Our Visit to Anthem United’s Koricancha Toll Milling Plant in Peru

The small and artisanal miners have been fixtures on the Peruvian gold mining scene since time immemorial. Mining in that area goes back at least 7000 years. In more modern times this has continued to make a significant contribution to Peru’s silver and gold output. To give an idea, it is estimated that in 2010, in the Piura region alone, northern of Peru, 10,000 artisanal miners and more that 160 processing plants were active.

Until recently much of the actual minerals mined were treated by the environmentally dangerous use of mercury amalgamation to recover gold. This has resulted in significant contamination of many areas in Peru, including the headwaters of the Amazon region. In response to this, the government of Peru has worked hard the past year to bring the artisanal mining sector into compliance with international norms against the use of mercury.

Recent changes in Peruvian law have facilitated this normalization. For example, artisanal miners are required to formalize their arrangements with the actual concession owners – often informal miners were “squatting” on third party concessions. In addition, the miners must sell their mined ore to authorized buyers. That is, companies that are authorized by the government to treat third party ores. As the law was implemented, the government acted forcefully to crack down on abusers going so far as to actually destroy treatment plants that did not conform with modern environmental norms – particularly those that used mercury.

Although the implementation of the new policy was difficult, it has been achieved to a large degree. In a country as large as Peru there is undoubtedly still illegal mining activity going on in remote areas, but to a very large degree it appears that real progress has been made.

One of the important consequences of these policies has been the need for new third party treatment plants to accept the increased legal mineral production. The growth in this sector has been real with many new private and public companies entering the market. Anthem United (AFY – $0.39) is one of the many new enterprises active in this sector. See images from our visit below.

The basic business model of the third-party plants is simple and is certainly common to many companies. They buy mined gold ore from various sources, and recover gold in their own processing plant with the well-known carbon in pulp (CIP) process. From the treatment plant, gold-laden carbon is transported to an independent facility in the capital Lima for gold stripping and doré production. Finally, the doré is sold to refiners.

Carbon in pulp is an extraction technique for recovery of gold which has been liberated into a cyanide solution as part of the gold cyanidation process. It is regarded as a simple and cheap process.

Hard carbon particles (much larger than the ore particles) are mixed with the ore and cyanide solution mixture. The gold cyanide complex is adsorbed onto the carbon until it comes to an equilibrium with the gold in solution. Because the carbon particles are much larger than the ore particles, the coarse carbon can then be separated from the slurry by screening, using a wire mesh.

Keys to Success

In all toll milling companies however, there are two important keys to successful operation that are easy to understand but difficult to implement.

First, the plant must secure sufficient ore feed for a continuing operation. There are many competing plants and gaining enough ore can be difficult in such a competitive environment. The competition focuses, naturally, on how much the processing company is willing to pay. This, in turn, is based on the price of gold and on the plant’s location – transportation is an important cost usually borne by the seller.

This leads to the second key factor for success: increasing recovery and lowering costs. Plant operation is complicated by the constantly varying sources of ore feed. Ores vary not only in grade but also in metallurgical characteristics. Some ores are oxide, others are sulfide. Some contain only gold, while others contain additional elements such as silver, copper, lead, etc. These additional elements have varying effects on recovery, reagent consumptions, treatment time and other factors that can result in differing costs.

Plant operators love consistent ore feed. It allows them to optimize their plant’s operation and assure smooth function. Variations in ore feed can cause all sorts of problems as reagent additions, leach times and other important factors must be constantly monitored and adjusted. Operators, in order to achieve a consistent ore feed, must blend the ore from the various sources. As a result, these Peruvian custom plants are different from other processing plants that are built for only one mine. Attention to detail is essential.

Because we wanted to see all these trends first hand, we visited Anthem United’s operations in Koricancha, Peru, a couple of weeks ago.

Anthem United’s Koricancha Gold Plant (Yauca Area)

Anthem United is a 75 percent owner of the Koricancha carbon-in-pulp, gold recovery plant. It is located just a few miles off the Pan American Highway near the town of Yauca in Southern Peru. The plant recently began initial production and is therefore still in “start-up” mode.

It’s easily accessed and has water and power available. There is a camp to accommodate all workers and visitors as needed. The location in southern Peru is extremely arid. In fact, it’s one of the driest areas in the world. However, the plant site is located at a small oasis where a relatively shallow well provides all water necessary. We were startled to see, as we drove onto the property, a tree growing in what is otherwise a vegetation-free region.

The plant is supplied by ores from independent third-party miners who bring it to the site at their cost. The bulk of the ore comes from what they term VIP miners who sell larger volumes of ore. There are also additional separate lots of ore as small as one tonne that are accepted. Trucks are weighed as each lot is received, they are crushed individually and then dumped onto patios for subsequent sampling and metallurgical testing prior to blending. There is a modern assay and metallurgical lab at Koricancha.

The local team prides itself on its transparency and attention to customers. Newly received ore is not only assayed for gold but it is metallurgically tested to determine reagent consumption and anticipated recovery. These factors are used to determine how much the company will pay for the ore. The seller is invited to view the assaying and testing and of course share in the results. They are also provided a sample split if they choose to use an umpire assayer. Final payment to the seller is usually within 48 hours.

Once the ore has been tested, it is blended with other lots to achieve the most consistent mill feed possible. This allows for more efficient operation and hopefully lowers the cost of production.

There are three (6’x10’) ball mills working with a total capacity of 350 tonnes per day. Reagents are fed in during milling. Reagent consumption is relatively high although this is a function of, and varies with, the mill feed. The milled ore is then fed into 9 leach tanks, which are actually large columns and are configured for easy maintenance without affecting production rates.

The carbon in pulp method is used. The carbon is then recovered and sent to a third-party in Lima for gold stripping. The gold in doré form is subsequently returned to the Company for refining.

Tailings are deposited in a lined facility. The current tailings capacity is one year but there is more than sufficient space for expansion.

Conclusion

Koricancha is a brand new facility completed at a cost of $10 million. It began operation in July of this year and is still making the normal start-up adjustments. During our visit it seemed to be operating efficiently with all equipment functional. The plant is gradually ramping up towards its maximum capacity of 350 tons per day. It was also clear that the original design has provided sufficient space for future plant expansion should Anthem United want to do so.

What is notable and important, is the Company’s attention to the seller. Peru has many plants that buy ore from third parties and there is good competition to buy it. However, we believe that because assaying and testing of the ore is transparent, and payments are quick, Koricancha will become a buyer of choice.

The on-site management is knowledgeable and experienced and will be a key asset to the project’s success. This is a new, well-operated facility. If they can keep their plant full, and it looks like they can, then Anthem has a very good chance of long-term success. Buy recommendation.

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