Estrella Gold Corporation: Gold Prospect Generation in Peru
Overview
Estrella Gold Corporation (TSXV:EST) is a “Prospect Generator” company, focused on discovering new gold resources in Latin America. Exploration is high risk, and Estrella increases the chances for successful development of a major new mine with its prospect generation strategy. The Company focuses on making early stage discoveries of prospective properties and then quickly forms joint ventures with senior mining companies to fund advanced exploration and development,and limiting shareholder dilution. (Hear Rick Rule’s views on Prospect Generation) Estrella has 22 properties in Peru (only), with 14 of these properties funded by other companies through strategic Joint Venture agreements with four separate companies. Estrella has a very small market cap with 31.6 million shares issued and trades with a huge portfolio of properties, including one NI 43-101 compliant growing gold resource.
The Company has a strategic exploration alliance with Cliffs Natural Resources Exploration Inc. (NYSE:CLF) whereby Cliffs fund exploration and evaluation of twenty-four properties identified and acquired. Estrella Gold Corporation currently has four remaining properties that are available for joint venture. These include the Cerro Cori porphyry copper-gold project, the Ccello high-sulfidation gold project, and the Sense epithermal gold project.
Investment Highlights
- 22 Gold Exploration Properties in Peru
- 14 Properties held in Joint Ventures
- Three remaining properties available for Joint Venture: Ccello Ccello, Cerro Cori and Sense
- Strategic Exploration Alliance with Cliffs Natural Resources for iron oxide – copper-gold
- Experienced and successful discovery team in place
Cliffs -Estrella Alliance
The Cliffs-Estrella Alliance is a joint exploration program, where Cliffs provides funding and guidance, and Estrella manages and operates the program. The Alliance is focused on the discovery of iron oxide-copper-gold (IOCG) deposits in the southern Peru IOCG terrain which hosts the world class Marcona Deposit and the nearby Pampa Poroma project. Cliffs is highly experienced in the evaluation, development and operation of ferro-alloy metallic mines and an ideal partner for IOCG exploration in Peru. Cliffs has an exclusive right to acquire up to 80 percent interest in each property that is acquired. Prospective properties which have received a minimum investment of US$50,000 in exploration expenditures, funded by Cliffs, may be nominated to Cliffs as a “Property of Merit”. Any Property of Merit accepted by Cliffs then becomes a project for continued exploration with Cliffs and Estrella each owning a 50 percent interest.
Cliffs is an industry-leading international mining and natural resources company, with an aggressive program to discover new IOCG deposits in Peru. The agreement provides Estrella and their shareholders with the potential for significant rewards. Each Property of Merit that is selected has a minimum expenditure requirement of US$500,000, within a first year expenditure requirement of US$750,000. Cliffs is required to either advance their ownership to 70 percent by funding a minimum of US$4,000,000 including 3,000 meters of drilling within four years of selection, or surrender the property back to Estrella. If Cliffs fails to earn a 70 percent, the property will revert back to Estrella (100%) subject to Estrella granting a small NSR royalty to Cliffs, based on the amount of expenditures Cliffs has made on the property.
Once Cliffs obtains a 70% interest, they must elect either to earn an additional 10 percent interest in the property or they can remain 70 percent owners by issuing a payment of US$2,000,000 to Estrella. To earn the additional 10% interest, Cliffs can either complete a NI 43-101 compliant Pre-Feasibility Study or define a NI 43-101 compliant mineral resource estimate containing a minimum of 1,000,000, ounces of gold or gold equivalent, within four years.
Key Properties
Pucarana Gold Project Joint Venture
The Pucarana gold project contains 1,889 hectares of land located in the Orcopampa Silver – Gold district of Peru. The property is located between Buenaventura Mines’ Poracota Mine and Chipmo Mine. Pucarana is three kilometers southwest along trend from the Chipmo mine, which produced more than 290,000 ounces of gold in 2010 from high grade underground vein mining.
Together, Poracota and Chipmo produced 360,000 ounces of gold and 131,000 ounces of silver in 2010, indicating that the district contains very significant potential for additional mineralization. Pucarana contains gold and silver mineralization hosted in quartz vein zones, and associated with favourable epithermal alteration zones. The project is a joint venture with Esperanza Resources as operator with Estrella holding a 40% interest. Pucarana is located along trend from the current operations of Buenaventura and may host extensions of the mineralized structures.
La Estrella Gold-Silver Property
Estrella’s “namesake” La Estrella property contains 2,500 hectares in the Central Peru polymetallic belt, Department of Huancavelica. This is a region with a history of silver mining dating to the 1500′s. The La Estrella property contains poly-phase gold and silver mineralization. The Project area contains well-developed roads and electricity, and is located 30 km north of the Julcani Silver Mine which began operations in 1955. Previous drilling at La Estrella included 5,796 meters of core and RVC in 33 holes. The drilling identified a mineralized area approximately 1,800 meters long and 300 meters wide which remains open along strike and at depth. Drilling has tested only 200 meters below the surface.
Wide intervals of gold and silver mineralization, averaging 133.5 meters, are present in 18 holes. Estrella’s studies have identified a minimum of 35 million tonnes of mineralization which is open at depth for expansion. Mines Management is now seeking to earn a 75% interest in the property by spending a minimum of US$5,000,000 on exploration and US$500,000 in payments, and by producing a NI 43-101 compliant Preliminary Economic Assessment. Estrella’s 25% interest will then be carried to production, with costs paid back from initial production. A 2,500 meter drilling program is now in progress with results expected during the Q3 of this year.
Isy Gold-Silver Property
The Isy Gold-Silver property contains 3,100 hectares located in the Department of Ayucucho and has been optioned to Lara Exploration. The project is an early stage exploration property acquired and is underlain by Miocene volcanic rocks containing extensive epithermal alteration. Estrella Gold has completed initial reconnaissance mapping and sampling which has confirmed the presence of anomalous gold values in two locations, with associated highly anomalous epithermal-suite metals. The Option Agreement grants Lara the exclusive right to acquire a 100% interest in the property within three years and provides a 1.5% NSR royalty to Estrella. Lara must make the following option payments to Estrella :
On Signing: $ 30,000
On or before year 1 Anniversary Payment: $ 50,000
On or before year 2 Anniversary Payment: $ 75,000
On or before year 3 Anniversary Payment: $100,000
On or before year 3 Anniversary Stock: 50,000 shares of LRA
Lara has the option to purchase 50% of the 1.5% royalty for US$3,000,000 within one year of commencement of production. Estrella and Lara may elect to have the first and second anniversary payments made all or in part in stock.
Summary
Estrella Gold Corporation is a “Prospect Generator” on with a strategic business model that is designed to protect shareholder value, by attracting partners to fund exploration of its property portfolio. Estrella is receiving funding and payments, which allow it to keep the number of shares very low, while increasing the value of its mineral portfolio. As exploration advances, payments to Estrella should increase, and the Company will continue exploring for new discoveries.
Management
John R. Wilson – President and CEO
Mr. Wilson has over forty years of experience and success in all aspects of base and precious metals exploration, discovery, reserve definition, and mine development. His work has included discoveries in Brazil, Nevada, and Peru. He has also done detailed evaluations of numerous deposits and prospect types in varying geological settings throughout the western U.S., Russia, Chile, Peru, Brazil, Mexico, Central America, and Asia. His work for Cyprus Minerals Company, Codelco Corporation, Amoco, AMAX Mining Corporation, and Essex has ranged from initial prospect evaluation to the design and management of regional exploration, deposit modeling, and development programs. Mr. Wilson has a strong field orientation with excellent development skills and a proven record of discovery. Mr. Wilson was previously the President of Animas Resources Ltd.
Mark T. Brown, B.Comm., C.A. – Director
Mr. Brown was appointed a director of the Company in July 2011 and has assisted Estrella in completing the last two financings. Mr. Brown has been involved in the public company markets for the past 18 years focussing on the financing aspects of the junior resource market. He was the founder of Rare Element Resources Ltd. and has raised all of the funds for Rare Element since inception. Mr. Brown has been an officer and director of several successful companies and invests in those companies through Pacific Opportunity Capital Ltd. which also provides M&A consulting services, raises funds, and provides financial management services.
Gregory R. Harris, L.L.B. – Chairman and Director
Mr. Harris is a lawyer and has been a member of the Law Society of Alberta since 1979 and previously a member of the Law Society of British Columbia in 1972. Mr. Harris received his B.A. in 1971 and his L.L.B. in 1972 from the University of Alberta. His legal practice is limited to securities law. He is a director of Poplar Creek Resources Inc., a TSX Venture Exchange listed oil and gas company and Antioquia Gold Inc., a TSX Venture Exchange listed mineral exploration company.
Donald R. Taylor, M. Sc. – Director
Mr. Taylor is Vice President of Exploration for Wildcat Silver Corporation. He is a seasoned exploration and mining geologist with over 30 years of international experience in North and South America, China, Africa, Australia and Ireland. He spent 10 years with BHP Minerals in senior management positions from 1989 to 1999. Most recently Mr. Taylor was Exploration Manager and Vice President of Exploration for The Doe Run Company from 1999 to 2010. Mr. Taylor holds a Master’s of Science degree from the University of Missouri-Rolla and is a Registered Professional Geologist, Fellow of the Society of Economic Geologists and member of the Society of Mining Engineers.
Fernando Pickmann – Director
Mr. Pickmann is a practicing lawyer, based in Lima, Peru and brings more than 15 years of commercial and mining law experience to the Company. Mr. Pickmann received his Professional Degree in Law from the University of Lima in 1994 and his Masters Degree in Law (L.L.M) specializing in Business Legal Advice from the Law School at the Instituto de Empresa IE in Madrid Spain in 1997. He worked for Centromin Perú S.A., the Pervúvian Government’s administration for the privatization process from 1997-98 and has practiced law in private firms since 1998. Currently Mr. Pickmann is a Mining Law teacher in Lima University and also teacher of Strategic Alliances in the LLM program of the Lima University.
Winnie Wong, C.A. – Chief Financial Officer and Corporate Secretary
Ms. Wong is the Vice President of Client Services at Pacific Opportunity Capital Ltd., a firm the Company has retained to provide financial management and accounting services. Following her graduation from Queen’s University, Ms. Wong worked with Deloitte & Touche where she earned her Chartered Accountant designation. Ms. Wong also acts as the CFO and Corporate Secretary on a number of TSE and TSX Venture Exchange companies.
