Formation of Precious Metals Mining JV, Peru
This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.
1 July 2024
Echo Energy PLC
("Echo" or the "Company")
Formation of Precious Metals Mining JV, Peru
Phase I development targeting mining revenues by Q4 2024
Echo (LON:ECHO), the Latin America focused natural resources company, is pleased to announce that its wholly owned subsidiary, Echo Natural Resources Limited, has entered into a shareholders joint venture agreement regarding a 50:50 joint venture company in Peru with the founding partners of Boku Resources SAC ("Boku" or the "JV"), to participate in the interests of Boku, being gold and silver mining and the cleaning of known tailings deposits containing gold and silver in Peru (the "JV Agreement").
Through Boku, Echo has secured an opportunity to scale operations in Peru, with experienced local partners, producing gold and silver through primary mining and tailings cleaning, owning 50% of the production and potential resources.
Any references to resources in this announcement are solely an internal estimate at this stage. Such estimates do not constitute resources as defined by any specific mining code (such as JORC) and there is no guarantee that they ever will do.
Highlights
Tesoro Gold Concession
· Boku intends to establish formalised artisanal and small mining ("ASM") operations on its 100% held Tesoro Gold concession, southern Peru.
· Early cash flow generation - Phase I development targeting mining revenues by Q4 2024 from an initial 147 oz/month of gold production (estimated) through an existing plant, operated by a third party.
· Tesoro has quartz-gold veins hosted in intrusive rocks with grades of 5-15 g/t Au with certain other zones of >30 g/t Au.
· Internal estimates suggest approximately 150,000 t with an average grade of 15 g/t Au for 73,000 oz Au.
Tailings Cleaning
· Boku also aims to build a material resource base of gold and silver rich tailings, targeting an internal estimate of 4.9 Mt for a contained estimate of 243,000 oz AuEq across an initial seven tailings dumps in northern Peru.
· Strategy to process the tailings dumps, extracting gold/silver while remediating the land, and bringing the tailings into legislative compliance.
· A process to bring the internal estimates to compliance with accepted international resource standards is to be undertaken.
The JV Agreement
Under the terms of the JV Agreement, Echo will commit a total amount, in aggregate, of up to $750,000 to Boku, over a period of 18 months, as consideration for it taking a 50% interest in Boku. Echo received a 50% interest in Boku upon entering into the JV Agreement. The consideration will be provided in monthly instalments based on the working capital requirements of Boku necessary to develop the mining projects in its portfolio. The initial consideration payable by Echo upon entering this agreement is $12,500.
Pursuant to the JV agreement, Echo directors Stephen Birrell and Christian Yates have been appointed to the board of Boku. Christian Yates, Non-Executive Chair of Echo, will act as President of the board, having a casting vote, and will serve for an initial term of three years.
The JV Agreement will be governed by the laws of Peru.
In order to comply with the ASM legislation in Peru, the JV will operate between Echo and Boku through a Bare Trust Agreement ("BTA"). The BTA is between Echo and a local Peruvian agent, Dentons Gallo Barrios Pickmann Abogados (the "Agents"). The Agents hold the 50% of Boku in trust for Echo. The Agents constitute a usufruct right over the shares in Boku in favour of Echo and provides Echo the right to receive all economic benefits and political rights. Through the agreement the Agents express and recognise that Echo is the 100% holder of the rights and shares of Boku. The Agents are irrevocably bound to carry out all acts mandated by Echo and may not enter into contracts or assume obligations unless expressly authorised in writing by Echo.
Tesoro Gold Concession
Boku holds 100% of the Tesoro Gold Concession ("Tesoro"), an exploitation licence with all permits required to start operations, which will be operated by Boku.
Tesoro is located in the prolific Nazca-Ocona gold corridor, south of Lima in Arequipa, and is characterised by quartz-gold veins hosted in intrusive rocks with grades of 5-15 g/t Au with bonanza zones of >30 g/t Au, and lengths >1km, depths between 0.6 - 1km, and widths between 10-80 cm. It has an internal estimate of approximately 150,000 t with an average grade of 15 g/t Au for 73,000 oz Au. The full extent of the potential resource needs to be clarified once the JV is underway.
Peru is one of the world's largest producers of gold and silver and the ASM sector accounts for 20% of the country's gold production. Boku intends to establish ASM operations, targeting early cash generation from mining revenues by Q4 2024. The initial production plan is to produce 67,500 oz Au using an assumed 90% recovery of gold and assuming the internal estimate is all converted to a reserve, beginning at a rate of 147 oz/month of saleable gold, with the potential to be scaled. This has been validated in a detailed scoping study but will require more metallurgical testing to clarify the recovery performance. There can be no guarantee of the exact recovery rate that will be realised at Tesoro.
ASM in Peru requires relatively minimal infrastructure and capex. The quartz-gold veins at Tesoro are relatively shallow and will be mined out via shafts, with the ore being trucked a short distance to tolling plants for processing. Initial production will be from a single shaft and Boku has already begun putting infrastructure in place for an initial mining team of approximately 25 people including a mining engineer and a mining geologist. Boku is aiming for production of around 15 t/pd per shaft.
Tailings Cleaning
The Huaraz area in Northern Peru has a wealth of tailings from historical polymetallic mining and processing activities, which contain variable grades of gold and silver. Boku has identified an initial seven tailings dumps containing an internally estimated 4.9 Mt of weighted average grades of 1.3g/t Au and 47.5 g/t Ag. This is based on a combination of small-scale sampling, analysis and metallurgy testing undertaken in 2023, along with using historical estimates from mining operations and back calculation methods. With the tailings at surface, the directors believe it should be a relatively simple process to apply volumetric calculations allied with comprehensive sampling for grade and density to bring these internal estimates to an international resource standard.
These tailings present an environmental concern, and cleaning of the sites is required to remediate the land and bring the tailings into compliance with current Peruvian legislation. Boku has signed heads of agreements to acquire several tailings sites.
A technical report, commissioned by Echo, estimates that the initial package of tailings cleaning projects could reach up to 243,000 oz AuEq, providing a processing life of 40 years at a rate of 350 t/pd or 20 years at 700 t/pd; however, the present scenario is not certain and the initial phase of work for the tailings will include additional sampling, analysis, metallurgy, beneficiation studies and resource estimation to NI 43-101 standards in order to reach a Final Investment Decision ("FID") with a view to commencing production from the first site by 2025.
Table 1: Echo's internal estimates of resources contained in the current and identified JV projects:
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Area / Project |
Type |
|
|
Estimate (Gross 100% basis) |
Grade |
Contained (Gross 100% basis) |
Au equivalent koz , Net attributable to Echo |
||||
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|
|
Equity |
Area, Acres |
Tonnage (kt) |
Au, g/t |
Ag, g/t |
Au, koz |
Ag, koz |
Net Au, koz |
||
|
Project A |
Mine |
50% |
800 |
150 |
15.0 |
|
72.6 |
|
36.3 |
||
|
Project B |
Tailings |
50% |
TBA |
892 |
2.5 |
92 |
70.0 |
4,000 |
60.3 |
||
|
Project C |
Tailings |
50% |
TBA |
260 |
1.0 |
60 |
8.4 |
1,006 |
10.6 |
||
|
Project D |
Tailings |
50% |
TBA |
200 |
1.0 |
73 |
6.4 |
942 |
9.2 |
||
|
Project E |
Tailings |
50% |
12 |
1,800 |
0.7 |
17 |
40.6 |
1,974 |
32.8 |
||
|
Project F |
Tailings |
50% |
26 |
1,300 |
1.0 |
|
40.0 |
|
20 |
||
|
Project G |
Tailings |
50% |
5 |
600 |
0.6 |
80 |
11.6 |
3,096 |
25.4 |
||
|
Project H |
Tailings |
50% |
2 |
150 |
0.5 |
28 |
2.4 |
271 |
2.9 |
||
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|
|
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|
|
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|
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Total internal estimate |
|
5,352 |
1.4 |
33.2 |
252 |
11,290 |
197.5 |
||||
Note: For determining the gold equivalent value of silver, an gold / silver ratio of 79x has been used.
Boku Operation
Echo has established the trading joint venture in Peru using a tax and legally optimised structure to ensure Echo retains effective control of Boku and that funds can flow to its shareholders. Operationally, Boku will be led by Erick Pegot-Ogier as Managing Director, who will provide on-the-ground local expertise through logistics and project management. Echo will not incur any project acquisition costs and will contribute the initial start-up and working capital necessary to achieve first production in Q4 2024 from the $750,000 referred to above.
Mr Pegot-Ogier is a senior executive involved in mining and ore processing businesses across Peru. He has a proven track record of operating mines and processing plants, implementing environmental remediation strategies, and running exploration initiatives. Mr Pegot-Ogier has been involved in mine and plant leasing contracts and is skilled in the regulatory landscape of Peruvian mining. He has been involved in the mining industry for over 16 years after qualifying as a lawyer.
The forecast of production and revenues from the JV is subject to funding availability; however, advanced discussions are in progress with a strategic investor to provide the capital to fund Tesoro and the tailings projects through to operation and production, with the priority being to achieve first production in Q4 2024. There can be no certainty that these discussions will result in the strategic investor providing capital to the Company. Further funding and cash flow derived from Tesoro will be used to progress to FID on the tailings cleaning projects with a full economic study and international compliant resource statement.
Stephen Birrell, Chief Executive Officer of Echo, commented:
"Through our Latin American networks, we have identified, pursued, and secured a transformational opportunity to scale a joint venture operation producing gold and silver through primary mining and tailings cleaning.
Echo is targeting early cash flow this year from Tesoro followed by building a material resource base, acquiring gold and silver rich tailings dumps. We expect the Company to be generating steady cashflow by mid next year from both mining and tailings cleaning operations.
We know that the Company's shareholders have suffered highly unpalatable value diminution from legacy projects over the years, so it is pleasing to be able to deliver unique access to the Peruvian precious metals sector with potential near-term cash flow at a time when precious metals prices and forecasts are running at an all-time high. We have an opportunity to grow a Latin America focussed resources business of considerable scale. We see the concept of treating isolated remnant resource and cleaning of tailings as a scalable objective. The tailings, especially, are at surface and are accessible for establishing a quick, robust resource at minimal cost."
For further information please contact:
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Echo Stephen Birrell, Chief Executive Officer |
Via Vigo Consulting |
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WH Ireland Limited (Nominated Adviser and Broker) James Joyce James Bavister Isaac Hooper
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Tel: +44 (0)20 7220 0500 |
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Vigo Consulting (Investor Relations) Ben Simons Peter Jacob |
Tel: +44 (0)20 7390 0234 |
About Echo
Following the partial divestment of its assets in Argentina, Echo entered into a 50:50 joint venture in Peru, Boku, with an experienced local partner for precious metals (gold/silver) mining and the cleaning of known tailings deposits containing Measured and Indicated resources of gold and silver. Through Boku, Echo has secured an opportunity to scale operations in Peru producing gold and silver through primary mining and tailings cleaning, owning 50% of the production and resources.
Qualified Persons Statement
The scientific and technical information contained within this announcement has been reviewed and approved by Dr Alberto Rios Carranza, a geologist with over 27 years' experience, who holds a doctorate cum laude awarded by the Polytechnical University of Madrid, Spain and who has published or co-authored over 17 scientific papers on the mineralisation across Peru. Alberto is a member of the Geological Society of Peru, the Colombian Society of Geology and the Institute of Mining Engineers of Peru. He is a Qualified Person as defined by the AIM Guidance Note on Mining and Oil & Gas Companies dated June 2009.
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Glossary
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Ag |
silver |
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Au |
gold |
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AuEq |
gold equivalent |
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bonanza zones |
a rich body of ore or a rich part of a deposit |
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g/t |
grams per tonne |
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Mt |
million tonnes |
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oz |
ounces |
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t |
tonnes |
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t/pd |
tonnes per day |
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