Cerro Resources: Continuing a rich tradition and history of success in Mexico
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By Jordan Luy
Tony McDonald, CEO and Managing Director of Cerro Resources NLo
When Kings Minerals NL merged with San Anton Resource in late 2010 to form Cerro Resources (TSXV:CJO), the focus was simple: to look for precious metals in Mexico, a country with a mining-rich history best known for its silver production but also significant quantities of gold, copper, lead and zinc.
Canadian-based San Anton Resource Corporation was an explorer and developer of primarily gold, silver and copper resources in Guanajuato, central Mexico. Similarly, Australian company King Minerals NL had been engaged in precious metals exploration in Mexico and Australia. A mutual interest in the Cerro del Gallo Project brought the companies together and the corporate structure was put in place late last year to form one company.
Separately, each company had established a history and reputation in that region. CEO and managing director Tony McDonald says that the new Australian-based company is now in a strong position to continue its strategic push and expansion in that part of the world. Since the merger, name change and additional assets incorporated, Cerro Resources has structured itself to gain further exposure in the North American market by dual listing the company and adding a new executive vice-chairman and investor relations manager from North America.
McDonald has spent the last 12 years managing companies and projects in the resources sector. He’s been connected to projects around the world, including Africa and Australia but singles out Mexico as being the standard for mining, in terms of advancing projects and government support. “We’ve set our minds on building a comprehensive suite of Mexican precious metals projects, ideally positioned at various stages of progress,” he says. “The culture in Mexico is very much mining and the mindset there allows us to fast-track and better advance our projects compared to for example, a place like Queensland, Australia,” which is where the company’s Mount Philp Project is located.
There, McDonald says, the focus is also mining-oriented and the mining regions stable, but in his experiences, the process is easier to work through in Mexico. He says the company will continue to work towards an updated resource estimate for Mount Philp. An initial 25Mt resource estimate was reported in October 2011 which is currently being expanded upon. The company expects this to be released by January 2012 but Cerro’s long-term plans ultimately lie in the grounds of Mexico.
“We decided to focus on Mexico because our focus is precious metals but also because of our long relationship with the country,” he explains. “The government view at all levels is quite supportive of mining plans primarily because of the jobs and economic benefits that go back into the region.”
The company’s portfolio currently consists of three projects in Mexico as well as the iron ore project in Queensland.
Located on the San Anton Property in Guanajuato State in central Mexico, the 77Mt (1.6M oz Au and 35M oz Ag) Cerro del Gallo gold-silver-deposit is the company’s most advanced project. Cerro holds a 66% stake with the remaining 34% owned by Vancouver-based gold producer, Goldcorp. A first-stage heap leach feasibility study and preliminary assessment in April 2011 delivered promising results and McDonald says the company is close to delivering a bankable feasibility study on the project in early 2012.
McDonald highlights the infrastructure and location of its projects saying they represent the company’s strengths. He describes Guanajuato State as a stable, relatively quiet and semi-rural part of the country. The project lies just an hour east of an international airport located in a large regional centre. This world class district is home to other significant producing companies.
“Mines have been built and operated in far harsher and more challenging parts of the world than this so we’re looking forward to doing it and we’ve been encouraged by the responses from the communities,” McDonald says. “This is a region that has a strong affinity to mining, having produced tremendous amounts of silver over the last 300 plus years.”
To the north of Cerro del Gallo is Namiquipa, a 4,400 ha exploration project in Chihuahua State. Drilling commenced in late May, with a two drill rig program of 20,000 meters expected to continue through this year and into 2012. First results were released in August and continue to return positive silver, lead and zinc grades while identifying additional target areas and extensions.
Rounding out the portfolio is the Espiritu Santo gold and silver project in Jalisco State, near the western coast of central Mexico. Cerro acquired the project in early October. The region has been known to reveal significant production historically but McDonald points out that the company’s specific ground has not been subjected to any modern mining exploration and assessment in the past 20-30 years. Aside from the potential of the individual project itself, the decision to acquire Espiritu was made based partly on the project’s synergy with the rest of the portfolio.
“It makes sense to bring Espiritu in with the Namiquipa Project in the north to feed off the success and potential cash flow generated from Cerro del Gallo,” McDonald explains. He says it is ideal having Espiritu compliment the existing projects just to the west of Guanajuato, the location of the company’s flagship project.
With a portfolio focused on Mexico, it’s no surprise that the management team possesses extensive knowledge and experience in that part of the continent. Since the company had its dual-listing on the TSX Venture Exchange and Australian Stock Exchange in October 2010, the last year has been formative as the two companies were consolidated and the project was placed under one roof. McDonald says the success of that transition can be attributed to the experience and reputation of the management team.
“We like the jurisdiction and we understand it. Our team likes working in that area and so our operations are efficient,” he says, and describes Cerro’s management team as a formidable one. Chairman Norman Seckold has over 30 years experience managing natural resource companies, much of that in Mexico. McDonald describes one of his strengths as building credibility for various mining operations working with both the Mexican government and North American investment community. Along with executive vice-chairman James Crombie, Seckold worked on the world-class Palmarejo gold-silver project in Chihuahua State and together they bring a track record of getting companies listed and moving projects forward.
The two have attracted former employees and consultants to Cerro which McDonald sees as bringing more credibility to the company through the shared wealth of experience in that part of the world. The company’s vision is to increase its presence there and the plan is to continue to methodically explore current projects and drive them towards production. McDonald maintains that having a clear focus helps the company move forward in the right direction and suspects as milestones are achieved, the market will begin to recognize the company’s value.
“As we do those things, we will review other opportunities in Mexico that are being identified and presented to us because of our exposure, our history and our reputation there.”
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