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Why illegal miners are bad for publicity and stock prices

Thom Calandra
2 Comments|October 15, 2013

Illegal miners are good. Illegal miners are bad.
 
In Colombia, a highly rated gold and silver property is drawing more and more wildcat miners who use explosives and mercury to scratch a living wage.
 
The bad hombres are good when they unearth fresh veins, oxidized minerals and other deposit clues.
 
They're also bad -- for publicity and stock prices. Illegal miners cause accidents. They rarely tidy up the landscape. Not just in Colombia, but everywhere.
 
This month I have received a half-dozen notices that so-called artisanal miners are increasing in number at Continental Gold Ltd.'s (TSX: T.CNL, Stock Forum) flagship development in Antioquia.
 
Last week, one 33-year-old illegal miner died after an explosion near the area of the property, called Buriticá about an hour's easy drive from the city of Medellin. See El Colombiano article.
 
The miner might have ignited what they are calling crazy dust, or polvo loco -- a powder of dynamite used by army engineers. Carbon monoxide poisoning usually accompanies such explosions, which can be sparked by pick-axe sparks and are happening anywhere in Colombia where local miners enter abandoned tunnels and former mines.
 
It is reasonable to say thousands of miners might now be in the area of the municipality of Buriticá  a picturesque coffee-growing region in the state of Antioquia.
 
"I don't know the quantity but illegal miners have become an increasing problem at Buritica," says Paul Harris, editor of Colombia Gold Letter, a monthly report. "They are not impeding the development works that are under way as they are in a different area to where these are occurring." Mr. Harris lives in Medellin.
 
Continental Gold owns the concession and operates the property, which originally belonged to syndicator Grupo de Bullet. The company, in my visits, has been making rapid progress as it develops the site into a legally permitted mine.
 
Continental Gold's Ari Sussman acknowledges an increase in the number of illegal miners, "but not in the thousands," he says.
 
The company is telling investors it is "in the process of negotiating formalization agreements with five local artisanal mining cooperatives," Mr. Sussman, chairman of Continental, says. 
 
Continental's gold and silver property regularly reports intense grades of mineral at Buriticá.  The most recent one shows more than 800 grams of gold per metric ton in a brief intercept of ore. 
 
The publicly distributed reports, and successful assays by prospectors the world over, draw illegal miners especially to gold-rich regions of South America, central America and western and eastern Africa.
 
The quest for underground and alluvial gold brings a few hundred dollars a week for 60 or more hours of work. It also brings camp towns, landslides, polluted rivers and streams, crime, shattered limbs and death.
 
Another company that operates in the Colombia state of Antioquia, Gran Colombia Gold Corp. (TSX: T.GCM, Stock Forum), has used binding co-op contracts at its Segovia property for more than a year in efforts to help regulate illegal miners, promote safety issues and extract value from their work via toll-mining agreements.
 
In the case of Continental, which probably will become the first new underground gold mine in pastoral Antioquia in decades, talks with co-ops involve almost two-thirds of the area's illegal miners.
 
The Mining Ministry is reviewing the contracts, "and we expect these to be signed shortly," Mr. Sussman says from Toronto, where Continental is based. 
 
"The government is also committed to evicting those groups that are not part of this process," he says. Continental recently indicated a two-year-old safety program resulted in 365 consecutive days of accident-free hours at Buriticá.
 
At Segovia, which is the site of the former Frontino Mine, Colombia's most prolific gold mine from the 1700s into the early 1900s, Gran Colombia Gold has reduced explosions, the use of mercury and associated criminal activity.
 
"It is not easy, but we are making progress," a spokesman for Gran Colombia says from Toronto. Still, there are so many illegal miners in the region, the company cannot send its own workers and geologists into some of the Segovia area's 27-odd known mineral veins. 
 
Gran Colombia also operates El Marmato, another producing gold and silver mine in Colombia -- one wracked by illegal miners, landslides and toxins. (Photo attached -- El Marmato | Thom Calandra)
 
In my visits, El Marmato appears to be improving. I see less damage to the sloping landscape of the mountain, and I hear of fewer accidental deaths and landslides. The river Cauca and linked streams, however, are still muddy with tainted sediments.  
 
I cannot vouch for Buriticá as I have not been there for almost two years. (I own no shares of Continental. I do own shares of Gran Colombia Gold, one of our TCR 8.)
 
One of my longtime geologist sources says he sees hope.   
 
"Truth is, if Colombia's legal system allowed for a sublease of the near surface like we used to do in the U.S. and Canada, I'd welcome the artisanal miners, says Robert Carrington. The Nevada resident runs a Colombia gold company with properties across the country.
 
Mr. Carrington, of Colombian Mines Corp. (TSX: V.CMJ, Stock Forum), says, "They prospect and do a lot of wrong things, but every once in a while they manage to uncover some things that no modern geologist will ever find. By shear numbers and perseverance they eventually get something right."
 
Week ahead: Off to see Paramount Gold Ltd.’s (TSX: T.PZG, Stock Forum) San Miguel silver and gold project outside of Chihuahua, Mexico.  San Miguel is close by Palmarejo deposit, a Coeur Mining deposit and operating mine on the western flank of the Sierra Madre. I own shares of Paramount (PZG in Canada and USA).
 
Happy Canada Thanksgiving Day, Canadian members of our TCR audience.
 
THE CALANDRA REPORT: Subscribe

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Comments

PANTHERSunite
NOT GOOD!....Excellent article Thom....Please review and do an article on ANACONDA MINING in Newfoundland if you could....Seems that this is a solid little company with room to grow!....PANTHERSunite
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October 15, 2013
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tcalandra
Thanks Panther ... thom
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October 16, 2013
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