The Dominican Republic: Overcoming earlier difficulties in the mining industry

Materials World magazine
10 Nov 2014

Michael Schwartz takes a look at the re-emerging mining industry in this Caribbean republic. 

It is estimated that, at 2014 prices, the Dominican Republic hosts US$58bln of proven metallic and mineral reserves. More specifically, according to Sodogeo, the nation’s geological society, there are 27Moz of gold, 168Moz of silver, 296,000t of copper, 2.7Mt of zinc and 11,000t of nickel. Mining in the Dominican Republic has achieved a remarkable turnaround. Little more than a decade ago, the key gold deposit Pueblo Viejo (then called Rosario) lay abandoned. Metal contained within large boulders had leached into a local river, causing it to be named ‘blood river’ by local people.

Since then, the damage caused by previous mining has been cleaned up. The Pueblo Viejo Dominicana Corporation joint venture between Barrick Gold (the operator, with 60%) and Goldcorp (40%) has taken over, claiming to treat 40,000m3 of water every day and introducing programmes to ward off stream pollution.

Pueblo Viejo, at the foot of the Central Cordillera mountain range, is now an 11km2 site some 100km northwest of the capital city, Santo Domingo. Barrick Gold’s share of proven and probable gold reserves comprises a resource of 9.7Moz, to be mined over at least 25 years. And yet, no one can claim that this has been
an easy enterprise.

The start of commercial production in early 2013 ran to schedule, but non-technical problems emerged. The national President changed and local activists made their presence felt. Governments of the Dominican Republic have had a long-term aim of reducing the country’s dependency on tourism as its key income source. This policy led to the President in 2009, Leonel Fernandez, signing a deal about which his 2013 successor President Danilo Medina publicly stated, ‘For every US$100 in gold exports, Barrick Gold receives US$97 and the Dominican people will receive US$3. This is simply unacceptable.’

A contract far more favourable to the Dominican Government was negotiated in May 2013, costing Barrick Gold more than US$1bln in market prices at the time. However, the local groups remain worried about contamination from rocks and are ready to fight any subsequent proposals for mining.

Barrick Gold remains optimistic. Andy Lloyd, Vice-President of Communications, confirmed the company’s commitment in a public statement ‘In our case, we reached a new agreement with the Government in 2013. Today, Pueblo Viejo is a large, world-class mining operation and we look forward to working with our partners in the Dominican Republic to ensure the mine’s success over the long term.’

The Government acts…

The Dominican Republic’s Congress created a Ministry of Energy and Mining in July 2013, but for some time there was no incumbent. Eventually, in April 2014, President Medina appointed Pelegrín Castillo Semán as Minister.

The appointment was crucial. The Mining Management Office on the island was associated with delays in processing applications. Since then there have been changes. Jeffrey Wilson, President and CEO of Vancouver-based Precipitate Gold, launched his company’s operations in 2012. He stated, ‘In our recent dealings with the Dominican Republic’s Mining Department, subsequent to the appointment of the Minister, we’ve seen an increase (albeit slight) in the pace at which applications are processed within the Mining Department. There is still substantial room for improvements and streamlining of processes but timelines are being shortened in some instances.’

...but pessimism remains

Business confidence is, of course, crucial, and for many years the Fraser Institute has been polling senior mining executives on their views of national and regional administrations. The Dominican Republic does not rank high in the Institute’s index of overall perception, ranking 97 out of 112 administrations, ahead of only Bolivia and Venezuela in Latin America. Trade barriers, the legal system and uncertainty regarding existing regulations have all pulled the Dominican Republic down from its position at 60 for 2012–2013.

In index after index, the Dominican Republic is seen unfavourably – even for investment attractiveness. And yet, there are contradictions. Uncertainty among survey respondents regarding current mining legislation runs at 59th place, but only a small percentage rules out investment altogether. The Dominican Republic also ranks 73rd in uncertainty over environmental regulations, but not a single respondent ruled out investment altogether on environmental grounds.

A mining sector that is ‘simply inconsistent and confusing’ and a Government suffering from an ‘inability to process exploration licences’ are the descriptions by two respondents. However, is this picture accurate?

At the time of going to press, Precipitate Gold’s contractor Energold Drilling Corporation had completed initial drilling at the Ginger Ridge gold zone. Ginger Ridge lies within Precipitate’s 100% owned Juan de Herrera project, in the Tireo Gold Camp. Recent mapping has indicated evidence of a rhyolite dome, a factor often associated with several forms of gold and volcanogenic massive sulphide deposits. Indeed, Ginger Ridge is characterised by the correlation of gold and silver as well as arsenic, antimony, barium, lead, copper and zinc.

Wilson explains, ‘Our projects are essentially unexplored, or certainly underexplored, and have seen little or no systematic prior exploration work and no prior drilling. These are grass-roots, green-field types of projects where we’re applying early-stage exploration techniques, including prospecting, mapping and sampling, with limited ground disturbance.’

Some 1,200m of diamond drilling has just been completed, comprising six–eight holes. This initial drilling will focus on the main trench zone as well as associated geophysical chargeability and multi-element geochemical soil anomalies. Subsequent holes will test target areas on strike to the northwest and southeast. ‘The prospect of testing the Ginger Ridge zone is part of the company’s objective to make a bona fide new discovery within the highly prospective and underexplored Tireo Gold belt in the Dominican Republic’, says Wilson.

As well as the Tireo Gold interest, Precipitate Gold focuses on Sonora State, Mexico, and on Canada’s British Columbia and Yukon. Involvement in these other markets has influenced Wilson, who stated, ‘For those of us who are used to dealing in jurisdictions with greater mining and exploration history (such as Canada, the USA and Mexico), where government bodies have implemented simple and efficient processes for things such as staking and permits, the DR can be frustratingly slow. The lack of an online component to the application submission makes it difficult for foreign entities to accomplish the requisite processes without having a person or people in the country to assist in facilitating that work. In a challenging capital market environment, such as the one our sector is currently experiencing, that can be a deterrent to foreign companies being able to complete the applications. That said, the processes are fairly clear and transparent.’

Wilson adds, ‘Continued exploration success, and ongoing improvements to processes and timelines with the Dominican Republic Government and its new Ministry, will ultimately determine our longevity there’.

Moving forward

Despite all the negative reporting, there is the example of Glencore’s Falcando ferro-nickel project, in forested mountains less than 100km from the capital Santo Domingo. Proposals for a new national park would have prohibited the expansion of Falcando by another 1,380ha. Initially, the park was approved by the Senate and Chamber of Deputies. However, President Medina vetoed the measure in September 2014, questioning whether the national park was constitutional and citing the country’s mining laws and international treaties.

And there was one more possible factor. A lawyer for Glencore estimated that if a national park was designated in the area, Glencore could expect something in the region of US$4bln in compensation. Whatever the reasons, the Falcando expansion can now go ahead.

Other operators are also active in the country. Since 2002, Unigold has been exploring and developing gold projects on the island, concentrating within the 75km-wide Cretaceous Tireo formation volcanic sedimentary rocks, which are known for hosting key deposits. By the end of June this year, Unigold had resumed its 5,000m drilling programme within its Neita concession (Neita is Unigold’s flagship project in the Dominican Republic).

Neita comprises 22,616ha and lies 200km north-east of Santo Domingo, with its western limit the Haitian border. It is situated within the Greater Antilles volcanic arc, which developed during the Cretaceous period. Unigold considers this belt to be one of the most prospective and underexplored gold regions in the world.

Exploration has started with the Loma de Montazo target, 2km from Candelones, where inferred resources of 39.5Moz averaging 1.6g/t for 2Moz of gold have been defined. This site returned the largest and strongest IP chargeability and resistivity response on the property.

Another company active in the Dominican Republic is Everton Resources, which is headquartered in Ottawa and holds 300km2 of rights adjacent to the Barrick Gold/Goldcorp project at Pueblo Vieja and another property near Falcando.

Mining has meant that the Dominican Republic is well on its way to changing from a tourism-dominated economy. Perceptions of it from those not actually involved in mining on the island need to be changed, as the Fraser Institute responses show. For those willing to accept slow-moving processes – and even these are speeding up – the country can repay investment handsomely.

In the November 2014 issue of Materials World, in the feature entitled ‘The Dominican Republic: overcoming earlier difficulties’ (page 43), the map on the opening page incorrectly depicts the Ginger Ridge (Precipitate Gold Corporation) and Romero (GoldQuest Mining Corp) projects to sit within the boundaries of the Jose Armando Bermúdez National Park. Both projects in fact lie outside of the boundaries of the National Park, as correctly shown on the revised map below. Materials World apologises to Precipitate Gold Corp and GoldQuest Mining Corp for the inaccuracy.