Salazar Resources (SRL) - "President Told Me We Will Get our Licence"

Matthew Gordon caught up with Merlin Marr-Johnson, Executive Vice President of Salazar Resources (TSX.V:SRL, OTCQX:SRLZF ) to discuss the past year and get a snapshot of what 2022 may hold.  

Salazar Resources

Salazar Resources is a Canadian-listed Ecuadorian exploration and development company. The company has a market cap of around CAD$ 50 million and is listed on the TSX-V, and the OTCQX.

Salazar Resources boasts the El Domo mine discovery, which is poised to be the next major mine built in Ecuador. he Feasibility Study stage of the El Domo mine has been completed and it is now in the stage of permitting. Salazar Resources is looking to make the next great copper-gold discovery in Ecuador through its 100%-owned portfolio and utilising its experienced exploration and management team.

Management

The CEO, President and namesake of Salazar Resources is Freddy Salazar. Salazar holds a Bachelor’s degree in Geology and a Master’s degree in Environmental Sciences from Central University in Quito, Ecuador. Salazar is a professionally registered geologist and has worked in the mineral resource sector throughout Ecuador from 1988 to 2000. Salazar founded Salazar Resources Limited in 2007 and listed the Company on the TSX Venture Exchange.

Merlin Marr-Johnson serves as the Executive Vice President and Corporate Secretary. Marr-Johnson holds a Bachelor’s degree in Geology from Manchester University and a Master’s degree in Mineral Deposit Evaluation from the Royal School of Mines, Imperial College. Marr-Johnson has 25 years of experience in the mining sector with positions as an Exploration Geologist at Rio Tinto, an Analyst at HSBC and Portfolio Manager at Blakeney Management. Marr-Johnson has experience in projects ranging throughout South America, Africa, Central Asia and Europe. He has also been instrumental in the listing of two companies to the Alternative Investment Market (AIM), a sub-market of the London Stock Exchange.

Freddy Salazar fulfils the position of Corporate Development Manager. He holds an honours degree in Global Financial Management from Regent's Business School in London and holds Ecuadorian certifications in tax.

Nick DeMare serves as Director. DeMare is a chartered accountant and received his Bachelor of Commerce Degree from the University of British Columbia in 1977. As president of Chase Management Ltd., DeMare specialises in providing accounting, management, securities regulatory compliance and corporate secretarial services to companies listed on the TSX-V and its predecessors.

Pablo Acosta has the position of Chief Financial Officer (CFO) and Director. Acosta is a certified public accountant and has been a director and officer of several private companies in Ecuador since 1985. Acosta earned his Bachelor's Degree in commerce from the Pontificia Universidad Católica del Ecuador in 1987 and has worked with Freddy Salazar since 2003.

Francisco Soria Venegas is Exploration Manager. Venegas has 39 years of experience as a geologist in Ecuador and worked at Newmont Overseas Exploration Ltd. Between 1990 and 1998. His time at Newmont saw him serve as Project Manager for the Cangrejos project, a Copper-Gold Porphyry of 1.6 Moz gold, located in Ecuador.

Carlos Aguila Guevara is tasked as Senior Geologist. Guevara holds a graduate degree in geology from Central University in Ecuador and a master’s degree in business management. Guevara has more than 33 years of experience in the mining sector including work on the Gaby and Rio Blanco porphyries in Ecuador. Guevara has been sporadically part of Salazar Resources since 2009.

The esteemed management team understands the country and is well versed to steer Salazar Resources forward and through tumultuous water, the government may create.

Ecuadorian mining sector

The newly appointed president of Ecuador, Guillermo Lasso announced Executive Decree No. 151. on the 5th of August 2021. The decree was announced with the hope of promoting foreign and national investment in the mining industry of Ecuador. The government further hopes that the decree will promote the development of a mining sector that is efficient, environmentally and socially responsible and gives best practices regarding the excavation of resources.

Security of title, enforcement of pre-existing mining rights and combating illegal mining in the country is guaranteed through this decree. The mining industry of Ecuador is set to be managed by the central government and not by provinces under Executive Decree No. 151.

The announcement of Executive Decree No. 151. excited mining companies operating in the country. The companies believed that it would create a favourable mining environment promoting investment into the mining sector. The country of Ecuador has significant mineral wealth and the issuing of the decree showed that the government supports and intends to develop its mining industry.

A recent ruling of the constitutional court however has caused the faith of some to dwindle. The constitutional court ruled that the startup of the Rio Magdalena project, a joint venture between Enami PE, Ecuador’s national mining company, and Cornerstone Capital Resources was unconstitutional and violated the rights of nature.

Enami PE and Cornerstone started the initial exploration of the project in 2017 but were forced to stop in June 2020 due to a ruling by the provincial court. The ruling revoked the environmental license and established that the right to prior consultation was violated.

Enami PE and Cornerstone vented their appeal to the constitutional court, only for the court to recognize and support the provincial court’s ruling. The constitutional court stated that granting the environmental license violated the rights of nature related to the protected forest as well as the right to live in a healthy environment and the right to water and environmental consultation.

The ruling has led some to believe that the mining sector of Ecuador lacks any legal security.

Executive Vice President of Salazar Resources, Merlin Marr-Johnson, believes however that the ruling does not set a precedent, he states:  

” This is going to be contested by the mining companies, and it’s going to be supported, I should imagine, by the government, the mines ministry, it’s actually the Ministry of Energy and Non-Renewable Resources, and the Environment Ministry because this was a ruling which is beyond the scope of the constitutional court.”

Marr-Johnson believes that the country still offers very attractive mining opportunities and that the mining sector of Ecuador is still poised for development.

El Domo project

The El Domo project, a farm-out arrangement of Salazar Resources with Adventus Mining, has the potential to be the next major mine built in Ecuador. Under the farm-out agreement Adventus will earn 75% of the El Domo project's revenue through funding the exploration and development, with a spend of US$ 25 million before October 2022.  Adventus Mining has agreed to provide Salazar Resources with advanced payments of US$ 250,000 per year until commercial production is reached.

The preliminary economic assessment (PEA) of the El Domo Project was issued in 2019 and showed a significant 4.9% copper equivalent resource. The PEA also shows that the El Domo project has the potential to be a low-cost supplier of copper, gold and zinc, generating cash flows after taxation of US$ 449 million over the initial six years of production. The PEA also boasts an internal rate of return (IRR) of 40% with a payback of under two years.

The El Domo project is supported by the Ecuadorian government according to Marr-Johnson, who states:

“We’ve seen with the Feasibility Study on El Domo that there is a huge amount of federal support for this project because they can see that it’s going to be stimulating a $200 million - $250 million investment into Ecuador.”

Marr-Johnson believes that the El Domo project will be permitted by the end of 2022. He is convinced thanks to a discussion he had with the Ecuadorian President at the COP26 summit in Glasgow.

“I asked him a direct question: ‘Are we going to get our mining permit next year?’ He hummed and hawed, and he said, eventually, ‘Yes.’ “

Salazar Resources’ portfolio also includes 100% owned projects in Ecuador, these projects include the Los Osos, Rumiñahui, Macara Mina, Los Santos and the El Porto properties.

The Los Osos and Rumiñahui properties have undergone exploration in 2021 with the Macara Mina, Los Santos and the El Porto properties scheduled for exploration in 2022.

2021 targets - Los Osos and Rumiñahui properties

The Los Osos and Rumiñahui properties are the only two of the four targets that Salazar Resources set for 2021 that have undergone exploration drilling.

The Los Osos property is a 229 hectare, single concession, exploration licence located in the El Oro State in Southwest Ecuador. Salazar Resources owns 100% of the license. The Los Osos property hosts a system of gold and silver-rich veins which is also combined with hydrothermal breccias and mineralised gold-copper porphyries. Several quartz-tourmaline breccias mineralised with chalcopyrite and pyrrhotite are also present on the property. The 2021 drilling campaign showed promise and delivered low-grade gold in each sample.

The Rumiñahui exploration licence covers 2,910 hectares and is located approximately 100 km northwest of Quito. The exploration drilling program started in October 2021 but no results are available as of yet due to the pending drill results.  Marr-Johnson however does not believe that the property has high potential.

“…from the geology that I can see, it’s okay but it hasn’t got the right kind of geology to shout, ‘We’re in a big porphyry system.’”

2022 targets - Macara Mina, Los Santos and the El Porto properties

The Macara Mina property is a 288 hectare 100% owned and licenced area in southern Ecuador. The property has the potential to be a buried volcanogenic massive sulphide (VMS) deposit with gold caps at the surface. The property has undergone mapping, soil geochemistry and rock-chip sampling with soil samples showing up to 9.9 g/t of gold. The rock chip samples showed results of up to 29.6 g/t gold over 1 meter. The Macara Mina property is planned to undergo further exploration as soon as it is granted the necessary water permits.

The Los Santos Property is a 2,200-hectare property located between the towns of Pasaje and Paccha in South West Ecuador. The northwest portion of the property is less than 2 km from the centre of the Cangrejos’ main mineral resource, held by Lumina Gold. The mineral deposit of Lumina Gold comprises 17 Moz of contained gold.

The results of surface exploration conducted in 2021 at Los Santos showed deposits ranging from 3 g/t gold to 10.7 g/t gold. A phase 1 drill program of at least 1,200 m is scheduled to start in January 2022 at this property.

The El Porto property was acquired in September 2021 and is located in the mineral-rich Loja porphyry district in Southern Ecuador. The property is 1,175 hectares and hosts a large gold porphyry system. All permits are in place to advance exploration at the property. Early in the property purchase, the due diligence conducted, shows gold concentrations ranging from 9 g/t gold to 26.76 g/t gold. The copper concentration ranges from 1109 ppm copper up to 2283 ppm of copper.

Salazar Resources is planning to establish accommodation and logistics at El Potro enabling sustainable exploration work in 2022. Mapping and sampling will test the extensions of the mineral deposit with the aim to identify drill targets as soon as possible.  

The planned exploration work will be funded by Salazar Resources’ cash position of $3 million.

The new year brings with it exciting opportunities and (hopefully) calm waters for Salazar Resources so that the words of Marr-Johnson ring true:

“…straight out of the gates next year.”

‍To find out more, go to the Salazar Resources Website