Five Minutes With Chris Gale, Latin Resources Limited

Jim Kharouf

Jim Kharouf

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Chris Gale is the CEO of Latin Resources Limited, an iron ore and gold exploration company based in Perth, Western Australia. Latin Resources uses mineral sands technology to process iron ore and other materials at its Guadalupito project in the northern desert of Peru. Gale talked to editor/producer Nicole V. Rohr about the company’s reasons for using offshore mining and mineral sands production and about its future plans in Latin America.

Q: What is the history of Latin Resources Limited?

A: We started the company back in March 2008 in Perth in Western Australia, and I’ve been investing in mining for some time in Australia. Australia is still at the point where mining exploration, and certainly mining itself, has become very expensive, for a number of reasons. So, we wanted to look offshore and at the assets in Peru and South America. We went over and had a look at these assets, and really liked not only the assets, but the country itself with respect to mining, with respect to mining law and mining concessions, structure, infrastructure itself, highways, and ports. And at the end of the day, [a significant percentage] of Peru’s GDP actually comes from mining, so they’re a mining country – the No. 2 silver producer in the world, No. 2 in copper, No. 2 in zinc and lead, and in gold they’re about No. 6.

One of the areas that we wanted to look at initially was exploration in iron. They [Peru] do have some very good iron ore… One of our key strategies was to ensure that these iron ore or these minerals were close to a port and close to infrastructure in regard to power, water and highways, for example. I see very often, in Australia incidentally, many assets, many good deposits, are discovered in places like Western Australia where they’re so stranded that someone has to spend $3 to $4 billion just to get those assets down to a port, and ultimately sold to market. So, we really focused on the coastal regions and our first area we looked at is right on the Chilean border, and we have a project down there. And the other area, around 2009 was presented to us, was project called Guadalupito, which is a mineral sands project.

So, that’s how we started. We actually listed the company two years ago on the Australian Stock Exchange, in September 2010, and we have a number of substantial shareholders now on our books.

Q: Why is mining so expensive in Australia?

A: My true belief is that Australia is one of the greatest explorers in the world, and we do use technology to find things. There’s a saying out there that you employ geologists not to look for things, you employ them to find them, and we actually find them. We’re very good at it.

But saying that, one of the issues I’ve faced in Australia in mining for some time is if I had to employ a geologist now, it costs me well over $200,000. To drill a diamond hole in Australia now costs around $300 to $400 per meter. I went to Peru and looked down there, you know, you could pick up a very good geologist down there for $70,000 to $80,000 U.S. dollars per year, very experienced and very knowledgeable. And it costs be around $150 per meter in a diamond hole in Peru – effectively half the cost.

Peru’s had its issues over the years. Twenty years ago, a group called The Shining Path, for example, were actually terrorizing the region, but that was all cleaned up in the late 1980s. That’s part of the reason why Peru hasn’t perhaps followed the same growth path as Chile and Brazil. Australia is a great place to do mining – it’s safe and I will say that the sovereign risk is minimal, but in recent times with the mining tax, people question that. And it is highly questionable what the government did, issuing a mining tax in Australia. We weren’t exploring in Australia at the time. We were focusing on Peru, but Australia’s an expensive place to mine. It has great products, it has great grade and certainly infrastructure is second to none.

Q: How does mineral sands mining compare to traditional mining?

A: One of the key factors in mineral sands mining over the last three to four years has been the price of these minerals that are normally contained in a mineral sands project, and why there’s so much interest out there at the moment. In particular, the reason is that the mineral itself has absolutely inflated in price.

The difference between hard rock mining and mineral sands mining, in most cases, is you do not have to really process as much the ore as you do in hard rock. With hard rock you have to crush, grind, mill, and in some instances float, in regard to copper. With mineral sands, it’s just a matter of actually separating the minerals via gravity, or magnetic separation for iron… So, very simple. This technology is 30 years old, and it’s very clean. There’s hardly any chemicals used in mineral sands production.

Q: Is there any way to know how long it will take to move into production?

A: If you look at history, if you look at statistics, generally five to 10 years from what we call a Greenfields exploration phase. We’ve been working on [Guadalupito] now for two years, and the way traditionally that an Australian company would work is to start with what’s called a scoping study and employ independent engineers and consultants to come in and have a look at the mining methods [and] the product itself, and come up with a plan on how we’re going to mine products and the mineral. Then we start what’s called a pre-feasibility study. There’s a lot more detail involved in pre-feasibility. Then if you want to go and borrow $100 million, you actually need what’s called a bankable feasibility study. Then you can go to the bank and say, “This is a BFS and we’d like some money, please.” Traditionally, the mining banks will then fund you on it.

Q: What other Latin American countries are you considering for exploration?

A: We’re called Latin Resources for a reason. We didn’t call it Peruvian Resources. We like the look of Latin America as a whole. Having spent a lot of time in Peru over the last four years, growth in emerging economies (Peru, Columbia, Equador, Chile, Brazil) has been going along very strongly over the years.

There’s always such emphasis on China and their growth. I have a firm belief that the middle class, certainly in Peru and in other countries like Argentina, Brazil, Chile and Columbia, is a lot more sophisticated than the average Chinese middle class. They command good living conditions. They command very good cars, etc., which all means very good growth for the country, and that’s one of the major reasons that we thought that we would focus on Peru. And our material can be sold domestically. There’s 8 million people that live in Lima. That’s a large city. There’s 30 million people overall in Peru. And I don’t have to tell you about the growth and the amount of people in Brazil.

Q: What projects will you be focusing on going forward?

A: Well, apart from our flagship project Guadalupito, we also have a project called Mariela. Mariela will start running in the next two, three or four weeks – certainly within the next month. Mariela sits down on the Chile border, and it’s in a very rich copper district. They’ve been producing copper there for some 20 years. This is a project we’ve been working on now for the last 12 months. We believe it probably hosts something similar to what we call IOCG, an iron oxide copper gold deposit. Until we drill it, we’re not going to know, but the drilling starts over the next four weeks. The news coming out of that will be really, really interesting.

The other big difference between explorers and miners is that out of 1,000 explorers, 10 percent end up mining. So, it’s not large. Some explorers go out just to explore or find a deposit and sell it, other miners, 10 percent of us, go out to explore, find it, and put it into production. And we’re a company that is moving into production. We’ve started our scoping study and we’ll complete that in the next five to six weeks, move into the pre-feasibility study and then we’ll start building next year, and start production in 2014. That’s incredibly important to investors, and those who have invested in us, that we go into production because ultimately you start producing revenue and profit, so that’s our main focus at the moment.

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