LatAm: Land of opportunity for Aris Gold

Aris Gold CEO Neil Woodyer aims to grow the business from a single-asset company to a diversified mid-tier producer, with gold output in the 700,000-1.3Moz/y range.

The acquisition of the Marmato mine and Lower Mine (Marmato underground) project in Colombia’s Caldas department is a first step, with the company now looking for further Latin American acquisitions.

The approach is similar to that taken by Woodyer at Leagold Mining, which was acquired by Equinox Gold last year, of assembling a group of well-managed assets worth more than the sum of their parts.

Latin America is the key focus of Toronto-based Aris, due to management and board experience in the region and the opportunities offered in favored jurisdictions, including Colombia, Mexico and Brazil.

BNamericas: What are your plans at Marmato?

Woodyer: The broad aims are straightforward. It’s a historical mine that has produced about 25,000-30,000oz/y gold since around 1990.

Very narrow vein, lots of working surfaces, lots of people running around relatively inefficiently.

The first thing we were going to do was improve that with better mine planning and methods, but the main thing is that our predecessors [Gran Colombia Gold]… had discovered below the upper mine, the Marmato Lower Mine project.

They did a feasibility study on it last year, which has a 2Moz reserve, 4Moz resource. It has a 13-year mine life, producing about 160,000-170,000oz/y gold, so in total about 200,000oz/y.

Capital cost is about US$268mn. They had done a good job on a PFS, a superb job in getting an approved mining extension for 30 years, which came through this year.

They had also raised about US$200mn in cash. They need about US$250-260mn, so we filled in that gap, and raised Cdn$85mn.

Our management team and directors put in Cdn$35mn of that. We went to friends for the balance.

That made the lower mine fully financed and got us in control of the asset.

What we’ve done since then is appointed an EPCM contractor. We’re finishing off some optimization studies over the next few weeks.

We’ve got some permit changes to make. They’re not large but because we rejigged a little bit, so we would expect to be in full construction later this year.

It’s about two years of construction, about US$260mn to build, and then we’re producing about 200,000oz/y gold.

We’ve also changed the management staff. We’ve brought in somebody who ran Endeavour Mining’s mine in Mali, and then the Los Filos mine [in Mexico] and the expansion.

He’s now resident in Colombia. We brought in someone else who ran our RDM mine in Brazil, who also worked in Mali, so we have a lot of the Endeavour Mining operating people.

BNamericas: So, do you expect to be in production at the lower mine in 2023?

Woodyer: Yes.

There’s a 2Moz gold reserve, 4Moz resource, and 2Moz of inferred. The interesting thing is our predecessors also started an exploration program, about 35,000m, which gave some good results.

It’s about 70% of the way through. We hope to come out with an increased resource in the next few months, and then we can update the mine plan. 

Maybe we can add years to it or improve the grade. That has very strong potential. We have got a good potential of making this longer and bigger. All-in sustaining costs are about US$900/oz.

BNamericas: What’s your view of Colombia as a mining jurisdiction?

Woodyer: A huge amount of potential. It’s underexplored. We and our predecessors have had superb relations with the government, which has helped get things through, and the community, and we’re particularly focused on community relations.

When we took over the mine only about 15% of the labor force actually came from the community, most were bussed in.

We’re trying to recruit in the local community, which is a historical mining area and there is a skillset there, so we’re trying to do that, and that will improve our community relations.

When we went through the civil unrest a couple of weeks or so ago we were able to maintain a good level of production and attendance.

We’ve got the ex-minister of mines as one of our directors, and we’ve got another sub-minister in charge of our government relations.

We find it a very good place to operate, we think there’s huge potential. Great country.

BNamericas: What’s your M&A strategy?

Woodyer: As Endeavour and Leagold was, it’s all based on the fact that if you can put together a portfolio of mines, manage them well, develop them, and put a group together, that group is worth much more than its individual components.

You can spread your management costs over a broader base and you create a very attractive investment vehicle.

It should have good liquidity by that stage, it should have a good portfolio, a balance of risk, and well managed, and you will get a fantastic valuation.

That happened at Endeavour, and in Leagold. So the idea is to do it again. It’s essentially the same management team.

BNamericas: Why have you focused on M&A in Latin America?

Woodyer: I first went down to Chile to buy copper about 50 years ago. We have all had a lot of experience in LatAm.

We wandered off to Africa with Endeavour, came back with Leagold. Our expertise is much more LatAm-focused, as is our board’s, with [former Goldcorp chairman] Ian Telfer, [former Goldcorp CEO] David Garofalo, and [Yamana Gold executive chairman] Peter Marrone. Importantly, it offers a lot of opportunities.

BNamericas: Can you talk through the jurisdictions you most favor and their strengths?

Woodyer: I personally would feel very comfortable going back to Mexico. We had a very good experience [with Leagold], not only the laws there, not only a great labor force and mining people, and a history, but we also extended a community relations agreement – we took a one-year contract and made it 6-7 years.

The government helped us on that, everybody worked together on that, including the union. I would love to go back. The laws are right and they understand it.

You can say the same thing in Brazil, but’t is a little more bureaucratic, and a bit more precise in some of its requirements, so it’s slower to get approval.

You get there but sometimes indirectly, because you have to waffle through several layers of bureaucracy, but again, great opportunity.

After those, I would think about Argentina. You look at some of the big companies there, Goldcorp has been there, Yamana is there. Opportunities, strong geology, unexplored, and some very large gold mines are there, Newmont and AngloGold Ashanti.

That’s attractive. There have been issues with debt and currency controls, but you can work through that.

Chile, very explored, some opportunities in gold. They tend to be larger operations, so that’s less likely than other countries on an opportunity basis.

Peru provides a lot of opportunities because of the structure in terms of smaller companies, private companies, and huge mining history. A little bit wonky occasionally politically, and there has been some community resistance and stalled projects, but good opportunities there.

My personal primary place would be Mexico, not that we’re necessarily going there, but I feel so comfortable in Mexico.

BNamericas: What about Colombia?

Woodyer: Yes, absolutely. It offers a lot of opportunity and it’s a good environment, politically and socially. There are a lot of ESG things you have to get right, but our predecessors have been very good at that and we can follow on.

BNamericas: What about Ecuador, Central America?

Woodyer: Absolutely, Nicaragua, that’s why we say LatAm.

If you look at West Africa, there are not that many opportunities. We certainly don’t want to go into Eastern Europe, other people run Australia, so LatAm offers it to us, more so than North America, which is a different thing.

Our flexibility and our style is much more suited to LatAm.

BNamericas: Is political risk increasing in the region?

Woodyer: I’ve known it for many years, and I would say it’s better than it has been, overall.

There’s always an element of surprise, and change, sometimes negative. It’s something you live with, and you need a balanced portfolio.

Whilst I would take more [operations in] Colombia now, if we did that the next thing would be to do something outside that and balance that unknown element.

BNamericas: How quickly do you expect to do a deal?

Woodyer: We’ve got our old operating team fully in control now at Marmato. Our small corporate staff has done that task, and therefore they’re able to look for new opportunities, which is what we’re doing now.

BNamericas: What is your target size?

Woodyer: If you want to make an attractive investment vehicle, probably the best size is 700,000oz/y gold to 1.2-1.3Moz/y. It gives you the balanced portfolio, the liquidity and the size.

It gives you a mitigation of risk. Once you start to get bigger, you get into other problems. You inevitably become bureaucratic, your management style has to change, and the value peels off. We would like to be in that range.

This is probably my last go. I’ve enjoyed it very much.

BNamericas: What role does ESG play in your M&A strategy?

Woodyer: We look at ESG as it is today, and make sure we can manage it. If it hasn’t been well managed in the past, that is an opportunity for us to improve community relations, provided we can do it quickly.

We’re not saying we need a good ESG company to acquire, what we’re saying is we need to be able to make it into a good ESG company.