Cadan Resources Corp (fka CXD)

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STORY OF THE MONTH - Cadan transforms from explorer to producer
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In February Canada-listed Cadan Resources Corporation (CXD-TSX.V) will transform from Philippines explorer to gold and silver producer with copper production to follow later in the year.
The company’s exploration began about 10 years ago with the initial identification and exploration of potential projects but, Cadan’s CEO Brett Taylor says it has been in the last two years that activity has intensified.
“It has taken time and a lot of effort from everyone to get our gold, silver and copper projects to the ‘resources’ status, but now we are ready to take them into production.”
First cab off the rank in Cadan’s suite of projects on Mindanao will be the T’Boli epithermal gold and silver mine, which will provide cashflow and enable the company to concentrate on its larger copper prospects, with the first of these, Tagpura, expected to come into production in the second half of 2010.
Cadan’s chief operating officer Robert Butchart says the company expects to commission the mill at T’Boli in the first week of February.
“We have some tailings that we will put through the mill first to help iron out any teething problems and get it operating as smoothly as possible.
“Towards the end of February we will start putting through a bit of lower grade ore, the 2 or 3 grams/tonne material that surrounds the vein systems and is stockpiled at the mill. Then we will start putting the primary ore through which should be 10 or 12 grams/tonne plus.
“The ramp-up to full production is expected to take a month.
“We are pretty confident there won’t be undue delays. We’ll start slowly with tailings and build it up with lower grade dirt through the crushers into the higher grade ore.”
Robert Butchart says, “It’s very simple and straightforward the way we are doing it. The ore body is simple and basic as is the mining and processing. It’s similar to Medusa’s Co-O gold mine. We have visited this operation and our mine is basically the same, just like looking in a mirror.
“The mill is built locally and to suit local operating conditions. It will cost some Philippines Pesos 45 million and will have a capacity between 175-250 tonnes per day.
“To increase capacity in the future is also easy because we only have to build another mill. We can do this relatively quickly and inexpensively. It’s easier to do it this way than to take out a $10-20 million gold loan and build a much bigger operation.”
T'Boli is a typical epithermal high-grade narrow vein system that has a resource to date of some 420,000 ounces of gold and 1.6 million ounces of silver. This has an in-ground metal value of about US$450 million. There is the possibility of increasing this through a regional exploration program.
In addition, the company has a major gold deposit and copper-gold porphyry deposits in the Compostela Valley Province of eastern Mindanao.
The gold deposit is the Batoto-Tarale gold stockwork system which has a historic Philippine resource of 39 million tonnes @ 1.8 grams per tonne for some 2 million ounces of gold. Validation exploration activities, including drilling, are progressing, with a high possibility of significantly increasing both the tonnage and grade of this system, which is one of a number of known stockwork systems within a 15km by 3km corridor.
Significant copper-gold resources are in both porphyry and porphyry skarn deposits, especially in the Tagpura porphyry copper-gold deposit which has a conceptual or order of magnitude potential tonnage range between 1 billion and 1.7 billion tonnes with an average 0.42% copper and 0.17 grams/tonne gold.
Within this lies the porphyry skarn which has an internal resource of some 10 to 15 million tonnes at 0.75% copper and 0.31 grams/tonne gold.
It is the skarn that Cadan is focusing on as T’Boli begins operating. Robert Butchart says the skarn is the preferred option for initial production because it requires a lower capital cost with lower operating costs and offers early potential to generate free cash.
“The mining and production will be relatively easy while our test work has shown that the mineralogy of the ore is superb, the copper just falls out of it. It’s not difficult ore to treat, very simple, very basic.
“We are planning a bacteria heap leach operation but are also looking at other technologies and are getting some test work done on these.
“Tagpura is the first of our copper targets and we hope to be on the ground there in the next few weeks with the aim of beginning a pilot test of around 100,000 tonnes in the second half of 2010 before ramping up to annual production of 2 million tonnes.”
Cadan is in the final stages of negotiating a development agreement for Tagpura which it believes will help it bring these plans into fruition as soon as possible. It is also in the final stages of offtake negotiations for the Tagpura copper.
Brett Taylor says the company is also progressing with all the local and regional requirements necessary to begin operations at Tagpura and already has secured indigenous consent. “The environmental report is under way and we are preparing briefs for government officials as part of preparations for the processing report.”
Cadan has already identified a number of additional skarns which it plans to drill later and is targeting about 100 million tonnes of porphyry skarn at about 0.75-1% copper and about 0.3-0.5 grams/tonne of gold.
Other projects the company is exploring and hoping to bring into production within the next few years are the Kalamatan porphyry copper-gold deposit, which has an indicated conceptual or order of magnitude potential tonnage range of between 100 million and 525 million tonnes, and the company-discovered Cadan porphyry copper-gold target to the west which has a potential tonnage of between 450 and 900 million tonnes.
Robert Butchart says after Tagpura, the company will probably move over to the Maangob deposit. “We see ourselves starting at 2 million tonnes each year but there’s no reason why we can’t expand to 4, 6 or 10 million tonnes over the next 3 or 4 years.
“It has taken a couple of years to get our ducks all lined up but we are now ready to go and will be one of the better stories of 2010.”
Brett Taylor concurs and says, “We have done a lot of work over the past two years, including around 20,000 metres of drilling at Tagpura, and we have gone about our business quietly, but now we are on the verge of producing from some exciting prospects.
“Our technical team led by technical director Bill Goode has had a challenging and exciting two years, have remained focused on the task and have demonstrated a strong desire to achieve and succeed.
“These qualities have helped take us to the point of becoming a producer and will continue to stand as in good stead as we strive to become a significant gold, silver and copper business within the next two to three years.
“These factors will be aided by the strengthening demand for copper and gold, especially in Asia led by China and India.”