- Doug Firby
CALGARY, AB, October 30, 2008/Troy Media/ -- John Morgan’s modest office is just a few blocks from the heart of Calgary’s business establishment – the Petroleum Club, a place where, for decades, oil barons have cut deals and hatched plans over single-malt Scotch and cigars.
Morgan volunteers quickly that he doesn’t belong to the exclusive club.
“It’s expensive,” he says with a half grin. “We’re trying to keep our overhead low.”
Indeed, the rented head office of Infinito Gold is a paragon of fiscal restraint – files kept in old, wooden cabinets, just two or three office staff and a CEO who answers his own phone. There is very little to suggest that this determined little company is on the brink of a breakthrough that could finally bring long-anticipated excitement for patient investors.
But then, Morgan explains, minerals don’t generally draw much interest in Calgary’s downtown core, where the social environment is almost all oil and gas.
“It’s funny being in an oil town,” says Morgan. “You talk about being in the gold business, and they say to you, ‘Are you lost?’.”
Actually, Infinito is anything but lost. When Infinito, formerly Vannessa Ventures Ltd., departed Vancouver a few years ago, it brought them closer to the offices of Calgarian Ron Mannix, who saw potential in the company when others only saw stagnation and now his company, Exploram controls just over half of Infinito. In 2004 the company hired Morgan, who had worked for the Mannix family two decades earlier, when they controlled Manalta Coal. (Manalta, then Canada’s biggest coal producer, is now an income trust.)
And, indeed, Mannix’s faith appears to be about to pay off. After years of delays, Infinito’s key property, the $66-million Crucitas mine in north central Costa Rica, is about to go into production, with the first gold being milled by November, 2009.
“With any luck, we’ll have gold bars (more correctly “dore”, a silver and gold combination that will be refined into pure gold in Canada) by December, 2009” smiles Morgan.
It will be the end of a long and convoluted regulatory and political maze for the former Vannessa, not only in Costa Rica but also in Venezuela, where the company argues its Las Cristinas project was expropriated by the hostile regime of leftist President Hugo Chavez.
Though never as tough as Venezuela, for years Costa Rica was less than a welcoming place for the little Canadian gold company, especially when the country was ruled by anti-mining president Abel Pacheco, who stonewalled the company during his tenure in office.
“There definitely was political influence,” says Morgan. “There was no will for the project to go ahead.” At that point, “I couldn’t look anybody in the eye and say with confidence that we could start producing by a certain date.”
But, rather than give up on a good prospect, Infinito stayed on, building relationships with the local people and pressing appeals through the courts. The project finally got permission to proceed in 2006, the last year of Pacheco’s term.
Morgan credits that ultimate success to Infinito’s long-term commitment to the local people.
“The process was started long before I got involved,” he says. But, importantly, when the development bogged down, the company did not abandon the social programs it was creating for the local people – improving roads, a school, helping to set up technical training programs, and a tilapia fishery and offering jobs wherever possible.
At one critical environmental public meeting, 1,200 people turned up. Opposition to the project came from urban activists and academics, but the local people got behind the project. In one compelling speech, a mother told the crowd that five of her seven children had to leave the area because there was no work and, to reverse that trend, she was prepared to trust the Canadian company that had treated her people in good faith.
“At the end of the day, it was almost a reverse NIMBY,” says Morgan, clearly moved by the local support.
With the court’s approval, an environmental green light and support of the new government of president Oscar Arias Sanchez, mine construction got under way in June.
Though relatively small by world standards, Infinito’s open pit mine is promising an impressive yield – 120,000 ounces per year in the initial years with a 92-per-cent recovery of the precious mineral. Company officials estimate one million ounces of gold are recoverable, and another one million ounces are inferred resources.
Gold mining is one of the few mineral operations well positioned to weather the current market turmoil – as most stocks tumbled, gold closed in New York on Friday at $846 US per ounce, a far cry from the days when the mine’s initial investor, Placer Dome (now owned by Barrick Gold), decided this prospect wasn’t worth the wait. It shelved the project when gold fell below $300 per ounce.
“We’ve got the luck of recovering gold prices,” says Morgan.
“Remember when oil was $18 a barrel? A lot of oil sands plays didn’t make sense then, either.”
Morgan acknowledges that another reason for investor ambivalence to his company is the fact that Mannix and now Steven Dean, Chairman of Amerigo Resources Ltd., together control roughly 60 per cent of the common stock. That makes the company “anomalous” in the marketplace. Investors sometimes ask, ‘Are you a private company?’
One other factor is memories of Calgary’s most notorious gold mining company, Bre-X Minerals Ltd., whose claims of an enormous gold resource in Indonesia turned out to be the largest fraud in Canadian history. Thousands of investors lost their life savings when the company collapsed in 1997.
“Bre-X was a real black eye for the Canadian mining economy,” says Morgan. But, as a result, today’s regulatory standards are much more stringent, and a repeat of that shameful chapter is considered virtually impossible. Placer’s original core samples for Crucitas, for example, are readily available, unlike Bre-X’s, which disappeared when the core shack mysteriously burned.
Infinito’s breakthroughs include both Costa Rica and Venezuela – again, after a tough fight against what Infinito alleges is expropriation of their mining rights at Las Cristinas.
Infinito launched a process of international arbitration action against the Venezuelan government, and recently won a jurisdictional hearing. That means that an international panel, the International Centre for Settlement of Investment Disputes, now has the authority to rule on Infinito’s claim for damages: $200 million invested (including Placer’s initial contribution), plus a “lost opportunity” claim that lifts the total above $1 billion.
Morgan says the panel could theoretically rule to return the property to Infinito, but that’s not a preferred option because, “Venezuela is a tough place to do business right now.”
The cleaner solution would be a cash settlement – “With the history we have there, it would be difficult to go ahead” with the project.
Infinito much prefers the friendly turf of Costa Rica, where both the local people and now the government seem to welcome their Canadian partners.
“It’s a good place,” says Morgan. “It’s safe. It’s a country of laws. The police are on your side.”
Editor’s note:
On Tuesday, October 21, Infinito Gold’s Costa Rican subsidiary, Industrias Infinito S.A. (IISA), was served with a court order from the Constitutional Court (SALA IV) requiring that tree cutting operations be suspended. This suspension was due to a challenge from an individual in Costa Rica under provisions which entitle every citizen to apply directly to the SALA IV for decisions on constitutional issues, in this case the environmental protection provision in Costa Rica's constitution.
While this matter is before the courts construction activity on the project has been suspended.
