Cerro de Pasco to soon kick off drill program at El Metalurgista Concession and Quiulacocha Tailings Project in Peru

Cerro de Pasco Resources (CSE:CDPR, OTC:GPPRF) will soon commence a 40-hole drill program at the El Metalurgista Concession and Quiulacocha Tailings Project in Peru after securing a crucial Land Easement via a Supreme Resolution.

The easement has been long-awaited by the company and enables it to advance the historic project toward a 43-101 compliant resource report.

CEO Guy Goulet joined Proactive’s Steve Darling to discuss the milestone.

Proactive: Some significant news out of the company is you’ve got your long-awaited land easement. First off, can you explain a bit about the project itself and what this document is?

Guy Goulet: We’re talking here about some material that has been extracted from the mine. It’s the largest above-ground mineral resource on Earth. We’re talking here about 461 million pounds of silver equivalent above ground. Let’s recall that producing a base metal or precious metal is 40% of the cost of mining. We own the mineral rights on the top of the tailings and the stockpile.

So you’ve been given this land easement. This is basically permission for you to go onto the land.

That’s it. What happened is that the mine was nationalized back in 1971… and the price of metal collapsed in 1999, so they were looking to sell the mine but no one wanted to buy the stockpile because of the acid water and nobody was thinking back in 1999 about reprocessing tailings. We started talking about reprocessing tailings in 2010, maybe 2012. So at the time, the government had to create another entity which was an entity entrusted to take care of historic liabilities. They had the mandate to take care of this acid water. On the other end, we have the rights to the minerals. So there was a procedure over the last two years that we had to go into and last week, the government of Peru signed an easement that enabled us to access the ground and transform that resource into a 43-101 and drill 40 drill holes.

And you want to collect the metal but also provide some clean-up as well?

This project has so many winning conditions. First of all, the mine used to employ 7,000 people. Today, the mine barely employs 500 people. We’re going to bring the wealth back. Secondly, we’re going to assume the cost of treating the acid water. Number three, in 25 years, there will be no more acid water leaking since we will preprocess all of those tailings and that stockpile. Number four, we are going to give the government of Peru US$23 million in income tax from an estimated US$120 million cash flow we are going to earn every year.

You are going to embark on a 40-hile drill program for this 43-101 compliant resource estimate. When do you hope to have that out?

At the moment, we cannot perform those drill holes because it’s still a little wet. This year is an El Nino here. But we think in the next month we will be able to bring the drill on-site and perform those 40 drill holes to transform the resource into a 43-101 resource. We estimate we’ll get from that Preliminary Economic Assessment (PEA) a Net Present Value (NPV) of about US$1 billion. We’re presently trading at a C$60 million market cap, so we expect there will be an adjustment at some point here.

Quotes have been edited for clarity and style