Lumina Gold advances Cangrejos, Gran Bestia

Lumina Gold (TSXV: LUM) is on track to complete a first-ever resource estimate on its Gran Bestia gold-copper deposit and an updated resource on its Cangrejos gold-copper deposit before year-end.

The two deposits in Ecuador are a kilometre apart and 40 km from the deepwater commercial port of Bolivar.

The junior, in which geologist and serial mine finder Ross Beaty owns a 17.2% stake, has already defined an inferred resource at Cangrejos, with 8.5 million oz. gold and 1 billion contained lb. copper within 408 million tonnes grading 0.65 gram gold per tonne and 0.11% copper. The company's goal is to upgrade the inferred material to indicated and include expansion drilling.

Gran Bestia, which Lumina confirmed earlier this year can be a satellite deposit, could add to Cangrejos' 16-year mine life.

The Cangrejos camp in southwest Ecuador. Credit: Lumina Gold.

In April, Lumina reported the longest continuous mineralized intersection at Gran Bestia, with drill hole 105 returning 0.62 gram gold and 0.11% copper over 626 metres from surface and ending in mineralization. The hole includes an 86-metre intercept of 1.14 grams gold and 0.13% copper from 224 metres downhole, and 86 metres of 0.93 gram gold and 0.18% copper from 510 metres downhole.

Under the Newmont Mining banner, Newmont Goldcorp (TSX: NGT; NYSE: NEM) had drilled five holes into the area in 1999, but the grades didn't work at a US$300 per oz. gold price, and it had walked away. "We had the Newmont holes, but we didn't know if there was a potential resource there," says Leo Hathaway, a geologist, and Lumina's senior vice-president. "We were intrigued."

But the company focused on Cangrejos, because it didn't have the surface rights to Gran Bestia until late last year.

"We only recently got to Gran Bestia to step out on those holes, and the step outs were pretty exciting," Hathaway says. "Some of the grades are higher than the average at Cangrejos and are near-surface, so we're excited about Gran Bestia because it's new and growing, and it shows signs it might be higher grade."

A work crew inside Lumina Gold's core-storage facility in Ecuador. Credit: Lumina Gold.

What's more, Hathaway and his team believe there could be a connection between the two deposits in the valley that separates them, and which it has currently designated as drainage on its maps.

"Maybe those two deposits connect, either at surface or at depth, and that's what we're going to test at depth," Hathaway says.

While surface geochemistry of the area has not highlighted anything of economic interest, road-building crews came across high-grade breccia at surface, with grades of 10 grams gold per tonne, 4.8 grams gold and 2.3 grams gold.

There is one drill testing the gap.

This year Lumina plans to drill 6,000 metres in 16 holes at Cangrejos and another 11,500 metres in 22 holes at Gran Bestia. The drill program may be expanded if more drilling is warranted in the gap.

"We're looking to finish the metres we've announced by the end of June or early July, unless the zones connect, in which case we would add more metres, which would be a happy problem," says Scott Hicks, vice-president of corporate development and communications. "We're hoping to get the resource updates out as early as the third quarter, but if there's more drilling that will be pushed back a bit."

A core sample from Cangrejos. Credit: Lumina Gold.

Hicks notes that the $20 million financing Lumina wrapped up in November 2018 should fund the company's work program until at least year-end, or early 2020.

The project is at a relatively low elevation by Andean standards (1,350 metres above sea level) and close to existing infrastructure, including the Pan-American Highway.

It is 30 km southeast of the provincial capital of Machala in El Oro province.

Hicks says there are no Indigenous Peoples on the property, and the nearest community is 7 km away.

Changes to Ecuador's fiscal and regulatory regime have also made it a more appealing place for mining companies, he says.

Last year the government eliminated a 70% windfall tax and lowered the net smelter return royalty (NSR) range from 5-8% to a range of 3-8%.

Lumina completed its PEA in June 2018 using a 5% NSR, and Hicks says there is potential for negotiation. "There's a possibility of getting the 3%, and that would add US$80 million to the NPV," he says. Its PEA assigned an after-tax NPV of US$920 million and a 15% after-tax internal rate of return.

"On a macro level, in Quito, the ministries and government are very supportive of the [mining] activity country-wide, and they're doing everything they can," Hicks continues.

Over the last year Lumina's shares have traded in a range of 46 ? and 82 ? per share, and at press time were trading at 56 ?.

The company has 310 million shares outstanding for a $173-million market capitalization. Management and insiders own 27.5% of the company, including Beaty's 17.2% interest.