In the world of mineral resource investing, the junior miner is the lottery ticket with tremendous, though uncertain, upside. Most of these stories come with a lot of promise but the potential for revenue is very far off, dependent on years of drilling and exploration and sampling and permitting and investment. The intervening years can produce value creation based on the quality and quantity of the resource, but many things can go wrong on the way to actually taking ore out of the ground.
Element 79 Gold Corp. (CSE:ELEM) (OTC:ELMGF) (FSE:7YS) is a rare junior miner with a focus on near-term revenue generation, and a reasonable path to get there. Element 79’s flagship project is the Lucero Property, a past-producing mine in Peru that ran from 1989 to 2005. It produced around 40,000 ounces of gold per year on average. Gold prices in that time were in the $300 – $400 range. The price for the past couple of years has consistently exceeded $1800, and currently sits above $2000. For a very general estimate based on those past production levels, and with no data on the updated resource, quick math of 40,000 ounces at $2,000 per ounce yields $80 million per year. This is certainly a lofty target considering all the variables, but even production levels as low as 20% – 50% of this figure make sense for Element 79 and its current market cap of about CAD$2.5 million.
Current Status
The Lucero Property covers 10,800 hectares and is home to about 80 known veins of gold, with seven of these having previously been mined. And these seven veins are actually currently being mined by local artisan miners who have been working the ‘abandoned’ property. Of course, the property is not abandoned and Element 79 holds all legal claims there.
Lucero site visit – Apacheta vein – with trucks hauling the week’s worth of extracted ore for the local artisanal mining groups. October 7, 2023
So the company has a couple of options. It could legally shut down the operation, going through all of the proper channels, spending time and money on fighting the locals. Or it could funnel that same energy, money, and time into developing the property to modern NI 43-101 standards, negotiating offtake agreements, and getting down to production through toll processing. This is the path Element 79 has chosen – to work with the community, developing relationships that should pay off in a number of ways over the longer term.
The decision is already paying dividends. The local community of Chachas permitted the company’s exploration operations for this fall, which are just wrapping up. As part of the agreement, Element 79 donated 3,000 meters of pipe to help Chachas channel its water source. Element 79 views Lucero as a two-part project. One part is updating the resource and opening the mine. The other part is a social and community project focused on inclusion and cooperation, developing the project with the highest environmental and ethical standards possible.
Element79 Gold Corp community relations manager, Jorge Vasquez, with the local artisanal miners enjoying a seasonal chocolatada together at the Lomas Doradas camp at the Lucero project. December 21, 2023.
Notably, the local miners are currently extracting high grade gold and silver ore from the Lucero site at the rate of 70 – 100 tonnes/week. It’s profitable enough to truck the ore about 400km to a mill site. But there are better ways to do business, and Element 79 is currently laying the groundwork.
The Path Forward
Element 79 is wrapping up an exploration and sampling program at the time of this writing. CEO James Tworek outlined the plan back in September, saying “This first four months of work is a critical step to our greater development plan leading up to restarting production at Lucero, where we will be building out a data set through sampling, mapping, targeting trenching and drilling locations both above ground and underground. While mapping will be across the whole property, trenching and drill site targeting will focus on the Apacheta, Pillune and Sando Alcalde areas of the property, where the past production came from and is therefore of highest interest. Looking to something new: we will also be setting our sights on the Andrea area, where we intend to begin work on a previously untouched vein system, alongside the Chachas community’s artisanal miners. These next four months provide a great first step towards building out both our understanding of the vein systems for subsequent phases of exploration, drilling and getting to bulk sampling and PEA-level studies, as well as building with the community to grow together.”
For the next three months or so, heavy rains typically set in to the region and work stops until the weather clears and the open adits can be reclaimed and rehabilitated for safe working conditions. Element 79 will restart in the spring with a targeted drill program. The data from the exploration and the drilling will then feed the creation of a Preliminary Economic Assessment (PEA). The PEA will outline the feasibility and economic viability of a re-opened and improved Lucero Mine, and will also inform the company’s decisions on how to proceed with building the mine.
The goal is to be extracting and selling ore to a local toll processor in 2024.
The Upshot
Element 79’s Lucero Property brings a tantalizing mix of positive features – high grade ore, access to currently productive veins, a clear path to near-term revenue, and many underexplored targets on the claim. It’s a good time to be developing gold mines, and Lucero’s potential is evident.
For now, Element 79 should be on your radar at the start of a pivotal year for the company. But there is much more to discuss with Element 79, including the unique operational skill sets on the executive team, options for the development of the Lucero Property, and several other projects of interest, so stay tuned.
