Carpathian Gold

August 05, 2010

A Feasibility Study For Carpathian’s Brazilian Gold Project Is Due Imminently

By Alastair Ford

How to please investors in fickle markets like these? One way is not to worry about the daily volatility and uncertainty, and simply to stick to your knitting. Another way is to release a resource upgrade that increases measured and indicated resources by 200 per cent on your lead project, and watch as investors slowly cotton on. Carpathian Gold has been taking both approaches lately.

The company has been steady with the newsflow from both its near-term gold project at Riacho dos Machados in Brazil, and from the much larger, but less well advanced Rovina copper-gold project in Romania. Not all the news has been spectacularly well received, and the company’s shares have tended to track the market over the past few months, but two recent events did go down well, and have served to reassure those investors who take the trouble to keep up to speed, that everything is well on track at Carpathian.

The first of those events was the recent resource upgrade at Riacho dos Machados, also known as RDM. Using a US$950 gold price the measured and indicated resource at RDM now clock in at just over 812,000 ounces, and there’s a further 690,000 ounces or so inferred. That represented a 200 per cent increase on the previous resource, a result which takes RDM respectably towards a ten year mine life. The company is continuing to drill at RDM, and indeed Carpathian chief executive Dino Titaro, says that following the latest work, which has looked at shallow material likely to be mined in the early years of any future operation, the latest resource numbers already look out of date.

However, they will form the basis of the company’s feasibility study for RDM, which is due out imminently, and had in fact been waiting on that very resource upgrade to allow the inclusion of the new inferred ounces – mineralized ore, which, says Dino, would otherwise have been classified as waste under parameters the study. Bearing that in mind, it’s no surprise that now, just one week on, Dino says that the feasibility study is “essentially” done. “I would like to think that by the end of the month I will be able to release it”, he says.

And that brings us to the second positive development at Carpathian that’s been much appreciated by investors – the securing of a recent US$30 million cash injection into the company via a forward selling deal with Macquarie bank. For its US$30 million, Macquarie gets to buy 12.5 per cent of the open pit production from RDM at US$450 an ounce, which looks a nice earner for Carpathian, especially as the company is protected on the upside, and gets a little extra if gold goes above US$1,850.

As Dino points out, that US$30 million puts the company some way down the road towards raising the US$120 million to US$130 million it estimates it will need to complete construction of a 100,000 ounce per year operation at RDM. The new money will allow greater flexibility as far as the timing of raising the rest of required capital is concerned, in what are, as we’ve said, fickle markets. Discussions about raising debt are ongoing, says Dino, but with the Macquarie money in, the pressure, to some extent is off. That said, Dino’s fairly optimistic that RDM will now move forwards fairly quickly, albeit with one or two caveats. “If all goes well”, he says, “and as long as I can get all the financing in place as I hope, then this project will be up and running by the end of next year.”

Meanwhile, over at Rovina in Romania the pace of work is likely to ratchet up a notch as the rest of the year progresses. Recent progress on the ground there by Gabriel Resources and European Goldfields has been helpful as far as maintaining positive sentiment towards Romania is concerned, to the point where Dino feels able to speculate that Romania might start to become a destination of choice. Certainly, he says, there’s enthusiasm in the country in official circles for his company’s project, an enthusiasm that’s helped by current plans at Rovina to produce a copper concentrate, a product which is already well understood in country.

Earlier in the year Carpathian completed a preliminary economic study at Rovina which showed a viable operation producing 196,000 gold equivalent ounces per year over a nineteen year life, with considerably more coming in the early years. Gold-equivalent costs per ounce worked out at US$438, using US$1.05 copper, so there’s plenty of margin on offer. More drilling is now underway, while the company continues to negotiate the conversion of the exploration licence into a mining licence. That oughtn’t to be a problem, “God willing, and with good luck”, according to Dino. Watch this space for more news, soon.