The market for junior resource companies has been nothing short of abysmal for the last six months and it’s just plain tough to get excited about anything. Having said that, I just can’t pass up the opportunity to get involved with a company that has as much potential as Santa Fe Metals. Santa Fe has all the makings of a winning junior resource company with the prospect of near term production. With an excellent set of properties in Mexico (one of which has very near term production plans), a strong management team and an excellent share structure with just over 15 million shares issued, I feel I can come out of the foxhole for this one.
Cuatro Cienegas Project
The recently-acquired Cuatro Cienegas Project, Santa Fe’s flagship property, is located in Coahuila, Mexico and consists of 3,408 hectares in six mineral concessions. The project is believed to host a breached anti-cline of cupriferous “red bed” type sandstones up to 20 meters in thickness, which can contain very large high-grade copper deposits. In the past, these sedimentary formations have accounted for 30 percent of the world’s copper production.
What makes this project such an exciting prospect is not just the potential for high-tonnage, high-grade copper ore, but the potential for near-term production. As part of the agreement, Santa Fe must put the project into production by November 7, 2009. That means that the project must begin producing more than 1,000 tonnes a day of leachable copper oxides within the next 18 months. Santa Fe plans to develop exploration drifts into the flat-lying sandstone beds as part of its overall exploration plan. The resulting material will be crushed, stacked and acid leached.
The resulting pregnant solution will be run over launders containing scrap iron to produce cement copper – simple, old technology that works. This will provide the company with the funds to continue their exploration plans as the proposed mine site is surrounded by blue sky country. This process will not recover any silver, which may remain as a residue in the heap. The vendor has reserved the right to recover this silver but would assume the environmental liability.
The project has excellent multi-element deposit potential. Copper isn’t the only base metal that has been found on the property. Channel samples have yielded values ranging from 42 to 180 grams per tonne silver, three percent to 4.7 percent lead and 4.7 percent to 9.7 percent zinc. It is possible that there could be a carbonate replacement deposit on the west side of the deposit. This requires further evaluation. These sulphides would be treated in a conventional flotation plant which of course would recover silver-more possible upside.
The Cuatro Cienegas project was acquired from Minería Melina S.A. de C.V. for US $500,000. In addition, the company must pay five additional installments of US $100,000 annually (one has already been made) and 3.5 percent net smelter return royalty payable on future production revenues, of which one percent can be purchased for US $1 million at any time. Melina also agreed to subscribe for 500,000 shares of the Company at $0.60 in a private placement valued at $300,000. The shares are subject to a four month plus one day hold, as per exchange regulations.
