Colombian prospects are expected to yield substantial reserves for AIM listedCMR

There is a significant error in the Dow Jones story mentioning CMR that was copied on this BB recently (“Gold Miners Rush to Colombia as Guerilla Fighting Eases”)

It quotes Peter Bolt as saying that CMR plans to invest $20million next year to boost production of the purchases we have made in Colombia to 25,000oz of gold a year in 2007. It also quotes him as saying that expenditure could double if we acquire another three or four small-scale operations.

I couldn’t square the probable debt finance repayment costs of this with the return so I raised it with the company yesterday and it turns out the figures given are inaccurate.

With the two small mines we have currently done deals on, the investment is more likely to be maybe $2million rather than $20million.

We clearly haven’t stopped looking for mines in Colombia yet and we could well pick up another three or four small-scale operations, which could in turn increase the level of debt finance we require (to maybe $4-$5million rather than $50million).

It’s a little early at this stage to give hard and fast figures because it depends on what further purchases are made, what the up-front costs are, what investment is needed and how much gold can be mined per year.

Nevertheless, I’m reassured that we are not contemplating debt finance of much more than 10 per cent of the expected return.

These small gold mines are in the “Frontino belt” but they are distinct from Frontino Gold Mines, the relatively large company that operates El Silencio and Providencia an which has estimated reserves of 1 million ounces.

These people have been making a lot of noise recently about a confidentiality agreement with CMR about a possible sale! I don’t think that CMR has put anything on the record on the subject.

If CMR were a purchaser, then clearly the sums involved here would be in a different league, both in terms of purchase price and investment. But then again, Frontino Mines are said to be producing 40,000 oz a year with “plans” to produce 80,000 oz next year – and this is with a relatively inefficient production system.

Our intentions in Colombia will no doubt become clearer in the first quarter of 2006.

I think this is important so I will repeat this posting in January, because I know a lot of people are now away for the Christmas and New Year break. Happy Christmas all. (and a prosperous Nw Year!)