Colombia

Red Rock Resources operates at El Limon, located on the Frontino Gold Belt. Progressive improvements under the Company’s management improve mine operations.

Highlights

  • El Limon gold mine owned through 50.002% subsidiary Four Points Mining SAS
  • Prime location 6km south of Zaragoza on the Frontino Gold Belt
  • Tighter operational and financial control has improved performance
  • 2012 saw the appointment of a highly qualified Mine Manager, which has led to improvements in production

Location

Both mines are located in northern Colombia, in the region of Antioquia, between Zaragoza and Segovia, along the Frontino Gold Belt, one of Colombia’s premier gold districts.

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Assets

  • El Limon
  • El Mango

Red Rock Resources’ interest

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Red Rock owns 50.002% of local operator Four Points Mining (“FPM”), which owns the mining licences to the El Limon mine and has an outstanding loan of uS$2.25 million to FPM.

El Limon

The El Limon mine has been in periodic production for over 60 years, with extraction on seven levels down to over 350m, and a new eighth level opened by Red Rock. Mining operations were restarted in 2011 after a ten year hiatus due to instability in the region.

A programme of improvements has taken place during 2012 and 2013. Initially this concentrated on ore transportation, plant improvement, mine safety and mine design. In the year under review the focus shifted to improving management and reporting structures, and controlling costs. More mine development work gave greater predictability of production levels.

The change in emphasis from ore throughput to cost and grade has resulted in improved financial performance with cash costs – which had deteriorated to $1,913 per oz in the last three months of 2011-2012 – falling to $964 per oz in the last three months of 2012-2013. In June 2013, costs were $940 per oz compared with $2,149 per oz a year earlier. we expect long-term cash costs to stabilise at $850 or
less per oz. The modern processing plant at El Limon has been operating with improved availability and has spare capacity.

Over the summer months of 2013 there had been strike action by the informal mining sector in the area but the Company was able to continue production with minimal disruption.

Future work

The Company, as part of the process of preparing FPM for sale, has been developing a programme of geological work, a data room and presentation materials, and working on restructuring and rationalising its loans and investments in FPM.

Sale process

In July 2012, RRR received an offer from Ashmont Resources Corporation (“Ashmont”) to purchase the whole of FPM. Due diligence was completed but delays have occurred, due in part to the changing funding and gold price environment during the year. Ashmont has recently reaffirmed its desire to enter into terms of acquisition. the Company has also made its data room available to other potential interested parties and retained the option, in an improving gold price environment, of continuing to hold and further develop the asset.