Saturday, July 13, 2024

Investment: Element79’s Lucero Project Garners Major Attention (CSE:ELEM, OTC:ELMGF, FSE:7YS)


Peru’s majestic mountains possess some of the richest gold deposits in the world. Now, one of the highest-grade underground mines in Peru’s history is about to change hands.

The project in question is a high-grade gold and silver development, currently owned and operated by Element79 Gold Corp. (CSX: ELEM) (“Element79”). The project is in the process of being reclaimed and restarted by historic mining firm Compañía de Minas Buenaventura S.A.A. (NYSE: BVN) (“Buenaventura”).

The big news

On Jan. 30, Buenaventura announced its official intent to take back its past-producing Lucero Mine (“Lucero”) project from the Vancouver-based junior miner, Element79. The project isnear Chachas, Arequipa, in the gold-rich mountains of Peru. Notably, Lucero is on a direct path to generating revenue.

The news of Buenaventura’s interest in Lucero reached investors in the stock market, with Element79’s stock price rising over 50% in a day! Here’s why you should also take notice.

Cash-flow machine

Element79 Gold’s flagship is a cash-flow machine. Lucero is permitted for 350 tonnes per day (“tpd”) and planning is underway to bring this high-grade gold mine asset back into production in 2024.

Buenaventura’s interest is a significant stride toward reanimating Lucero and generating revenue from Element79’s “crown jewel” property. Element79 has been the caretaker of Lucero ever since June 28, 2022.

Consolidating its focus in this region and its impressive geology, Element79 acquired the Roxana Vein and surrounding 1200-hectare  property, Lucero del Sur 28, via auction held on May 17, 2023. The Roxana Vein is located strategically just east of the high-grade Lucero gold-silver project

Lucero is a high achiever

Lucero is one of the highest-grade underground mines in Peru’s history, at grades averaging 19.0g/t Au Equivalent (“Au Eq”) (14.0 g/t gold and 373 g/t silver) – with recoveries at the ore processing facility averaging 94.5% for gold and 85.5% for silver. In five years of production ending in 2005, it produced on average over 40,000oz/yr.

Scarce and exceptional numbers

The project hosts an impressive 74 recognized veins, of which only 14 have been commercially explored. A recent sampling at Lucero returned up to 116.8 g/t Au Eq (78.7g/t Au and 2,856 g/t Ag).

Numbers like this are scarce and indicate something exceptional is here. Buenaventura has certainly noticed.

Wisdom of Buenaventura

The Peruvian precious metals producer has experience in exploration, development, construction and mining operations dating back to 1953. It was the first Latin American mining company to list on the New York Stock Exchange, starting in 1996.

Buenaventura certainly has the experience and wisdom to recognize Lucero’s potential.

Past and future of Lucero

Buenaventura abandoned the project in 2005, when gold prices were languishing at about US$400/oz. Buenaventura then decided to sell the property to Element79 in mid-2022 with a buyback option included.

With gold now nearer to US$2,000/oz, the project seems far more feasible to churn a profit. Hence, that’s why Buenaventura submitted a Letter of Intent (“LOI”) to reclaim the project from Element79. 

Leaning on Element79’s expertise

Element79 has a team with a proven track record of building and operating mines, benefiting from decades of experience with global mid-tier and major mining firms. The expertise of Element79’s team, notably in mine planning and development, Andean geology, and mine operations in Peru, played an important role in the current community relations and 2023 mapping and sampling plan.

This will all play a crucial role in drilling for resource value and restarting production.

Another component of the LOI is that Buenaventura has granted Element79 access to valuable historical information from its archives. This will allow Element79 to benefit from a more comprehensive understanding of the property, and therefore, provide greater potential for more effective and efficient mine planning. This knowledge will be instrumental for developing an efficient bulk tonnage extraction and toll processing plan.

Key Terms of the LOI

Under the terms of the LOI, Element 79 Gold and Buenaventura have outlined several key points that promise exciting prospects for the Lucero property:

  • Bulk Sampling Program: A Pilot Bulk Sampling Program is set to commence in mid-2024, aiming to extract a minimum quantity of ore over a 12-month period, to be shipped to Buenaventura’s Orcopampa mill for processing. 
  • Definitive Agreement: The parties are committed to negotiating a Definitive Agreement approximately 90 days before the Pilot Program’s start. 
  • Quantity: Element79 will deliver an average of 200 tons per day of ore to Buenaventura’s Orcopampa facilities under the Pilot Program. 
  • Right of First Refusal: Buenaventura has the exclusive right of first refusal to buy the ore produced by Element79 during the Pilot Program. 
  • Purchase Price: The purchase price per metric ton of ore will be determined per delivery, after sampling and testing by Buenaventura, based on industry standards and the LME (London Metal Exchange) pm price of the day. 
  • Delivery Schedule: Specific delivery schedules will be mutually agreed upon in advance, ensuring smooth coordination with Orcopampa’s operations. 
  • Quality Control: Rigorous quality control mechanisms will be established to meet agreed-upon specifications. 
Ryan Y
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