We had a few moments to catch up with Adam Smith, the Business Development Director of Oroco Resource Corporation recently. One of the most exciting Canadian junior mining companies, the brand is a relative newcomer to the business. It just listed on the TSX-V in March of 2008. However, between their focus on the highly profitable Cerro Prieto Project, a gold and polymetallic project in northern Mexico, and their all star team, it’s a difficult company not to get excited about.
The Team to Watch
Of course any company’s prospects are only as good as its current projects, but those don’t always define the success of an organization. More often than not, it’s the team behind the scenes that makes the difference, and that’s where Oroco has an advantage over lots of other mining companies.
“We recognized right away that while we may have had a strength in financing the company at an early stage and in negotiating for the acquisition, we wanted a very, very strong mining team put together,” said Smith.
Ken Thorsen, President, CEO, and Director, Christopher Anderson, Adam Smith, the Business Development Director of the Oroco Resource Corporation at the Vancouver June 2009 World Resource Investment Conference
That strong mining team began with Ken Thorsen. A veritable rock star in the industry, Thorsen’s four decade career initially began with the discovery of Australia’s Leinster mine. In his most recent position as the President of Teck Cominco Exploration, one of the biggest mining companies in the world, Thorsen reviewed thousands of different projects. With seventeen worldwide offices, he helped keep the company on top. An extremely capable man, he’s ready to take Oroco from their current pre-production phase all the way into the final stages of production.
Mr. Thorsen might be enough for many companies, but Oroco is a bit different, and they added Stephen Leahy, Executive Chairman, Director of Oroco who is also the President of North American Tungsten, the largest tungsten producer outside of China. Mr. Leahy’s past work was literally on top of a mountain, where the need for a helicopter is essential to get simple things like diesel fuel in and product out. It’s one of the most difficult places to mine on the planet. That kind of experience is unbeatable as you’re forming a new company. Another experienced geologist, Robert Friesen, formerly with Teck Cominco Exploration as well, was added. Adam Smith, a twenty year veteran of corporate finance rounding out the team. The company is expecting to see significant success in just a few years.
An Enviable Location
Mexico is the world’s second largest silver producer, and Sonora State, where the mine is located, handles nearly a quarter of the mineral production in the country. The Cerro Prieto mine itself, Oroco’s primary project, is already well known as a strong historical producer, but Oroco is helping to add modern technology in terms of both exploration and production to the resource. Given its close proximity to nearly every form of infrastructure, it’s different from many other locations.
CERRO PRIETO PROJECT
“Cerro Prieto has a premier location from a logistics and infrastructure perspective, and it also benefits from a favourable regulatory and social environment” said Smith. “Cerro Prieto is very close to all necessary infrastructure. It’s in a terrific part of the world in terms of acceptance of mining and mining culture; Mexico is a country built on mining. The specific geology of Cerro Prieto and the engineering required to make this a mine, determined by the shape of the deposit, the proximity of the ore body to surface and the shape of the topography, suggests a very rapid timeframe to production is possible.”
Oroco began drilling in April of 2008. At the close of the initial drill program in October 2008, they suggested two separate resource calculations thanks to the data they’d gained. They have nearly one-half million ounces of gold, 9.9 million ounces of silver, and a billion pounds of zinc and lead. After adding those to a new production model and expanding the scope of the project, the idea that a significant increase in resources is just around the corner is hardly far fetched.
What’s more is that, because Oroco plans to increase drilling throughout 2009, as well as complete the engineering and metallurgical test work, production in the next eighteen months is a very safe bet at this stage of the game.
The Xochipala Project, Guerrero State
“Oroco’s Xochipala Project is located in the southeast extreme of the original Morelos National Mining Reserve, a 49,400 ha federal mineral reserve which includes the most promising and expanding gold reserves in Mexico. This region encompasses a northwest trend of intrusions with associated gold bearing iron skarn deposits and is part of a wider area which has come to be known as the Guerrero Gold Belt (the “GGB”).”
Strong Positioning Promises Success
Today’s economic climate, though, has been hard on more than a few mining companies. Oroco seems to have dodged that bullet as well. At the start of June, Oroco announced private placement based on the extensive demand for their shares. “We have had such tremendous demand for the placement that we probably could sell three times as many shares,” said Smith.
While they don’t intend to do so at the outset, the first stage will not only offer sufficient money to start the drill program, metallurgy, and the engineering, but it should also put them in a good place to start another financing to satisfy the unmet demand with the first one.
Once they’ve finished the second stage, the final step is financing production, and because that will probably begin fairly rapidly, it’s not a difficult prospect to undertake.
One of the biggest factors here, though, is the low level of capital expenditures required to put Cerro Prieto into production. At approximately $20 million, this is a rather straightforward undertaking. By working with engineering companies to understand carefully the cost per ounce for gold, silver, and zinc, Oroco is in the process of finalizing the numbers, but Smith has suggested that their rate of production is targeted to run something like 60,000 to 80,000 ounces of gold per year not to mention the zinc and silver production. With the preliminary figures indicating $80 million to $100 million in annual revenue looking quite likely, twenty million dollars in capital expenditures seems like a relatively small price to pay.
The Excitement Continues to Increase
Among those in the industry, the enthusiasm for this project is high. With a low share price, the efficiency of last year’s drill program, and the expansion of this year’s program, along with the additional metallurgy, engineering, and mine planning Oroco has scheduled for this year, investors both in and out of the industry may be looking hard at Oroco very soon, and the share price is, unquestionably, going to reflect that.
It’s tough to find a company as focused and close to production as Oroco in today’s mining industry, but the closer this project gets to production, the more interesting it becomes.
For more information:
http://www.orocoresourcecorp.com
Oroco Resource Corp.
789-999 West Hastings Street
Vancouver, B.C.
V6C 2W2
Canada
Phone 604-688-6200
Facsimile 604-688-6260
Email: info@orocoresourcecorp.com