part two/part of company history; this is writer's respect to SAGD /\SAGD/12-10-12
writer Special Situation Newsletter #26 - July 8, 2011
mick chat to ceo yesterday!
this deal didn't workout due to mining changes in this area of claim!
Start-up South American Gold Corp. (SAGD.OB) offers an early bird adventure in going after three separate multi-million ounce gold plays in one of the least explored most promising gold development areas left on the planet.
In the early 1500s Spanish Conquistadors entered Columbia and it became the chief country from which to send gold to Spain. Prior to l937 Columbia was the largest producer of gold in all of North and South America. Unfortunately, rising drug violence (90% of the cocaine entering the U.S. was processed in Columbia) and the insurgency of the Revolutionary Armed Forces of Columbia (FARC) which turned to drugs and kidnapping to finance their idealistic cause, put the nation's viability in question.
About 1999 Columbia became generally too dangerous for most mining companies to do much exploration with the FARC fighters then winning and cartel drug violence, killings and kidnappings out of control.
To combat narco- terrorism, spur economic recovery, strengthen democratic institutions and respect for human rights and provide humanitarian assistance to internally displaced persons a Plan Columbia Program was designed.About 2002 under former President Alvaro Uribe, who boosted the army significantly and with a lot of help and support from the U.S. government military, Columbia gradually turned around and became safer. In 2009 early bird junior mining companies and some of the majors again became active.
During the decade of danger exploration in the western mountainous Columbia Cordillerawhich runs right down the entire country was seriously interrupted even though promising small scale mining of high grade veins existed there even before the Conquistadors arrived.
Responding positively to the challenges, Columbia's government became more capitalistic, encouraging business investment and the creation of jobs. Amnesty for past drug crimes was offered and the vast majority jumped at the chance for a new start and appear to be trying to turn over new leaf.
With impressive infrastructure improvements in mass transportation, energy, housing and local security, the government is sincerely trying to improve theenvironment so young people will have more hope for better lives and will seek education. Opportunities for women have increased and senoritas jokingly nicknamed one new government skyscraper "the intelligence building" because only females can work in it.
Importantly, Columbia has initiated business friendly reforms, many favorable to the mining industry in particular. For instance, the mining code of 2001 includes a low 4% royalty rate to encourage sustainable development and invigoration of the national economy. The mining code ordains the principle of environmental sustainability throughout the mining cycle. At the same time the code established the simultaneity of both technical and environmental viability studies and increased speed and efficiency in the process.
Overall, the people of Columbia have grown tired of the mindless violence. In voting a vast majority put life and safety before liberty. While the people want liberty too, without safety liberty cannot be enjoyed. T shirts are everywhere with messages to end violence and respect life. Here is a hard working people filled hope for a better future and the joy of living in an upbeat improving nation. (I hope we in America will feel that way again too.)
Tourists are returning and today's local young people feel safe enough to go out and party and have fun. In a great square created as part of a huge modern transportation project an outdoor samba class was being taught to about 50 swaying young people. Hundreds of onlookers not only watched, but joined in sensuous dancing as intoxicating rhythms filled the air.
Current President Juan Manuel Santos won election by a huge margin as voters confirmed preserving the improved safety was a high national priority. So President Santos has a mandate to continue the capitalistic friendly policies of President Uribe and a military partnership with the U.S. In summary, the Columbian government has a message for the foreign investment community -Columbia is open for business!
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Company History
In October 2010 this early stage gold development explorer went public by backing into a shell company Grosvenor Exploration , Inc. and changing its name to South American Gold Corp. Trading commenced on the OTC Bulletin Board under the symbol OTC BB: SAGD but has been very light with hardly any shares changing hands in some weeks. Average daily share trading for the latest three months is under 900 shares.
Also in October 2010 veteran mining executive Raymond De Motte became CEO and subsequently assembled a highly experienced mining team with local know how to exploit opportunities in Columbia's last remaining gold frontier, which includes SAGD's highly promising initial Santacruz Project.
Some rural or border areas had been too dangerous to even enter during the worst of the period. The best opportunities remaining were in the least picked over properties and a lot of it could be acquired on at bargain prices.
De Motte went after a private company Kata Enterprises, which owned 85% of the intriguing Santacruz Project in the Department (state) of Nariño in one of the least explored areas not far from the Ecuador border where FARC fighters still come to cross over and regroup.
After a down payment of $1 million plus one million SAGD shares, SAGD agreed to buy Kata's remaining interest in Santacruz Project and spread payments of another $3 million in cash plus 3 million more SAGD shares out over 18 months to conserve precious start up seed capital.
This is only the first step in De Motte's ambitious plans to acquire at least three separate projects to diversify SAGD's risk. Past bitter experience has convinced him not to depend upon any single mining project, not matter how promising it looks. Any prospect can turn out to be very disappointing once the drilling starts.
Because in mining a company needs scale to achieve low costs per ounce, De Motte wants properties with at least the theoretical potential to contain a multimillion ounce deposit or a smaller outdated mine where the marginal production could be sharply and profitably improved by switching to modern technology. In both cases, SAGD's on the ground knowledge of local properties should come in very handy.
"We are looking at projects which in the past because of the political strife were shied away from," De Motte explains. "Even now that Columbia has become more secure people haven't come back in those areas yet.
We want to have the first mover advantage and go into those areas before other people and hit the ground running. Look at some other more developed areas and everybody and their mother is chasing their own tails for projects. It affects the entry costs. If you get in there after everybody else you pay sometimes two or three times too much.
We are focused on areas that historically have produced gold but where modern technology and exploration sampling have lagged or not even been used. We believe can find some projects which meet our acquisition criteria and get in there first."
Of the 40 or so prospective investors who attended the March Columbia Gold Investment Conference in Medellin all were non U.S investors. The biggest group appeared to be from Switzerland, followed by Germany, U.K. Canada and other spots like Israel, Lebanon and Panama etc. Some mentioned they attended because they had invested and made money in previous De Motte led companies. In March the initial $1.5 million private placement was completed and entirely subscribed by foreign investors so SAGD is virtually unknown to most U.S. investors.
Because no one was granted registration rights all of these foreign investors can be considered long term if management stays on track.
Some of the institutional investors were pleased that De Motte not only had valuable triumphs in the background, but had also made mistakes and appears to have learned from them.
On the plus side De Motte has taken two mining properties from exploration into production. On the minus side he admits making his share of goof ups. Paraphrasing the hilarious old Bob Dylan song "It ain't me, babe!" De Motte throws up his arms and laughs, " If you are looking for the perfect manger, it's not me."
Bitter experience from the volatility of silver prices has taught him to take into consideration and beware of the volatility of mining prices. "They don't always go up." So De Motte includes the unexpected wider fluctuation of gold prices among the biggest risks facing his new company.
Here is how De Motte sizes up that very real danger. The price of gold has soared and it will from time to time correct. But the price has gone up so spectacularly that the bottom floor under the price of gold has kept rising too. That takes a lot of the risk out for South American Gold. Before that gold floor was maybe $300 an ounce and now many mining majors use a rock bottom $1,000 for internal planning purposes.
De Motte figures even if gold fell back to $600, which is highly unlikely, largely open pit operations in Columbia and even probably underground mines using modern technology should remain profitable.
Dealing with unreal outsider expectations can also be a dilemma. De Motte stresses SAGD is a very early stage development company in its crucial foundation period where the stage must properly be set to execute its plan for its initial property and for the future new two or more acquisitions.
"Getting value out of this property will take time," De Motte sighs. "Everyone is so short term. Every step forward takes a certain amount of time. The longer you have the more value you can develop.
At 54 I would love to have South American Gold be my last stop. Naturally, I will always have to listen to an offer which is attractive to shareholders, but I would like to build this one."
The prize is to try and build a company with at least one and possibly three separate multimillion ounce deposits. "We have put together the acquisition criteria, basically driven by the strategy of the company and right now are building the foundation to execute it," says De Motte.
"We have already hired a mine engineer. So we've hedged development and potential near term production. We have a really strong team (See Management Section) and we waited and took our time in choosing the people.
Any business is problematic until you get further into a project but we feel by having the right people in place and the right consultants outside the company we are building now for a bright future. "
SAGD's Initial Santacruz Project
South American Gold Corp. is an early stage American junior mining company committed to high potential, under explored properties in Colombia's historic gold mining districts.
This historic gold district has been virtually unexplored by modern exploration techniques but historically was known to host gold deposits and production mainly by Spanish and English miners. Offering highly favorable geologic trends, the region has a number of small mines operating with outdated technology and the Department of Nariño is governed by a forward -looking pro-mining expansion government.
Currently SAGD controls one project, the Santacruz Gold Project in Guachaves, located in the department (state) of Nariño. The nearest airport is in the rural city of Pasto, overlooked by a volcano. The Santacruz Project encompasses over 4,500 acres across this legendary gold-rich area.
In '80 and '82 agencies of the Columbian and Japanese governments did some mapping and regional work trying to identify anomalies. A Japanese agency identified 36 multiple vein clusters, 16 of which are on the Santacruz Project. Gold mineralization at commercial grades was identified at the relatively shallow depth of 100 to 150 meters, which suggests low -cost open pit production potential.
One vein the Japanese sampled yielded 7 grams of gold per ton. Another sample came up with very decent poly metallic gold silver mineralization. Again theoretically find and put enough of these veins together you could be looking at a multimillion deposit.
Tantalizingly, most of the Santacruz property is still unexplored. Similar results concentrated in any newly discovered vein clusters could prove out to 2 to 3 million ounces of gold. With good mining characteristics and the potential for low cost bulk open pit production besides underground mines, Santacruz could turn out to be a big play. In terms of an opportunity in the underexplored part of Columbia to look at, Santacruz ranks up there with the best.
Red Light! The old studies are a good starting point but need to be confirmed by using new technology. The rest of the unexplored ground needs to be systematically gone through to identify the best prime drilling spots. The forest terrain overgrowth must be cleared with machetes to reach drilling targets.
Everything requires a lot of field work. Phase I exploration has already begun, which includes preliminary site-work, surveying, geologic mapping and sampling due to be concluded soon. The hope is to find new veins in places SAGD didn't know about and open pit opportunities. SAGD is doing inventory to confirm what SAGD thinks it knows from the old government agency studies and what today's observers think they can see on the ground.
The owner of the existing marginal underground El Diamante mine operating on Santacruz on a very small scale using antiquated machinery lets SAGD use it for a base camp. Modernizing El Diamante or one of the other numerous existing small mines in the area now operating with antiquated equipment is also a tantalizing possibility for early cash flow.
In his previous companies, De Motte has done similar things. De Motte really shines when he gets a property into production. Everywhere in his jeans and hard hat De Motte knows many of his key producing people by their first names and can inspire their loyalty.
Results from South American's Phase I exploration plan should be released this summer. Phase I includes preliminary site-work and surveying, geological mapping and geological sampling. Advance geochemical, geophysical work should establish preliminary drill targets.
Phase II, which naturally must be built upon Phase I results, will be an advanced $1.2 million exploration program with a 6,000 meter drill program costing $200 a meter. By the end of 2011 or in early 2012 investors could hopefully see South American's initial resource report NI 43-101. Phase II exploration should also be well underway on track to define the potential for establishing a multimillion ounce open pit or underground mine.
SAGD's Other Two Mining Opportunities De Motte has been insistent he wouldn't feel comfortable unless he had at least three projects because in mining anything can happen to just one. Why was he so confident he could identify new targets within the next 12 months? "We went to the least explored part of the greatest remaining gold play on the planet," De Motte replied. "We just see so many opportunities down there. We have the talent and we feel our company is scalable with the talent we've assembled."
A management team with extensive mining and capital markets expertise
Because SAGD is looking at underexplored neglected areas CEO Raymond De Motte has put together an experienced team which has previously distinguished themselves at larger mining concerns, especially in Latin America.
Raymond De Motte, 54, President and CEO has over 30 years of business experience starting off with the global giant Bechtel where his father was a high executive.
After developing global outlook and learning to do deals, DeMotte expected to spend his entire career there. In an unexpected economic downturn, he saw his own future there suddenly disappear. Although advised if he stayed things at Bechtel would ultimately turnaround, instead the impatient young man confidently started off on his own.
De Motte took over a company in mining which became his career. A few current SAGD investors became his fans after earlier making money from his previous efforts as CFO of Kimberly Gold or as CEO of Sterling Mining Company , which filed for bankruptcy after he left.
Among his best accomplishments are bringing two mining operations into production, raising over $50 million in equity financing and management of exploration, development and production in the U.S. and Mexico. De Motte is currently a director of two Canadian public companies, Silver Fields Resources and Westcan Uranium.
South American Gold is the major opportunity of his life to create new value for himself and his investors.
Camilo Velasquez, 32, CFO and Director, focuses on corporate development and finance. Previously he served as a senior financial analyst at Merck & Co. developing business planning processes and financial objectives. In 2007, he joined Sterling Mining Company as budget/financial analyst in Sterling's Mexico operations. He is a very impressive young man.
Francis Xavier Reinhold Delzer, P.E., 75, Vice President of Operations, has more than 40 years experience in Latin America. He has worked for top mining companies like Ariel Resources, Marcona Mining, Orinoco Mining, CIA Minera Industrial and Andes Copper Mining Company in the areas of production management and supervision of gold and base metal mines and also consulted for Sterling Mining. He is a former Fulbright Scholar.
Rene Von Boeck, geologist, 74, Vice President Exploration, brings more than 40 years of experience managing and supervising precious and base metal exploration projects in Bolivia, Ecuador, Peru and Mexico.
In the past he managed the multi-million -dollar -exploration -drilling program that led to the discovery and development of a major AG-Zn-Pb deposit in Southern Bolivia. He also worked for CEO Demotte at Sterling Mining.
Quinn Bastian, Director,served from 2005 to 2007 as Vice President of Finance for International Minerals Corporation, a Canadian mineral resource company.
From 2000 Bastian hasserved as an officer and director of a privately -held mining company and also operated his own consulting practice in general areas of accounting , business plans, financing, mergers, acquisitions and reengineering.
He began his career in public accounting with the firm that became KPMG and has over 40 years of experience in finance, accounting and senior management.
Beatriz Duque, Director, worked in the Columbia Ministry of Mines and Energy from April 2004 until November 2010 in a number of capacities including Director of Mines and Energy.
Ms Duque has a Civil Engineering degree from the University of Medellin and has completed postgraduate finance studies at Eafit University. She has served as a board member to a number of South American energy and engineering companies, including Empresa de Energia de Cundinamarca,
Central Hidroelectrica de Calda, Centrales Electricas del Norte de Santander, Electrificadora del Huila and Electrificadora del Quindio. During her tenure as Director of Mines, Ms Duque was instrumental in the development of policy and decrees related to mine health and safety.
Consultants- an established and experienced project support team in place in Columbia:
Dr. Stuart Redwood, PhD, geologist, 50,consultant,is a key member of SAGD's Advisory Board. He has over 30 years experience, including over 20 years all over Latin America including Bolivia, Brazil, Costa Rica, Dominican Republic, El Salvador, Guatemala, Guyana, Honduras, Nicaragua, Panama, Peru, and of course Columbia.
Formerly the chief geologist for AngloGoldSouthAmerica, now AnglogoldAshanti, the hottest explorer in Columbia, Redwood is credited with many discoveries in Latin America including in Columbia. He will be a key advisor as SAGD looks to identify, acquire and develop prospect gold deposits.
Importantly, Dr.Redwood has the capability to independently prepare a NR 43-101 qualified person resource report which will be an important step in initially determining the value of the Santacruz Project. A report from Dr. Redwood also should carry credibility.
Juan Carlos Benjumea, consultant, is the initial member of SAGD's Advisory Board. He is a business attorney based in Medellin with an international commercial practice assisting foreign companies developing and expanding operations in Columbia.
mick;
starting part 3 / very long desription.
