Michael Schwartz examines how and why Nicaragua has become a mining success story.
Nicaragua has long been respected as a key regional gold producer – the historical output of its mines totals 7Moz. In 2016, three commercial mines produced 270,000oz gold – La Libertad 140,000oz, Bonanza 70,000oz and El Limon 60,000oz. In addition, there is some exploration, although no mining, for copper.
Mark Child, Chairman and CEO of Condor Gold, a UK-based AIM-listed exploration company, sets the scene. ‘Nicaragua has been mining gold for hundreds of years. There is a mining culture and gold is the third largest export. Concessions are granted for 25 years and are both exploration and exploitation, while investors can own 100% as there is no free carry interest to the government.’
Further endorsement of Nicaragua comes from Greg Smith, CEO of Calibre Mining Corporation, a Vancouver-based exploration and mine development company. ‘Also very important is the high level of safety and security in Nicaragua, the safest country in Central America. Specific to mining and exploration, Nicaragua is very supportive of mining as it is an important part of its growing economy, with its gold production having doubled in the last ten years, according to the Nicaragua Chamber of Mines (NMC). There are fewer and fewer jurisdictions in the world that promote mining.’
The geology of Nicaragua shows three areas hosting high-grade, economically viable gold deposits – Quaternary volcanic and felsic intrusive rocks in the west, Mesozoic volcanic rocks in the east and a belt of Palaeozoic metamorphic rocks in the north. It is this combination of deposits that has created Nicaragua’s rich gold resources.
Both companies interviewed in this article have invested in Nicaragua and are benefiting from the government’s generally sympathetic attitude towards such enterprises. Condor Gold has complete ownership of 12 exploration concessions either at previous gold-mining sites or close thereto. It is working to expand one of the better-known Nicaraguan gold sites, the former Noranda-owned La India mine, which produced 570,000oz of gold at 13g/t prior to its closure in 1956.
Various factors have combined to create Nicaragua’s favourable status. Foreign investment is the most obvious, reflecting the country’s pro-mining stance. This
has led to increased production and therefore higher revenue, while advantageous prices have also been crucial. The NMC assessed the total foreign direct investment
in the mining sector in Nicaragua at US$793m for the decade to 2016.
Changes to legislation
In July 2017, the Nicaraguan government confirmed its support for mining by passing into legislation the Empresa Nicaragüense de Minas (ENIMINAS or Nicaraguan Mining Company). The key objectives of the state-owned mining company is the execution and development of Nicaragua’s exploration, the rational exploitation of her mining resources and to encourage foreign investment.
Pro-ENIMINAS support comes from Child, who explains, ‘The establishment of ENIMINAS signals the government is pro-mining, otherwise they wouldn’t create a state-owned mining company.
‘My understanding is that the Ministry of Energy and Mines will transfer 13% of Nicaragua’s mining concessions to ENIMINAS. If an overseas investor wants to explore on one of the concessions held by ENIMINAS, they will have to do a deal with ENIMINAS. Under the new law, ENIMINAS is not entitled to any shareholding in concessions already granted or the renewal of those concessions.’
Smith is another supportive voice, describing its establishment as an opportunity. As he points out, ‘The mineral titles currently controlled by ENIMINAS have been abandoned, and if they are able to attract new companies to invest and advance these projects that will benefit the overall mining industry in Nicaragua.’
According to Nicaragua’s state-owned Investment Promotion Agency, the area of land nationally available for mining concessions is 17,000km2. Of this, 409km2 – with expiry dates ranging from 2026 to 2040 – has been acquired by Condor Gold. The Toronto Stock Exchange recently provided conditional approval for Condor Gold to obtain a secondary listing, and a prospectus could be filed on SEDAR before end 2017. The latter’s NI43-101-compliant resource stands at 18.1Mt at 4g/t for 2.32Moz of gold, plus 2.66Moz of silver at 6g/t.
Indicated resources total 9.6Mt at 3.5g/t for 1.08Moz of gold, with inferred amounts of 8.5Mt at 4.5g/t for 1.23Moz. Studies regarding open-pit mining at La India have defined a probable reserve of 6.9Mt at 3g/t gold for 675,000oz and 5g/t silver for 1.185Moz. Meanwhile, a detailed Whittle Enterprise Optimisation Study pushes the pit deeper and has 955,000oz contained gold at 2.6g/t gold, producing 100,000oz/y gold for the first five years of production.
Interestingly, one of several scenarios investigated by Condor Gold was for exclusively open-pit mining at La India, with underground mining taking place at a later date, funded out of cash flow. For this surface project, a study indicated what Condor Gold describes as ‘a robust and economically viable base case for the project’.
What is involved is the mining of 0.8Mt/y of ore for an ultimate total of 6.9Mt at 3g/t of gold for 614,000oz – a recovery rate of 91%. Life of mine would be eight years and the overburden ratio 13.6:1, while final annual gold production would be 79,300oz/y at an all-in sustaining cost of US$690/oz.
On a fiscal note, Condor Gold and Calibre Mining confirmed that Nicaragua’s taxation and royalty system for this type of project comprises 3% royalty on sales, tax deductibility for most upfront capital expenditure and 30% corporate tax.
While Condor Gold did not disclose the destination of the gold in question, the La India site does not pose any infrastructure challenges, as a paved road and a power grid run through the concession. Resettlement of local people will, however, present a challenge and this matter is under discussion.
Calibre Mining Corporation
Regarding government support, Smith told Materials World, ‘Nicaragua has a solid mining law in place. They are pro-investment and, as with all projects around
the world, if they pass the socio-economic phases involving permitting and development with proper public relations and local consultation, it is our view that Nicaragua will be supportive towards the development of its mineral assets by various foreign entities.
‘We continue to develop our significant land package – it was a past producing area. There are good, strict mining rules for permitting and advancing projects that of course have to be adhered to and this is a sign the government is aligning towards supporting and advancing proper mining.
‘Mining is an important part of the economy and a significant source of foreign investment. Jobs within the sector have one of the highest average salaries, and this is looked upon favourably.’
In addition to its broad portfolio of gold, silver and copper, Calibre Mining works with other companies in joint ventures (JV), as well as wholly owing certain mining properties. The list of sites that Calibre owns is as follows:
- Primavera, gold and copper
- Monte Carmelo, gold
- Rosita, gold and silver
- Carpatos, precious and base metals – at early stages
El Paste, at early stages, with indications of a gold presence
Calibre also has JVs with Iamgold and Centerra. At present, the company is not selling metals as it is at exploration stage, although existing operations are free to sell on global markets.
Calibre has noted big steps forward in recent years regarding the country's infrastructure. There have been improvements to roads and bridges, upgrades to electricity distribution and advances to water supply, among other things. A ready pool of skilled workers is also on hand.
On the other hand, artisanal mining has a long history within Nicaragua’s North Atlantic Autonomous Region, with three municipalities, Siuna, Rosita and Bonanza, making up the so-called mining triangle. Indeed, the gold rush of 1880 sparked the colonisation of this mining triangle.
Condor Gold does not itself undertake artisanal mining. However, Child did confirm to Materials World that ‘artisanal miners are the best people at identifying surface expressions of gold. Condor’s geologists regularly map and sample areas of artisanal miner activity’.
He added. ‘The government’s slogan is "Mining for All", by which they mean support for the co-existence of artisanal miners and large commercial mines. It is not just about supporting the commercial mines, but that is what they do.’
Calibre Mining also does not actively participate in artisanal mining. However, as Smith explains, ‘We certainly work side by side with the artisanal miners in many cases and can benefit from their efforts as they can be excellent prospectors. Our neighbour Mineros SA does have existing mining and processing operations and it has incorporated a significant number of local miners into its operations.’