Nicaragua: Elephant country for Calibre Mining

Calibre Mining acquired B2Gold’s Limón and Libertad Nicaraguan gold mines in 2019 in a move which immediately established the company as a junior producer.

Nicaragua’s unexplored mineral potential was a key attraction for Calibre, CEO Russell Ball says in a BNamericas interview, with the country a hotspot for artisanal mining but which had not seen any modern mining before B2Gold’s arrival around a decade ago.

Vancouver-based Calibre plans to significantly boost exploration around Limón and Libertad with the aim of extending the life of the assets, which had become non-core for B2Gold as the company expanded in Mali, Namibia and the Philippines.

In addition to the mines, Calibre also has a portfolio of exploration projects in Nicaragua, where Ball says a long tradition of mining and a supportive government combine to create a favorable environment.

BNamericas: What interested you in the B2Gold assets?

Ball: Really the unexplored exploration potential in the country. There's a large informal artisanal [mining industry], that's a leading indicator of a great resource endowment, in a country that until B2Gold went there about 10 years ago hadn’t seen any modern mining. It’s still elephant country for modern exploration.

Calibre had been in the country for 10 years as a junior explorer, largely focused on the Atlantic coast region and the Borosi concessions in the northeast part of the country. And the market rightly or wrongly wasn’t willing to fund or value early stage exploration in the last 5-10 years.

What the transaction with B2Gold allowed us to do was to transform the company into a junior producer, but just as importantly from a value creation perspective, still have that whole exploration piece tagged onto it, in the Calibre legacy, with the ability to generate cash flow and reinvest that in the assets and drill-bit. These assets in Nicaragua, although they started B2Gold, had become non-core for the company because they couldn’t move the needle any more.

What the transaction allowed B2Gold to accomplish was to participate in the upside, which they were aware of but didn’t allocate the capital in the form of dollars or people to Nicaragua because of what was happening in the rest of their portfolio, which was the right decision. What we saw were non-core assets that hadn’t received the level of attention or capital they needed, so opportunities were there.

This was then married up with our view, based on the last 10 years of work in country, of the exploration upside. That’s in a nutshell what we saw and the thesis on which we raised the money and concluded the acquisition.

BNamericas: B2Gold experienced water issues at Limón and permitting delays at Libertad. How are these issues going?

Ball: At Limón, there are currently no issues with water. The operation is transitioning from a historically lower grade underground to a higher-grade open pit operation with the recent discovery and development of Limón Central. The mine has really shifted. Those [water] issues have been diluted in the sense that we are moving from predominantly underground to predominantly open pit production.

At Libertad, during the transaction B2Gold got the permit for the Jabalí Antenna pit which sits on top of the Jabalí underground mine. Then what we did was we ceased mining at Jabalí underground. There’s a settlement around the corner where the artisanal miners had been mining under existing houses. The government had been monitoring that and came out with a report saying they needed to condemn those houses and move the residents because the slope is moving and there is going to be an incident. We have been working with the government here.

What the government did was reroute traffic because of the vibration. Also we agreed to stop blasting. The perception was that some of this damage was caused by the blasting at Jabalí underground, which was not the case, but sometimes perception and reality can be different.

The government is leading this. We are an interested participant. But we shut down mining underground. We still have access and have done rehab, maintenance, facilities services. And we moved those contractors to other opportunities in the portfolio. 

What we have said is there is no impact on overall guidance. We continue to work with the government to help address the safety concerns. The artisanal miners have come right up to surface and now there’s some geotechnical instability, insofar as there is going to be an event and we need to get the people out of there before that happens.

BNamericas: What about mine life?

Ball: One of the opportunities we see is to reinvest in exploration, and that’s what we’ve done. I think B2Gold drilled about 4,000m in 2019. We are taking that to 47,000m in 2020.

Where we are focused, and this isn’t because of geological opportunity, is we will have six drill rigs turning by the beginning of February. Five will be at Libertad and one will be at Limón. We have a 6-8 plus year mine life at Limón because of the recent discovery B2Gold made around Limón Central.

At Libertad, which ironically represents the upside for us, based on street consensus, there was six months left of production in 2020 and the mine was then going into closure and reclamation. 1,500 people would be let go and you would have to deal with all those social issues. That’s not our view and we're putting our money where our mouth is by investing in this exploration program to expand that mine life.

And I feel very good that we're following up a number of opportunities that B2Gold identified in this drilling program and I think we'll extend that further. My goal as CEO is by the end of 2021 I want an inventory, it won’t be in reserves but in various stages, but I want an inventory of material at Libertad of five years of production.

BNamericas: How do you view Nicaragua as a mining jurisdiction?

Ball: It’s great. I have worked in most places in Central and Latin America, and what differentiates it from a lot of Central American countries is it has a long tradition of mining. Mining is in the DNA, you've got fourth, fifth generation artisanal mining.

Among communities and the government there's an understanding of the business and the challenges mining can bring. It’s a jurisdiction with an established framework that works.

The one thing that has been hugely successful is how the government incorporated artisanal mining into the mining code. Around the world that’s where a lot of friction can occur between traditional miners and modern companies. That whole issue is very well managed between the government and ministries and representatives for the artisanals. It's the best model I have seen.

The other big difference, that is really positive, is you don’t have the narco-related crimes that you have in a lot of other jurisdictions. There is rule of law and order.

You have a government that is welcoming of investment, job creation. You have a mineral endowment that is underexplored and you have this legacy DNA mining culture. That doesn’t happen in too many places in the world.

BNamericas: What are your 2020 priorities for the Calibre legacy projects?

Ball: We have one with IAMGOLD, they're earning in to 70% of a project. That project continues, once they get to 70% we're no longer carried and have to start funding. We've budgeted our share for the balance of the year on that.

They discovered a copper porphyry when B2Gold was involved in a JV basis called Primavera. From a strategy perspective we're focused on gold and we will look to monetize that or add value to that by bringing in a partner that's more focused on copper.

It’s a bit like a dog chasing a school bus. It's too big for Calibre to do that drilling and then construction. We would hopefully bring in a partner to continue to advance that and add value for Calibre shareholders as it’s not something we're going to be focused on.