia Gold Letter. All Rights Reserved.
No.56 / April 2016
Angostura project in Santander. These include the government’s
unreasonable delay in clarifying the limits of the Santurban Paramo
and whether it overlapped with Angostura, and its persistent failure
to provide clarity as to EOMs right to continue developing its mining
project in light of further undefined requirements and later as a
consequence of the February Constitutional Court decision, which
broadened the prohibition of mining activities in paramo areas.
EOM is open to continue amicable discussions with the government
regarding settlement of the dispute, but if an acceptable settlement
cannot be reached during the next six months, EOM may submit the
dispute to international arbitration and seek a declaration of a
breach of the FTA and monetary compensation.
Atico Mining (TSXV: ATY)
Will undertake a 5,000m underground drilling campaign
in 2016 at its El Roble Cu mine in Chocó to infill and
explore the northern extent and downdip of the Zeus orebody. In
addition, it will undertake a 2,000m regional drilling campaign to
test one or two targets that exploration has identified. The com-
pany has paid down a significant part of its US$12M long-term debt,
with the amount outstanding as of February being US$6-8M. The
company intends to pay down more debt throughout 2016 as there
are no early payment penalties for doing so.
Batero Gold (TSXV: BAT)
Reported results from 11 holes drilled at the La Cumbre
deposit at its Batero-Quinchia project in Risaralda.
These holes represent 36% of the company’s planned 2015/2016
infill drill programme. La Cumbre near surface drill highlights
include: 106.9m @ 1.47 g/t Au & 2.34 g/t Ag in hole DDH-ZO-011
and 22.3m @ 1.19 g/t Au & 1.25 g/t Ag in hole DDH-ZO-004. The
2015/2016 infill drill programme was initiated after receipt of a gap
analysis from Heap Leach Consulting outlining steps required to
move towards a production decision on the higher grade central
portion of La Cumbre. Prior to drilling, 9,593m of drill core were re-
9
 @ColGoldLetter No.56 / April 2016

Exploration News

logged and an updated geological model was completed. 30 infill

drill holes totalling of 3,000m are planned for 2015/2016. An
additional 12 holes have been completed and assay results are
pending. The infill drill results at La Cumbre continue to outline
additional volumes of higher grade oxidized Au mineralization in the
deposit’s core which grades in excess of 1.0 g/t Au and occurs near
and at surface. Infill drill results also extend the trend of La
Cumbre’s higher grade core to the south. “We are pleased that the
results from our 2016 drill programme continue to outline grades of
over 1+ g/t Au in the large continuous zones of mineralization at La
Cumbre,” said president & CEO Felipe Ferraro.

Antioquia Gold (TSXV: AGD)

Reported that the main development tunnel at the Gua-
ico deposit of its Cisneros project in Antioquia is now
more than 211m advanced. The main Guaico vein structure was
intersected at ~135m and averaged 1.2m in width with some areas
up to 1.5m wide. The vein structure is brecciated and strongly
mineralized with pyrite and chalcopyrite. Six samples were taken
across an average true thickness of 1.02m and the weighted
average for these samples was 63.2 g/t Au. Electrical infrastructure
on site is now complete including the main transformer.
Section of BATs La Cumbre deposit
Pacifico Minerals (ASX: PMY)
Completed a drilling programme at its Berrio project in zone is 21.7g/t over 2.2m from channel 12 in the El Alacran tunnel.
Antioquia with intercepts including 0.36m @ 16.93 g/t Au Underground mapping reveals that generally shallow-dipping
& 13.00 g/t Ag in hole BE16-026 and 0.67m @ 6.69 g/t Au & 6.50 g/ individual veins and vein zones in the El Alacran and Montana
t Ag in hole BE16-029. Drilling targeted three zones along the tunnels can be connected between development levels by steeper-
contact between the Segovia Batholith and Berrio Sediments with dipping lift-off veins resulting in a general step-wise shallowing of
11 holes completed for a total of 986.20m. Drilling demonstrates underground development and at-least four vein-zones towards the
the contact is either faulted or intrusive, varying along strike. When NE and over a total known vertical distance of approximately 40m.
faulted the contact acts as a conduit for ascending fluids mani- “The observation of a linked vein system from underground
festing as alteration and or mineralization. exposures at La Golondrina is an important one that adds a new
exciting element to the previous stacked and sheeted horizontal
Royal Road Minerals (TSXV: RYR) vein model. This observation effectively opens up the potential for
Announced results from 60 saw-cut channel samples tak- steeper-dipping Au mineralized shoots, or lift-off veins between
en from active underground workings at the La Golon- shallower dipping vein and vein zone bodies across the project
drina Au mine in Nariño. The company completed a saw-cut area,” said president & CEO Dr Tim Coughlin.
channel sampling and mapping programme on four active
underground mining levels at La Golondrina to confirm the high- Goldsource Mines (TSXV: GXS)
grade nature of vein-hosted Au mineralization and to test vein Completed its first Au pour at its Eagle Mountain mine in
zones and vein stockwork zones in the host-rock outside of and Guyana. Commercial production is anticipated in 2Q16,
adjacent to the main vein bodies. Vein samples across all active which requires achieving 80% of nameplate capacity (1,000 tpd).
workings average 31.1 g/t Au over 0.3m highly variable but average Tailings are being retained as inventory for future reprocessing.
vein widths. The best channel intersection to date across a vein Phase I calls for a 1,000 tpd open pit-gravity plant. “Our first Au
pour is an extraordinary and historic milestone for GXS. … Our
immediate focus over the next several months will be to ramp up
production to the designed nameplate capacity and to demonstrate
that the economic viability outlined in the PEA is achievable,” said
president Yannis Tsitos.

Pershimco Resources (TSXV: PRO)

Received approval from the Panama government, by min-
isterial resolution, for the exoneration of taxes on all local
and imported goods and services for all work performed on the
Cerro Quema mining concessions, including all contractors partici-
pating in the project development and import duties, covering
practically all supplies and equipment required for the construction
and operation of the mine. The exoneration has a positive impact
on the project’s NPV and IRR. “This exoneration also clearly
demonstrates the level of priority this project has for the Azuero
region and the positive approach the Panamanian government is
taking towards its plan to make the mining sector a pillar of its
economy within the next years,” said VP Latin America Octavio
Choy.
Cross section of Royal Road’s La Golondrina project

ABOUT COLOMBIA GOLD LETTER: Colombia Gold Letter is published twelve times a year during the first week of each month. The information contained herein is derived from sources believed to be reliable but no warranty expressed or implied exists between the recipient and
the Publisher that this information is accurate. The contents of Colombia Gold Letter are intended for information purposes only based on news and information obtained and/or researched by the Publisher and is not intended to be construed as advice to buy or sell shares in any
security or asset. The Colombia Gold Letter is intended to be authoritative, critical and independent. The Publisher is not a stock tipper or promoter and is not paid, sponsored, provided with stock options or otherwise enticed to write positive pieces about the companies covered.
The Publisher does invest in some of the companies’ active in the Colombia gold sector and ends up with dogs as well as winners. The Publisher has shares in: CNL and CMJ. The Publisher has been involved in mining information research, analysis and publication for over ten years
including roles such as investor relations, media relations, senior reporter and research consultant for companies involved in mining and exploration, and reputable industry information providers. The Publisher is not a registered securities professional and as such is not qualified to
give personal or individual investment advice. Resource investing is risky and you could lose pounceart or all of your investment. Consult a registered investment professional before making any investment in any security. For more information contact please write to
Paul.corresponsal@gmail.com. COPYRIGHT: © 2016 Colombia Gold Letter. All Rights Reserved. Unauthorized duplication or distribution of all content herein prohibited. This document is copyright protected and may not be copied, disseminated or distributed without the prior
express consent of the publisher.

© 2016 Colombia Gold Letter. All Rights Reserved. 10

 @ColGoldLetter No.56 / April 2016

Exploration News

GoldQuest Mining (TSXV: GQC)

Announced an update on the district wide exploration of
its Tireo project surrounding its Romero Au-Cu deposit in
Dominican Republic. GQC geologists have highlighted a corridor of
alteration indicating mineralizing hydrothermal activity, as seen at
Romero. The company is following this with a ground IP geophysical
survey covering over 30 km2. At least four new exploration targets
considered worthy of drilling have been identified. In the area
surveyed to date, 17 grab samples returned over 1 g/t Au, with the
highest sample returning 9.7 g/t Au. “Our new exploration targets
display a number of similarities to our 2012 Romero discovery,
which was discovered by drilling targets generated by the first IP
programme deployed in the region. … GQC has always stressed the
importance of the Tireo trend as a potential mining camp capable of
hosting multiple deposits. We view the results of the ongoing
programme as the roadmap to potential new discoveries,” said
chairman Bill Fisher.

Dynasty Metals & Mining (TSXV: DMM)

Received the environmental authorization for an open pit
at its Dynasty Goldfield project in Ecuador located about
160km SW of its Zaruma Au mine and mill. Dynasty Goldfield
qualified under Ecuador’s small-scale mining regime and is subject
to a fixed 3% royalty and no windfall tax. The small-scale mining
regime allows open pit activities with an exploitation volume of up
to 1,000 tpd per concession, a total of 3,000 tpd for the three
concessions under consideration. Dynasty Goldfield has over 1Moz
Au & 8.5Moz Ag in the M&I categories and another 1.1Moz Au &
9.9Moz Ag in inferred. “This is a significant milestone for DMM, one
which establishes a permitting framework for us to build and grow
our Au production in the future in respect of this project, subject to
obtaining adequate financing and finalizing a development plan and
budget. We are now proceeding with registration of this author-
ization and look forward to implementing a plan for the develop-
ment of several shallow open pits along this system when economic
conditions are appropriate and capital is available for this project. …
It is anticipated that any production from the Dynasty Goldfield
Mill assembly at RDs San Ramon mine development
project would be processed at DMMs Zaruma plant, and will assist
in filling the spare capacity,” said CEO Robert Washer.
Condor Gold (AIM: CNR)
Re-negotiated the terms to acquire 100% of the Espinito
Mendoza concession in the heart its La India project in
Nicaragua. The revised terms end a dispute between the sellers of
the concession and CNR and allows the company to advance the
concession on terms acceptable to it. The Espinito-Mendoza con-
cession hosts a NI 43-101 compliant mineral resource estimate of
908kt @ 6.66g/t Au for 208koz Au and a Soviet classified resource
of 1,442kt at 13.03g/t Au for 513koz Au. The enlarged Mestiza vein
set includes epithermal Au veins on Espinito Mendoza and the
surrounding La India concession and has a NI 43-101 compliant
Mineral Resource of 1,490kt @ 7.47g/t for 333koz Au, and a Soviet
resource of 2,392kt at 10.21g/t for 786koz Au. The Mestiza vein set
is excluded from CNRs PFS and PEA. CNR made a cash payment of
US$30k to Mestiza, a further cash payment of US$470k is due by 1st
June. Additional payments of US$10k per month are payable for 20
months commencing 30 days after the further payment. Mestiza

Tireo Formation, chargeability anomalies & argillic alteration

© 2016 Colombia Gold Letter. All Rights Reserved. 11

 @ColGoldLetter No.56 / April 2016

Corporate News

GoldQuest to raise C$3M

GoldQuest Mining (TSXV: GQC) intends to complete a
non-brokered private placement of up to 15M shares @
C$0.20 for gross aggregate proceeds of up to C$3M.
The net proceeds will be used for general working
capital purposes. There are currently 177.7M shares outstanding
and following completion of the private placement, GQC will have
192.7M shares outstanding. GQC will pay a 7% finder’s fee for
subscriptions arranged by Cormark Securities.

Royal Road to raise C$1M

Royal Road Minerals (TSXV: RYR) intends to
undertake a non-brokered private placement of up to
20M units @ C$0.05 for aggregate gross proceeds of up
to C$1.0M. Each unit will be comprised of one share and half a
warrant exercisable for two years @ C$0.10. Proceeds will be used
for initial drill-testing of the high-grade La Golondrina Au project in
the La Llanada Au district in Nariño.

HPX exercises Cordoba warrants

High Power Exploration (HPX), a private mineral
exploration company indirectly controlled by mining
entrepreneur Robert Friedland, exercised its C$0.20-
per-share warrants in Cordoba Minerals (TSXV: CDB)
providing CDB with proceeds of C$1.5M. Following
the exercise of the warrants, HPX controls about 32.4M shares, rep-
resenting 37.3% of the issued and outstanding shares of CDB. “The
early exercise of warrants by HPX is a strong vote of confidence in
our highly prospective San Matias Cu-Au project, where we believe
the potential exists to find a world-class discovery,” said president &
CEO Mario Stifano.

Metminco (ASX: MNC)

Signed a heads of agreement (HOA) with RMB
Australia Holdings to purchase Minera Seafield, owner
of the Quinchia Au project in Risaralda that has a NI 43
-101 mineral resource of 2.8Moz Au. The Quinchia
portfolio covers 6,043 hectares of granted concessions
and an additional 3,792 hectares of pending applications, and
contains a number of deposits and exploration targets including
Miraflores, Dosquebradas and Tesorito. The acquisition includes a
near-term development opportunity at Miraflores that contains
resources of 1.88Moz Au & 3.8Moz Ag, and which has been the
subject of two prior PEAs, a FS that is largely complete, and an inter-
nal technical report completed by SRK Consulting. There is also an
inferred mineral resource of 920koz Au & 1.04Moz Ag at Dos-
quebradas. MNC will issue RMB with 50M shares @ US$0.05 on the
HOA becoming binding. On settlement, MNC will issue RMB with
350M shares @ US$0.05 and pay a maximum of A$7M in royalty
payments to RMB from operating cashflows. “The acquisition
presents an important, new, opportunity for MNC. The near-term
CGL Analysis Au production opportunity at the Miraflores project
combined with the drill ready Au-Cu porphyry system
identified at Tesorito, makes the Quinchia portfolio a very attractive
acquisition,” said director William Howe.
This deal marks a sea change in the attitude of RMB towards the
Quinchia project to basically get it off the books and book a loss on
its investment. Quinchia may well have found a home much sooner
if RMB had not previously been intent on recovering its full
investment in former owner/operator Seafield Resources (TSXV:
SFF) to which it extended a C$16.5M debt facility in February 2013
to fund a FS on Miraflores. SFF sought creditor protection in
September 2014 and entered receivership after defaulting on the
loan.
B2Gold takes Gramalote impairment
B2Gold (TSX: BTO) took a US$36.2M impairment
charge on its Gramalote JV in its 2015 financial year to
31 December, adding to the US$96.3M impairment
charge it took in 2014. BTO has a 49% interest in
Gramalote with AngloGold Ashanti owning the
remaining 51%. BTO conducted an impairment analysis whereby the
carrying value of the investment in Gramalote was compared to the
investment’s recoverable amount which was determined to be its
fair value less costs of disposal utilizing discounted cash flow models
incorporating estimates and assumptions that included such factors
as future production levels, mill recoveries, operating and capital
costs in its life-of-mine plans, future metal prices, foreign exchange
rates and discount rates, and an updated long-term Au price
assumption of US$1,250/oz, down from US$1,300/oz in 2014 and a
discount rate of 6.5%.
Continental names Restrepo
president
Continental Gold (TSX: CNL) promoted Mateo
Restrepo to president from EVP. Prior to CNL
Restrepo was VP corporate affairs at Glencore
subsidiary Prodeco, Colombia’s third largest thermal coal producer.
Restrepo holds a MA in Public Administration from Harvard
University and a BA in Business Administration from Berkeley
College. “Since joining the company in August 2015, Mateo’s ener-
gy, strong leadership skills and key relationships have made a pos-
itive impact on the company,” said CEO Ari Sussman.
Dynasty names Gellibert interim CFO
Dynasty Metals & Mining (TSX: DMM) appointed
Ruben Gellibert as interim CFO to replace Nick Furber.
Gellibert is a CPA and Ecuadorean Authorized Public
Accountant and has spent the last six years at DMM
working closely with Furber.

© 2016 Colombia Gold Letter. All Rights Reserved. 12