by Wally Graham, Resources Roadhouse
Latin Resources has two projects in Peru, the Mariela iron ore project and the Guadaluptio iron heavy mineral sands project. Magnetite and minerals sands are an interesting combination. How will they work together? The magnetite, from our perspective, is a no brainer.
The large South American steel manufacturer Gerdau operates a plant some 25 kilometres south of the Guadalupito project and we anticipate selling our magnetite into their plant, from which they will produce pig iron for steel manufacture.
Guadalupito is our flagship project. Besides the magnetite it is also a multi commodity mineral sands project.
It was identified by one of our geologists two years ago, who said that if it was in Australia it would have been in operation 20years ago.
You recently announced a new JORC-compliant inferred heavy mineral resource at Guadalupito. How do the numbers stack up? The resource within the 1070 hectare TresChosas area is 257 million tonnes at 3.9 per cent heavy minerals in situ.
The latest estimate also updated 850 hectares of the Heldmaier area for 136 million tonnes at 5.5 per cent heavy minerals.
We now have a total at Guadalupito of 393 million tonnes at 4.5 per cent heavy minerals in situ for 17.7 million tonnes of contained heavy minerals.
Like the Guadalupito project the term ‘Heavy Minerals’ covers a lot of ground. What particular commodity is emerging as the key at Guadalupito? The major mineral we have at Guadalupito is magnetite and andalusite, which is used in the manufacture of refractory bricks for kilns.
It is also becoming a replacement for zircon in a number of products.
Most andalusite currently comes out of South Africa; it’s not a huge market with sales of globally of 400,000 to 500,000 tonne but will increase as it potentially replaces some Zircon products.
What is worth noting however, is that over the past four years the price for andalusite has gone from around $120 per tonne to $350 to $400 per tonne.
What about Mariela, what type of project is that shaping up to be? We consider Mariela to be situated in, what is emerging to be, an iron-oxide/copper/gold (IOCG) province.
BHP Billiton has just staked around 400,000 hectares through the district, Antofagasta from Chile has around 600,000 hectares and CST Mining recently sold its Mina Justa copper project for over $500 million.Metminco’s project is around 300 kilometres north of Mariela
We think Mariela could be a very big IOCG project, but of course, we can’t be totally sure until we have conducted enough drilling to be certain.
And there is currently some drilling being carried out at Mariela by your Joint Venture partners? That’s right, we joint venture the Mariela project to a Chinese concern called Junefield Group, which is our largest shareholder.
They will spend $35 million on a Bankable Feasibility Study to earn a 70 per cent interest.
They recently moved a second drill rig onto the project after drilling just three holes of the current 20 hole program.
They must like what they’re seeing? Perhaps,I don’t think they would move a second rig in if they didn’t.
How long have you been there? We hold 100,000 hectares in the area; we started pegging ground there in 2008.
This particular project, Mariela that we are focused on at present is 5,000 hectares.
Have you been able to identify any other reasonable targets within that tenement holding? IloNorte is displaying some copper gold potential – we have already drilled eight holes there and anticipate drilling a further 10 towards the end of this year.
It’s in a very good area. Southern Copper own three mines there and they have produced around 400,000 tonnes of copper.
It appears you are in a reasonably populated area in mining terms so there must be a good deal of infrastructure in the vicinity? Mariela is 40 kilometres from a major port, from which Southern Copper exports all its copper.
One of our key strategies has been to locate close to ports and close to infrastructure because we don’t have the money to build railways and ports.
We’re focused on mining districts – for a number of reasons.
One, for infrastructure and also for community involvement; South America is a very mining friendly jurisdiction and Peru is a great example of that.
Community relations and social issues are very important and it is very important for a company to get these things right.
That’s why we maintain a strong local focus in terms of where we want to sell or product and who we employ.
Is your strategy of looking to supply local markets contributing to the local aspect of the projects? We employ 40 local people out on site. We have about 60 to 70 people working for us in Peru now; around 40 to 50 of those are at Guadalupito, and about 10 more at IloNorte, which is a small town within Mariela.
The local people recognise us as an avenue for employment, which for us is important.
Has South America always been the main target region for the company? We started operations in Peru in 2008 as a private mining company. We were the third Australian explorer into Peru; there are now twelve.
I was told at the recent Latin Down Under conference that in 2008 there were 20 Australian explorers in South America, there is now 80.
I think everybody needs to look at what is happening in South America versus what is happening in Africa.
There’s no doubt South America has really become a popular destination. What was the attraction for Latin Resources to go to Peru? We always considered Peru to be an ideal jurisdiction to set up a mining operation.
Two years ago our confidence was confirmed when the Fraser Institute rated Peru as the third-best destination for mining. It has always been in the Fraser Institute’s top ten.
There are over 900 million people in Latin America and the growth in the region is obvious.
Brazil has just eclipsed the United Kingdom as the sixth largest economy in the world.
Forget China for the moment, there are six countries in South America that have grown over six per cent over the last three years.
The internal demand for construction and materials in Brazil, Chile, Columbia, Peru, Ecuador -Mexico also falls under the Latin America banner - you would probably put Argentina on that list too, is phenomenal.
Vale sells all its iron ore to China, there’s not enough iron ore left to actually supply the growth that is occurring in South America.
Would these internal South American countries be your targeted customer base? Gerdauis the largest steel producers in Brazil at 21 million tonnes per annum. They have 52 plants scattered across the Americas, and they’re using scrap iron to feed most of those plants.
That’s their model, but they are running out of scrap metal. They can’t buyenough economically viable iron ore from Vale. They are actually starting to buy their own mines now.
How does the cost of mining in Peru compare to Australia? To employ a geologist in Peru costs us $60,000 - $70,000. We wouldn’t get change out of $200,000 to employ an Australian geologist.
To drill a diamond hole in Peru costs around $150 per metre, while in Australia it can be anywhere from $300 per metre.
You’re obviously happy working in Peru? Absolutely. Watch this space; I think South America is going to be a wonderful mining destination.
