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speedybure (< 20)

Looking For Colossal Returns: Colossus Minerals

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September 04, 2011 – Comments (6) | RELATED TICKERS: COLUF , AUY , AEM

Colossus minerals is a name most have never heard of as it is in the precious metal mining industry where even the large producers are largely unknown by the average money manager and retail investor. Unlike other advanced stage mining companies (approx. 18 months from commercial production), Colossus possesses characteristics extremely unique relative to the rest of the complex. It has shown to have at least one extremely high grade gold deposit, bi-products of platinum and palladium (opposed to the usual silver, zinc, lead, copper, etc.) located in Brazil, which I consider to be one of the most mining friendly countries in the world. Serra Pelada was host to one of the largest precious metal rushes in Latin American history.

Its sole focus is on its flagship property, Serra Pelada, which is proving to be one of the highest grade gold and platinum group metal deposits in the world. (SEE: CHART For Highlights). Like any investment, Colossus comes with its share of risks but this is one story in the industry that has gone more or less overlooked. From what I’ve gathered from my time spent evaluating Colossus, the risk/reward ratio looks extremely compelling and definitely warrants a closer look.

The following is a brief overview of management, financial position and developmental progress:

 CEO- Ari Sussman whose resume includes 15 yrs involvement in the mining industry. Over the last decade he has raised hundreds of millions for various projects and been involved with the Titanium Corporation and Continental Gold. COO- COO- Paulo Fagundes – Has a very strong track record of executing mine development and expansion projects. He has proven himself through his general manger position at Yamana’s Mercedes mine, responsible for U/G development as later for the successful expansion at Its San Andreas mine.

CFO- Claudio Mancuso – With over a decade in the capital markets under his belt, he went on to become the VP of Agnico-Eagle from 2002-2009.

Financial Position – With everything on budget for the most part, Colossus has done an excellent job managing its exploration and capital costs incurred thus far. With over 80m of cash on hand at the end of Q2 2011, it is likely one more equity offering will be necessary before initial production commences.

Execution- With construction underway and continued exploration, Colossus has achieved several important milestones, namely the acquisition of an existing ball mill (which moves phase 1 production to 2H 2012 instead of 2013) and finalized plans to extract an initial bulk sample in the upper CMZ. This will be followed by two additional bulk samples from the middle and lower portions of the CMZ once appropriate underground development is reached later in 2012. A 3,500 meter U/G decline is on schedule with 200m completed, with acceleration expected, estimated completion by Q2 12’. 5 drills are currently operating with more to come in the near future. Installation of dewatering pumps and construction of a tailings starter dam are on-going and will be finished Q2 12’ and Q4 2011. Lastly construction of a processing plant completion is currently estimated for Q3 2012. 

Click here for drill hole highlights 

6 Comments – Post Your Own

#1) On September 05, 2011 at 4:03 PM, traderbach (< 20) wrote:

Speedy.

Have read your blogs w/ interest & appreciate them.  You are listened to by the likes of Sinchiruna no less.  Yet this pick of yours really seems to go against the grain of Fools' opinions.  I myself had this on my watchlist but never bought.  Took a look at the Fools' scorecard.  The latest 10 entries have 9 red thumbs, no less than 5 of them Fools w/ scores in the 90s, another 2 in the 80s.  With this in mind I wondered what makes you speak w/ such conviction about this company?  Taking it for granted that your statement that the ores are very high grade is accurate; I like the look of management as you point out, & feel fairly safe w/ the government in Brazil, but I guess the brass tacks of the thing is what is the cost of extraction, including milling, accessibility etc?  Have you got more on this aspect.  Would appreciate it if you have & would really welcome the views & technical mining analysis of other PM afficionados on this.   Thanks a lot for your post.

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#2) On September 05, 2011 at 4:25 PM, speedybure (< 20) wrote:

While Colossus may need to do one more equity financing prior to commercial production, they are positioned very well if they can continue to execute. While I only posted the drill holes in gold equivalent ounces, the grades for gold-platinum and palladium are all extremely high which should translate to well below industry average cash costs, especially on a bi-product basis. While this is no gurantee by any means, I do think this is a great more speculative play. 

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#3) On September 06, 2011 at 1:49 AM, traderbach (< 20) wrote:

 So Speedy, thanks a lot for your reply!  The drill hole results made interesting reading.

In terms of what makes an ore 'high grade' purely on grams per tonne something like the Gammon Gold Ocampo results seem to bbe significantly higher than the Colossus drill holes, i.e. ranging approx. between 3 g/t & 172 g/t.  So it seems basically that you believe that the mix of palladium, platinum etc. by-products in the ore is rich enough to offset this apparent shortfall relative to a few other gold companies that you & Sinch both like.  I know this is an over-simplification, from a neophyte but a passionate one, & I'm just trying to understand the basic facts about the financial analysis of the nuts & bolts of the actual mining operation.  I'm sure for example the 'interval' numbers are important but I am not familiar with what are good interval numbers. 

I've pasted the Gammon numbers below.  Thanks a lot.  

 During 2010 the Company completed 137,393 metres of drilling at Ocampo with twelve drill 
rigs operating on surface and underground during the fourth quarter.  
 
New Discoveries Recent Drilling Highlights  
 
Polvorin 
Drilling at the Polvorin target, located directly north of the mine offices, reported additional 
high‐grade mineralization. 
• Drilling highlights include: 
o Hole OG‐1213, 0.5 metres grading 121.69 grams per tonne gold equivalent(1) 
 
Refugio Norte 
Drilling at the Refugio Norte target zone, located southeast of the mine offices and on the north 
side of the Refugio open pit, reported very high‐grade mineralization. 
• Drilling highlights include: 
o Hole OG‐1194 , 0.8 metres grading 172.71 grams per tonne gold equivalent(1) 
 
Resurrecion  
Drilling  began  on  the  Resurrecion  vein  and  shear  zone  during  the  fourth  quarter.  The 
Resurrecion target is located on the east side of the town of Ocampo and projects downward 
into the existing North‐East mine complex and has reported high‐grade mineralization. 
• Drilling Highlights include: 
o Hole OG‐1155, 0.8 metres grading 26.58 grams per tonne gold equivalent(1) 
 
Candelaria 
Drilling  on  the  Candelaria  target,  located  directly  under  the  Picacho  open  pit,  reported 
encouraging results. 
• Drilling Highlights include: 
o Hole OG‐1149, 0.6 metres grading 7.30 grams per tonne gold equivalent(1) 
 
(1) Using the Company’s long-term gold equivalency ratio of 55:1
Key Drilling Highlights on Existing Veins
 
Altagracia 
• Drilling highlights include: 
o Hole OG‐1150 , 2.3 metres grading 5.63 grams per tonne gold equivalent(1) 
o Hole OG‐1164, 7.1 metres grading 9.86 grams per tonne gold equivalent(1) 
o Hole OG‐1212, 1.2 metres grading  23.75 grams per tonne gold equivalent(1) 
o Hole OG‐1217, 1.5 metres grading 6.72 grams per tonne gold equivalent(1) 
 
Balvanera 
• Drilling highlights include: 
o Hole OG‐1134 , 1.3 metres grading 9.07 grams per tonne gold equivalent(1) 
o Hole OG‐1143 , 1.3 metres grading 6.37 grams per tonne gold equivalent(1) 
o Hole OG‐1143, 0.6 metres grading 39.74 grams per tonne gold equivalent(1) 
o Hole OG‐1195 , 0.5 metres grading 19.29 grams per tonne gold equivalent(1) 
o Hole OG‐1195 , 2.6 metres grading 9.93 grams per tonne gold equivalent(1) 
 
Aventurero and LaMore 
• Drilling highlights include: 
o Hole OG‐1185, 0.7 metres grading 25.24 grams per tonne gold equivalent(1) 
o Hole OG‐1185, 0.8 metres grading 10.67 grams per tonne gold equivalent(1) 
o Hole OG‐1197, 2.5 metres grading 11.33 grams per tonne gold equivalent(1) 
 
Belen  
• Drilling highlights include: 
o Hole OG‐1245, 0.5 metres grading 3.15 grams per tonne gold equivalent(1) 
o Hole OG‐1254, 1.0 metres grading 6.15 grams per tonne gold equivalent(1) 
 

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#4) On September 07, 2011 at 1:24 PM, speedybure (< 20) wrote:

Traderbach,

Some more amazing drill holes released today: http://finance.yahoo.com/news/Colossus-Minerals-Drilling-ccn-4165194078.html?x=0&.v=1

look at hole SPD-113 

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#5) On September 09, 2011 at 11:42 PM, traderbach (< 20) wrote:

Speedy,

Just saw your reply.   Very impressive!  I see the high numbers in SPD-113 for gold but also for platinum and palladium.  I will watch for an inpoint & do some more studying meanwhile.  Thanks again; appreciate you finding this stuff. I'll do the same but it looks like you're ahead of me.

 

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#6) On September 11, 2011 at 9:09 AM, skypilot2005 (< 20) wrote:

http://www.sprott.com/Fund1.aspx?id=23

June 30, 2011 Sprott Gold and Precious Metal Fund owned it.   #7 of top 10 holdings

http://www.theaureport.com/pub/na/6457

Interview of Charles Oliver Sprott Asset Management

http://www.time.com/time/magazine/article/0,9171,924406,00.html

Historical Information

 

Thanks Speedy, for another one.

 

Sky Pilot

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