Vannessa Ventures Ltd. - Costa Rican Crucitas Deposit Approved for Production

Dr. Allen M. Alper and Jill Cueni-Cohen

The Crucitas Project has the potential of being a low cost gold mine, producing over 82,000 ounces per year, which will be mineable in about eighteen months. We interviewed John R. Morgan, President, CEO & Director of Vannessa Ventures Ltd., just before the long-awaited news broke on April 24th: Industrias Infinito S.A. ("Infinito"), a wholly owned Costa Rican subsidiary of the Canadian firm Vannessa Ventures Ltd., announced that it received final official approval from Costa Rica’s Ministry of Environment and Energy (MINAE) to develop and produce 18,000 hectares of exploitation concessions at their Crucitas gold project. Along with the approval of the modified Environmental Impact Statement ("EIS") received on February 4, 2008 from SETENA (the environmental department of MINAE), production can now move forward at the Crucitas gold deposit.

Located in the underdeveloped north-central part of the country, Morgan explained that the Crucitas deposit is actually situated along the gold-producing Rim of Fire. “Costa Rica has a gold-mining history, even though there are no active gold mines in the country right now,” he said, noting that this project is on the border of Nicaragua, which supports several gold mining operations. “One knows that gold deposits don’t recognize borders."

The Crucitas deposit was identified by Placer Dome in 1992 and underwent extensive exploration work until 1998, when the project was sold to Lyon Lake Mines Ltd. Vannessa Ventures purchased the project and received its exploitation license from the Costa Rican Government in early 2002, at a time when gold prices ranged $300.00 an ounce or less. Said Morgan, “This was a pretty courageous move, I think, because mining was a tough business then.”

From Gold Explorer to Gold Producer

Based in Calgary, Canada, Vannessa Ventures is a unique company. “We have one controlling shareholder, who is an entrepreneur and industrialist here in Alberta,” explained Morgan, noting that he owns over 50% of the company’s shares. “I think that’s important, because having a controlling shareholder adds a degree of stability to our company. So, investors can be aware that we are not subject to being bought out by an opportunistic company if we hit a rough patch or have a low spot in our share price.” The company also has offices in Venezuela and prospects in Guyana. A geologist trained at the University of British Columbia, Morgan joined Vannessa Ventures as its president in 2004. He spent the bulk of his 30-plus year career in mining with Manalta Coal Ltd., which was the largest coal mining company in Canada until it was taken over in the mid-‘90s. More recently, Morgan served for four years as Vice President Operations in charge of a large tonnage coal operation in Venezuela, known as the Paso Diablo mine.

Vannessa Ventures’ Vice President of Operations, Dr. John Thomas, has relocated to Costa Rica to oversee the construction of the Crucitas mine and the initial operation period. Said Morgan of Thomas, “He’s a metallurgist with many, many years of planning, construction, and operating experience. In fact, his most recent construction was the Choco 10 Mine in Venezuela, which is now currently owned by Rusoro.”

Morgan explained that his predecessors were forward-thinking when they acquired the Crucitas property and identified the fact that the project could be mined cheaply because of the saprolytic material -- soft, weathered rock which lies on top of the deposit – that can easily be processed through a mill at a high rate.

Morgan estimates that when mining the overlying saprolitic material, the mill will initially produce at the rate of about 7,500 metric tons of ore per day, and that will fall off to 5,000 metric tons a day in later years. “As we get into the harder rock, production will drop down because we’re limited by grinding capabilities. But that will still mean an average production of about 82,000 ounces per year over the life of the mine,” he pointed out, adding that the Crucitas project is just the beginning. “In addition to that, we have 1,800 hectares of an exploration concession, and those are different under the mining regulations in Costa Rica. An exploitation concession means that one has the right to go in and actually develop and produce the resource while an exploitation concession gives you the right to explore for additional prospects.”

A moratorium on open pit gold mining in Costa Rica since 2002 was lifted by MINAE in April, according to a newspaper article in La Nacion, published on April 24, 2008. “The Crucitas Project was not impacted by that,” noted Morgan. “We were grandfathered because we already had certain permits in place.” However, lifting the moratorium now paves the way for the exploitation concessions held by Infinito adjacent to the Crucitas project area. Morgan refers to this as a high potential area, having already exhibited interesting anomalies surrounding the mine.

“We have approvals,” said Morgan. “We’re ready to construct an actual mine that’s going to be profitable in its own right. But the fact that we have this large additional land body surrounding the mine in a known gold producing area with identified gold mineralization of a very substantial grade should give investors encouragement that this is not a one-off -- there is a potential for additional resources to be identified and developed in the area.” One of these areas called Conchudita was also drilled by Placer Dome and gold mineralization averaging over 4.5 grams per tonne was identified. This property has a historical inferred resource estimate of 470,000 oz but the work was done prior to the implementation of National Instrument 43-101 and does not comply fully with that standard.

Environmental and Social Impacts

The plans for developing the deposit at Crucitas are well advanced. “We have purchased the mills, and they’re in California awaiting a shipment to Costa Rica. We have both a SAG mill and a ball mill in hand. We purchased or control all of the land required for the project, including the Tailings Dam infrastructure (which will contain the waste product from the mill) in the mining area,” said Thomas. “We have paid our environmental bonding – a deposit to the government of $600,000.00 U.S. dollars – and we are currently working on improving the road to the mine, putting in some bridges that need reinforcing and other development activities in the area.” Employing the latest technology in waste water treatment, Vannessa Ventures has publicly promised the Costa Rican government that all of the releases from the Tailings pond will be free of cyanide. In addition, Morgan said, “We will replant the area that’s disturbed, plus some additional lands that we have that won’t be disturbed, and we will take those from their current use, which is low-level agriculture and plantation forestry and put them back into native species. “Costa Rica has a very demanding and a very exhaustive environment approval process and we respect that.” Acknowledging that some communities in this very poor region of Costa Rica will be impacted by the mine, Morgan emphasized Vannessa’s ongoing commitment to providing the local people with community and social development projects, including computer training and sewing classes. They’re also tackling sustenance issue by encouraging organic farming, fish farming and helping the community establish a co-op in the area.

“We have strong community support there, and we think that is [due] to the fact that we’ve continued with these socially responsible activities,” he noted.

The Right Place, the Right Time

Costa Rica provides a stable regime in a country that has no history of radical changes to tax laws or other things which impact some developments in that part of the world, Morgan pointed out, adding that the country’s legal system is renowned for being fair and equitable.

“We have gold at historic highs over the last several months, so this is the time, in terms of the commodity cycle, to be developing a mine like this,” said Morgan. “And what we have here is a mine that’s ready for development. We have a a well defined deposit which will be a low-cost operation; a very simple mine with low strip ratios and with very high gold recoveries. And what I like about this deposit as well is the blue-sky potential in the large area surrounding the mine.

Morgan estimated that it will take 18 months to construct the Crucitas mine, and then it’s all systems GO. “The mine will be producing gold right from the start,” he pointed out, noting, “As soon as you start digging into the ore body, you’re actually producing gold as the deposit is not covered with any significant amount of overburden material.”