Read part 1, Gold mine tour in Colombia; and part 2, Gold miner drilling in Colombia

Photos by Jim Marx

CAMP MARMATO, Colombia (TC) -- The mujer in this photograph is Omaya. She is weighing grams of gold dust brought to her by one of many wildcat miners on this mountain in Colombia.

Omaya works at one of several mills, legal and illegal, that dot the upper and lower halves of El Marmato, a mountain some three hours' drive from the striking city of Medellin. When a campesino brings his load of rock into the mill for the old cyanide treatment, Omaya can guess fairly well just how much gold will wind up in the bottom of the pan.

"Empirico," she says, meaning I think that she has plenty of experience. Omaya knows where the stooped and grizzled rock diggers work their part of the mountain. In a way, she is an empirical geologist, grading each peasant miner by their geography.

As the world of numbers and Canadian resource filings go, today, a week or so after we met Omaya at Colombia Goldfields' budding project in Latin America, I got to read the first official resource report from the mountain. The Toronto company* grading this mountain, Colombia Goldfields (OTC: BB: CDGF, Bullboard); (TSX: T.GOL, Bullboard) and adjacent properties just published its so-called 43-101 resource report, a legal (in Canada) sizing up of the number of ounces, the richness of the rocks, so to speak, and other geological assay criteria that are critical to making a gold mine a success these days.

The inference in the independent (independent of the company, that is) report figures 2.6 million ounces of gold for the mountain's upper half. The evidence comes from nine diamond-tipped drills boring into 12,000 meters of the upper mountain.

But I won't bother you with the stats. You can see them for yourself at the Colombia Goldfields home on the Internet. You see, I found Omaya's tipping of the scales much more interesting than the published report.

She had real gold running through her fingers, the old gal did. Hers was an exercise that many of the of the 800 or so Colombian breadwinners on this mountain practice each day, heaving their canvas sacks of rock across the fire roads of the mountain. Degrading the steepest parts of El Marmato with water. Crawling through makeshift holes in the ground looking for the rocks that will yield a decent amount of gold when the poor sods reach the mills.

Slicing and sluicing and eventually, causing landslides that bury the local hospital, the town hall and who knows, maybe a fellow countryman or two. All of that is in Part II of this series, in which I probe what is really going on at El Marmato, in this Andean patch of gorgeous terrain not far from the city of Medellin, where I taught English a long time ago at Centro Colombo Americano.

I guess I was lucky in that I connected personally with the company's chief geologist, Jeffrey Brooks. He's been around the block in Latin America. Señor Jeff holds a doctorate from Washington State University. He seems to care about the mountain, about his small band of 30 or so mostly kids working the data on site ... and about the villagers who ultimately will need to vamoose from the mountain if what the company sees in this Marmato project comes to pass.

Brooks, updating me with his own interpretation of the independent resource estimate on Monday May 12, 2008, was quite candid. Just as he was about the quality of the mango and papaya and platano at the roadside stands dotting the 3-hour drive to Marmato a week or so ago.

"Well, it looks like this," Brooks says. "At a 0.3 cutoff grade (minimum grade necessary to be considered economic), we actually lost tons from the previous resource estimate (1.5% fewer tons) but the grade is higher (1.05 versus 0.88 – a19.3% increase) and accordingly there was an increase in contained ounces (2.55 million ounces versus 2.18 million ounces – a 17.2% increase). Things look pretty good to me."

I'm not going to travel the several iterations of Colombia Goldfields that go back to 1998, via Conquistadore Gold and other entities. It's all in the company's press releases. But I will say this, as I have before: several companies have sifted the dirt here in Colombia, a country known for its orchids, emeralds, coal and empanadas (my favorite). The country, before the violence that has consumed millions of lives during the past 80 or 90 years, and before the drug trade and the kidnappings and the political weirdness, the motorcycle assassins and Pablo E. and on and on, this country led Latin America in ounces of gold pulled from the ground.

Take that and sip it with your Coca Tea.

Still, the story of Colombia Goldfields and its small roster of Canadian executives, along with the London and Geneva bankers who tell the stories that raise the money for these mining endeavors, this tale is only as good as the heart you have to believe. See, it's somewhat easier for me to believe than for you, volditos mios, to believe. I've seen and touched and scoured much of the mountain and the back office and the front office with my pen, my only prospecting tool. I've traced Señor Jeff's surveys in the gravel of the fire roads.

The company Colombia Goldfields, its young geos, senior geo Señor Brooks and the drillers and even the Toronto and Medellin and Panama City execs connected to the nuevo gold explorer, all mostly having behaved in a responsible fashion, working with local government, hiring local talent, shepherding the young folks who one day want American and Canadian dollars in their ATM accounts, shuddering when landslides bury parts of the mountain's cottages, this company -- big sigh here! -- must once again turn to shareholders to raise the money it will need to purchase surrounding properties and keep drilling into some 60,000 meters of mountain.

You'd think that would be easy in a 2008 world of almost $1,000-an-ounce gold. But it's not. There's a ton of competition for the capital that yields Au resources. I guess that makes sense: companies such as Colombia Goldfields wanting to identify a deep-hole, or not-so-deep-hole, of mineral that it then can assign a dollar value to. And then sell to some vast mining company that wants to make a go of Colombia.

Even the company's bankers are frank about raising money via private placement, an exercise that already has happened twice in the past six or so months: raising several million Canadian dollars but also diluting current shareholders (did someone say moi?)

Says R. Edward Flood, a managing director of investment banking at Haywood Securities' London office and a Nevada-trained geologist whom I know fairly well: "We will have to do a financing to raise money for the Mineros transaction (purchasing a Colombia company with properties on the mountain). Since it is cash flowing we will probably employ some sort of hybrid debt, like a bond with warrants. That way the company doesn't take on so much dilution ... and frankly the mine is not being purchased for its production but for the potential resource it represents at the bottom of the pit."

For my money, I like Omaya's approach in her cubbyhole office. Omaya la mujer at the creaky old mill with the conveyor belts going round and round and round. That is, she weighs the gold dust, pays for it, collects the Au in a small canister that looks like a film capsule. Hands it off to the owner of the mill, who happens to be mayor of the village.

As for the appetite for Colombian gold, investors were almost surely nonchalant about the results from the resource estimate. The company's stock barely moved in Toronto and on Nasdaq and in Germany.

I could quote the CEO in Toronto, Randall Martin, but you know, he's much too driven to provide any perspective. I mean, like almost all top execs, he's out to raise his money and stitch together the surrounding properties and pay millions of dollars for other parts of the mountain. And then, he hopes, sell the lot to one of the big three gold companies who are desperate to land a foot or three and a heap of drill rigs in Colombia.

The laser-focus of a CEO in search of money ... well, put it like this: expect a one-sided tale that resembles a fable. That's his job. You'd have more luck ruminating on the bronze C-3PO the villagers have fashioned in the abandoned town square than you would taking lunch with most CEOs in search of financing.

Brooks, the middle-aged geologist and gracious host who hems and haws and as I said, seems to care about the stability of the mountain, seems to care about the 800 or so folks who live on it and really seems to care about the fruits and veggies his small band of planners and young folks eat each day at the company camp, put it to me thusly today: "We suffered from a lack of arial coverage in the drilling in the resource estimate. By this I mean that wherever we drilled we found Au (hey you!); however, for various reasons, logistics and time being the most important, we were not able to cover more of the license area. The drilling completed to date since the cutoff for inclusion in the resource estimate has been the same as the previous drilling – where we have drilled we have found Au."

From this, Brooks says in a bit of insight that is his own on-site opinion, the conclusion is "inescapable: we will add more ounces in the next iteration of the resource estimate.”

Oh Lord, let it be so -- this is what I want to say, pray/shout inside the little chapel the mostly Catholic villagers go to on Sunday mornings. But I don't say it or pray it. I've already seen Omaya's turnstile weighing of the gold that is peppered all over the place here. That and the sluices and the surrounding parcels and the 25,000 ounces of Au that already come out of this mountain each year in Barney Rubble fashion -- eso, es verdad! -- already have me looking forward to my next platano and refried bean with sour cream breakfast. Campesino style.

-- Thom Calandra in Medellin

Thom Calandra is of service at ThomCalandra.com.

* Thom and his family own $45,000 worth of Colombia Goldfields shares at current prices. The Toronto company's stock trades in Canada, Germany and on Nasdaq in the USA. Thom and family have no intention of buying or selling any current or additional shares of the company until at least three months after this series on El Marmato is completed. Thom paid about $60,000 for the shares several months ago. He and his photograher have received no fee or compensation from Colombia Goldfields, unless you count some empanadas, some platanos and frijoles and three-hour jeep rides into the countryside.

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Thom Calandra

www.ThomCalandra.com

http://thomcalandra.blogspot.com

Email: thom.calandra@gmail.com