Market Summary

Gold Chart

Silver Chart

Silvercorp Metals

Click Here to View Website


SNS Precious Metals

Click Here to View Website


Panama Gold

August 20, 2010

By David Bond, Editor

Molejon Manager Lazaro Rodriguez surveys the mine's three main pits  
Penonome & Panama City, Panama " In the 50 years following Christopher Columbus's accidental discovery of the Americas, Spaniards hauled some 21 tonnes of gold out of the east-west isthmus of what is now called Panama. There ended, by AD 1550, Panama's mining industry. Her dense jungles, populated by snakes and bugs and panthers, and overburdened with mud so slick and greasy you can bury a Land Cruiser in, forbade future prospecting.

Fast-forward 460 years, and Panama is back in the gold-mining game. Petaquilla Minerals, Ltd., (TSX: PTQ) entered gold production this year at its 2,200 tonne/day Molejon open-pit mine north of Penonome, the first of several new precious and strategic metals projects on Panama's plate.

“Panama lies on a bed of copper and gold,” Robert Henriquez, Panama's Minister of Commerce and Industry, told us in a recent interview in his Panama City office. “We feel that mining is an area of great potential for us.” He endorses Petaquilla's Molejon mine as a model for future mining ventures in his country, including Inmet's (TSX:IMN) nearby prospective $4 billion Cobre porphyry copper-gold deposit 20 km south of the Caribbean shore in Colon province. “They are doing a very nice job and we support their project.”

Forget what you think you know about Panama. Bananas, notes Henriquez, account for just $150 million of Panama's $25 billion gross national product. The nation's debt rating was upgraded to Investment Grade status earlier this year by Fitch, Moody, and S&P, joining Mexico, Brazil and Chile in the BBB-minus category. Panama grew its economy even in the depths of the global recession and its jobless rate peaked at 6.4 per cent, versus the 10 per cent in the U.S. and 20 per cent in Spain.

Ambitious public works projects are under way as well, including the $5.2 billion widening of the Panama Canal (under budget and ahead of schedule for its opening in 2014 " the new locks will handle ships with a beam of 200 feet, double the current width) and some $13.6 billion planned for infrastructure improvements, mainly in the areas of transportation, including a new international airport near Cocle to take some of the load off of Tocumen. If anything sucks about Panama, it's the traffic in and around Panama City: included in the budget are an urban mass-transit system and replacing the city's overcrowded and antiquated public buses. The country recently negotiated a free-trade agreement with Canada and is awaiting the U.S. Senate's approval of a similar treaty. (For reasons unknown to this writer, the Obama Administration has held up free-trade deals with both Panama and Colombia that were negotiated during the Bush Administration.)
  Panama Commerce Minister Robert Henriquez (center) greets a reporter (left) and Petaquilla Gold President Rodrigo Esquivel

We digress. In 1968, the United Nations initiated a mineral survey of Central America and turned up multiple gold and copper findings the rivers and streams flowing through what is now the 842-square-kilometre Petaquilla Concession. Richard Fifer, a third-generation descendant of Panama ex-pats from Chehalis, Washington, is a player in Panama politics and business. Educated in geophysics, geology and finance, Fifer took an early interest in the Petaquilla district, as did Fifer's father's contemporary, the late Panamanian President Omar Torrijos, who saw Panama's copper and gold deposits as a way out of the country's chronic poverty. But mining was back-burnered in the aftermath of a chain of military dictators, culminating in Manuel Noriega's fiasco in the late 1980s. Following Noriega's removal from Panama by U.S. troops in 1989, Panama has conducted constitutional elections every five years, beginning in 1994.

The Petaquilla mining district returned to the front-burner status during the presidential tenure of Omar Torrijos's son, Martin. When Martin Torrijos's Democratic Revolutionary Party was turned out of office during the 2009 elections after a peaceful term (executives may not succeed themselves), it was replaced by the even more pro-mining Democratic Change Party, of which PTQ's Richard Fifer was a founding member. As part of current President Ricardo Martinelli's cabinet, Henriquez has been charged with making Panama the first Central American country to achieve First World status.

“Israel has done it, Brazil has done it. We will do it, too” he said.

Molejon is set to produce about 100,000 ounces of gold-equivalent ore annually over an 8-to-10-year mine life, which could be extended should preliminary laboratory successes in recovering gold from the muddy saprolite overburden prove up in the field. You can't run gold-enriched mud through a jaw-crusher or a ball mill, but you can pelletize it with concrete and extract the yellow metal in a column with the right reagents. Mill capacity, currently at 2,200 tpd, is being expanded to 3,000 tpd, with a future second phase to 5,000 tpd from its existing foundations.

John Kapetas is an agreeable Australian who joined PTQ as exploration VP four years ago after a decade of jungle geology in Africa and Indonesia. He likes the odds of finding at least one more million-ounce gold deposit in the Petaquilla batholiths, and has spent his time with the company walking and canoeing its rivers and streams, collating data from the U.N.'s initial research with more modern sampling and mapping. Of special interest are gold anomalies along the Cocle del Norte River. Petaquilla has set up a 90-man camp and drilling station not far from the Atlantic coast to test Kapetas' not terribly unconventional theory that where there's gold in the river, there's a gold mine waiting to be born  nearby.

The first phase of drilling at the Oro del Norte camp will be completed in Q3 2010, which could lead to a mine-construction decision next year following an N.I. 43-101 workup. The company recently announced discovery of a new epithermal gold vein system from its drill and trench program there; Oro del Norte is within trucking distance (20 km) of the Molejon mill.

PTQ geologist John Kapetas (right) inspects core at Oro del Norte  
“Panama is an easy place to work in,” says Kapetas, who has charge of PTQ's $200,000 per month exploration budget. “Molejon is a simple ore body in an andesite host.” Between Molejon's two gold-bearing quartz veins is a vast quantity of aggregate waste rock that has a commercial potential for the road-building that will be necessary to Inmet's Cobre mine, slated to enter production in 2014. Mud is so predominant in the Panamanian jungles that as much as a metre of aggregate must be overlaid before a road can be stabilized. Petaquilla paid more than $40 per ton for the stuff to build its roads. The company can produce similar aggregate from below its upper quartz zone for a fraction of that price, making Molejon's lower gold zone much more cost-attractive.

Grade control is critical to Molejon. Lazaro Rodriguez, PTQ's vice president of operations and manager of the mine, oversees a futuristic high-tech operation that computer-monitors output from the three pits and mill throughput down to the decimal point. Processes can be tweaked from there to maintain a constant 2.9 gram/tonne mine grade. Three ball mills digest feed from crushers, sending 74-micron muck to thickener tanks, then to leach tanks. The solution then passes through carbon pulp columns, then to the cell room. Tailings water is recirculated into the mill. Molejon produces a gold-silver Dore and Petaquilla controls the product's marketing through to the end-user.

“I think we can get more than 10 years out of that mine,” says Chairman of the Board Fifer, given preliminary test results of Molejon's saprolite gold returns. Built at a cost of $150 million, Molejon was financed by $69 million of debt, with the balance in equity. On 19 August, PTQ announced it had reached a forward gold sales agreement with Deutsche Bank for $42 million of the remaining debt. In essence, Petaquilla will commit to deliver 68,243 ounces of gold to the bank over the next five years " about 6.3 percent of the company's total gold resource at Molejon.

“The lower payments that will now be due to the Company's note holders will allow for an increase in funds to be directed towards the exploration of the Oro Del Norte region where significant gold mineralization has been discovered,” Fifer said. Also, the company is in the process of spinning off its considerable mine-building and infrastructure development capabilities into a new company, Panamanian Development and Infrastructure, Ltd. PTQ will retain a 47.78 percent interest in the new entity. Fifer will settle for a small portion of the $4 billion Inmet is expect to spend building the Cobre.

“Our track record should speak for itself, and for the future of mining in Panama,” Fifer says. “We have opened the door for the mining industry here.”

  PTQ Chairman Richard Fifer, at his finca in Panama. He works in his spare time to save Panamanian wildlife
Casimir Resource Advisors, LLC, of Cartersville, Georgia, put PTQ on its radar screen in March. Concluded Casimir President Eric T. Allison: “CRA’s review of the Molejon Gold Project has not revealed any fatal flaws. The geological modeling and interpretation is very good and the resource estimates and the Life of Mine Plan based upon them are sound. The mining activities are well planned and appear to be  professionally executed. The plant has successfully gone through its start-up and commissioning  phases and is currently fine tuning its processes and upgrading equipment as needed to fully achieve and maintain its design capacities. The careful attention to grade control coupled with the close interaction with Geovectra to continually revise the mining plan should allow the project to mine sufficient amounts of ore at high enough grades to meet its planned target of 6,000 ounces of gold per month. The exploration efforts are of high quality and are just beginning to tap into the significant potential of the balance of PTQ’s concessions. Additional growth and revenue generating projects are in the pipeline.”

Rodrigo Esquivel is a Panamanian attorney and President of Petaquilla Minerals' wholly-owned subsidiary, Petaquilla Gold S.A. He negotiated the companies' gold-export permits and also the so-called Petaquilla Law, by which the Panamanian National Assembly certified by law PTQ's leases in the batholiths concession. Among its components:

- A 2 percent royalty once mine-building costs have been recouped;

- Monthly inspections holding PTQ to drinking-water standards for water discharges;

- Expenditures of $1.2 million annually on health centers, schools, road-building, agronomic activities, and chicken- and cattle-farming support.

Additionally, PTQ has agreed to re-vegetate 1,000 hectares of jungle for every 100 hectares it digs up and has a “gentleman's agreement” to provide hot meals for the schools it has built. The anti-mining NGS can pound sand, or in Panama's case, mud.

“It has been a wonderful experience for me to be involved in commercial mineral production. We are creating jobs and wealth in an area that was long forgotten,” Esquivel reflects. “Mining can be in a good harmony with the environment and it is the policy of Panama's government to develop the mining industry.”

Commerce Minister Henriquez says miners and explorers are welcome in Panama so long as they play by the country's very stringent environmental rules and establish good social contracts. “We are advancing mining projects that previously were only on paper. We welcome their state-of-the-art technologies, their commitment to international standards of environmental quality, and their willingness to support, and to get the support of, their local communities,” he said.

I like these guys. They know their country, they know their geology, and their federal government would like them to succeed. What a refreshing departure, on all fronts, from the U.S. government's thuggery in the hard-rock western United States.