Resource World Magazine

Resource World - April/May 2014 - Vol 12 Iss 3

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48 www.resourceworld.com A P R I L / M A Y 2 0 1 4 MINING Insiders in the mining industry often take on a derisive tone toward the term "closeology". Over the years, the term has referred to a dubious strategy adopted by promoters to capitalize on the success of a particular proj - ect or region. Closeology occurs when groups take up peripheral acreage positions in order to ride the wave of positive investor senti- ment over neighboring properties. But there's a different kind of closeology play in the industry. A type of business plan that actually generates significant value, by enhancing the economics of some of the most important mineral production centres on the planet. This is the tack that Cancana Resources Corp. [CNY-TSXV] is taking. The junior has utilized the strategy perfectly – to the point where the firm is now making a seldom-seen leap from exploration to production in an unusually short period of time. Closeology in Cancana's instance comes down to exploring in the right places; namely, an area west of an already producing manganese operation known as Rio Madeira. This project, Valdirao, is where Cancana has commenced its first trial mining, all of this in the western Brazilian state of Rondonia. At first examination, the attraction of the Valdirao Project seems obvious. The land here hosts high-grade manganese miner - alization which is visible at surface. With this advantage in hand, Cancana has made quick work of delineating a resource on the project. Initial investigations came up with 8,775 tonnes grading at an elevated 54% manganese. That's not a lot of tonnes. But – further to Cancana's positioning advantage here – the point of this work wasn't to turn over every last corner of the property in search of resources. In fact, the company's initial resource calculation is based on just three hectares of land – equating to less than 0.01% of the 41,350 hectares the company holds. Why survey only such a small area? Because the next stage of Cancana's devel - opment plan goes well beyond just finding in-ground resources. Reconnaissance examinations of the com- pany's land package suggests that surface and near-surface manganese mineralization exists over large areas of the claim package. There's little doubt that a lot of ore is avail- able here. Cancana, and its neighbor Rio Madeira, built a working relationship that evolved into the owners of Rio Madeira offering itself for sale to Cancana. With an already- producing operation, permitting and clients, Cancana saw this as an opportunity to rapidly accelerate its growth and have access to processing facilities. Cancana sought financing for this acquisition and was presented with a joint venture opportunity with an Australian-based pri - vate equity fund. The acquisition of Rio Madeira was closed on December 20, 2013 and Rio Madeira became a joint venture operating unit of Cancana. Rio Madeira already had 72,500 hect - ares of mineral claims and this combined with Cancana's original lands now totals 113,850 hectares. Cancana intends to develop a comprehensive exploration pro- gram for the area in concert with a number of areas of existing production that will feed the plant and operations. Cancana, along with its joint venture partner, will be improving the processing facilities to increase production and in turn increase sales and the range of prod - ucts that are available for sale to the steel and fertilizer markets. The company is now moving quickly toward becoming a sizeable-scale man- ganese producer. In November, mining began at the Valdirao portion of the proj- ect. The near-surface ore is being stripped, screened and stockpiled for processing. Cancana may thus accomplish what so few juniors have been able to – getting into production on a manageable timeline and budget. This achievement provides a textbook example of how exploration and mine development can complement each other by aggregating operations. From the point of view of Cancana and its investors, this is a win-win scenario. By leveraging its mineral resources as an add-on to existing operations, the com- pany is avoiding all kinds of risks that come with starting a mine from scratch. In Rio Madeira, the firm has an operation that has already proven itself. This is a boon in steering clear of problems like capital cost overruns or operational hic- cups that are all too common during new facility start-ups. That's just the beginning. Cancana and its joint venture partner are also look- ing to invest further capital to expand operations. A total of approximately $25 million of financial firepower has been dedicated by the joint venture to ramp up production significantly. That's what a well-planned closeology project can do. n Cancana Resources – the fast way into production By David Forest Mining operations at the Valdirao Project in Rondonia, Brazil. Photo courtesy Cancana Resources Corp.

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