What is Cuervo Resources’ business model and what makes Cuervo Resources stand out from the other iron ore junior companies?

Cuervo Resources’ business model is basically, find it, prove it and sell it.  I don’t know how different it is from other iron ore junior Companies, that you would have to ask them. But basically our belief is a junior company is best suited for exploration not moving into production. 

The Cerro Ccopane Project has a measured and indicated resource of 56 million tonnes at 46.8% iron with an inferred resource of 51 million tonnes at 43.7% iron.  What is the potential of Cerro Cccopane and are you planning to do more drilling this year?

The geophysical potential of Cerro Ccopane is close to two and a half billion.  The compliant resource that’s been drilled off is at 100 million.  We have two other areas that have over a billion tonnes each in potential. 
Our plans for drilling this year are dependant on establishing a joint venture partner to fund the drawing necessary to take the geophysical potential into an inferred category in the next 15 months. 

Cuervo Resources has recently sold its Pampa de Pongo iron deposit in Peru to Chinese interests for $100 million US.  What does this imply about the value of the Cerro Ccopane project?

The comparison is a little bit of apples and oranges in the sense that the Cadero Project is underground mining and on the coast and we are open pit mining in the Andes.  So, in my opinion it certainly gives the minimum value to Cuervo of $100 million for its property in Cerro Ccopane in the sense that the transportation costs versus mining costs of underground mining are offsetting each other.

And Cadero has an inferred resource based on 30 drill holes.  So again, the object of the drill campaign with a joint venture partner gives the potential for Cerro Ccopane to be worth many multiples of what Cadero’s property is worth if the drilling comes in.

What can you tell us about progress towards finding a Joint Venture Partner, to take Cerro Ccopane forward Brian?

At present talking to four or five interested parties and talks remain at the confidential stage.  When an agreement has been reached that’s a closable deal, as I like to call it, we would put out a press release.

Does the location of the Cerro Ccopane project lend itself to the export of iron ore to steel mills in Asia?

Yes, because Peru is on the Pacific coast.  Asia is Pacific access.  So we have a shorter shipping route than stuff coming from Eastern Canada.

What are the significant findings of Sandwells Engineering Transportation study focussed on the Cerro Ccopane Iron ore project Brian?

That a slurry pipeline is the most efficient way both from a capital  cost viewpoint and from a variable costs viewpoint of transporting the iron from the Andes to the coast.  There is also the side benefit of fresh water in the Andes and desert climate on the coast.  So distribution of the water after it reaches the coast would be a potential economic benefit to the project.

How critical are transportation costs in the iron ore business Brian?

Transportation probably makes up a good 50% of the cost of the iron ore to the steel industry.  At Cuervo, through the pipeline we have indicated a transportation cost of $8 - $10 a tonne from mine site to the coast. And as mentioned earlier we have that distance advantage over Eastern Canada of about 3000 nautical miles in distance to get from Peru to China.  So they are a key cost but we have a competitive transportation scenario.

What is Cuervo Resources’ financial situation?

We are properly funded until the end of July.  We have significant share holders that, should more capital be needed, would provide it.  We hope we don’t need to raise anymore money but we may just to ensure we are fully funded.  That decision has not been made as of yet.

What can investors expect form Cuervo Resources over the next 12 to 18 months Brian?

I would suggest that we would be able to announce a strategic joint venture partner and have begun drilling Bob One Huillque North, the two billion plus targets.

Are your investors comfortable with your listing on the CNSX, Canadian National Stock Exchange?

Yes.  The investors are comfortable although they have a preference for a higher level listing at the TSX level which again would coincide with a joint venture agreement.  We would then be able to qualify for the TSX and would move from the CNSX to the TSX.  But the CNSX is the proper exchange for us at the present time.

What are the processing characteristics of the iron ore at Cerro Ccopane?

Basically the sulphur is coarse which means the impurities can be removed easily by magnetic separation which adds a cost of about a buck to a buck and a half a tonne.  So there has been no metallurgical problems established with the ore at all.  It upgrades to steel industry standards.

Why iron ore at this time?

Iron ore is the building block of economic expansion and it is as essential to third world economic growth as oil is.  In other words if you are going to build infrastructure you are going to need steel.  Steel requires iron.

What are your thoughts about operating in Peru?

Peru has recently been upgraded to investment grade; it is a democracy; it’s got a long history with mining; excellent banking system; excellent mining laws; excellent court system. To me it’s one of the top three countries in South America to operate in.

How many other iron ore concessions does Cuervo Resources hold in Peru?  What makes them attractive and what priority do they have at this stage?

We have another 10,000 hectares we have not investigated because the significant find at Cerro Ccopane is the main focus.  Two and a half billion tonnes of iron ore is a world class deposit.  The board will probably review our other holdings. We have done no geological exploration on them. At this time they just are high potential but again we intend to stay focussed on the two and a half billion tonnes.

What does the measurement team of Cuervo Resources bring to the job?

Basically we’ve got a Board of Directors with a hands on approach. We meet monthly at a minimum, bi-monthly during busy times.

We have Gord Watts with forty plus years in the business.  He is a mineral economist and has worked on over 200 mining projects worldwide.  And then I have Vel Spring who has over 45 years experience, 11 of which was Exploration Manager for South America for Noranda - so sort of an expert in how things are done in South America.  But the key to both of them is they have experience in iron ore and understand the iron ore market. 

Brian Cloney is basically the Board’s Financial Audit Committee Chairman and brings 35 years of accounting experience on that front.  John Siriunas is the President and Head of the Exploration.  Again, over 30 years experience as an Exploration Geologist. 

Myself, my expertise is investment and finance so I keep the company funded and try to manage the financial aspect and again negotiate the Joint Venture. And then we have Dan Hamilton, he is our chief Financial Officer who brings 20 years experience in the mining business there.

So that we think is a solid management team and it’s an active management team and we think we can get the job done in iron.

The move was announced last week.

Cuervo issued 1 million units at C$0.35 per unit. Each unit consists of one share in the company and one full warrant with a conversion price of C$0.55. The warrants can be executed within 18 months of the closing of the financing, and can be accelerated if the company’s share price reaches or exceeds C$1.10 for a period of 10 consecutive trading days at any time in the six months after the closing, which is set for 15 December this year.

The company is actively seeking a joint venture partner to advance its Cerro Ccopane Iron Ore project in the Cusco area of southern Peru. One of the six zones identified at Cerro Ccopane, Orcopura, has a measured and indicated resource of 56 Mt (million tonnes) grading 46.7% Fe (iron) and 51 Mt grading 43.7% Fe in the inferred category. However, gravity and geophysical testing and modelling on five of the six identified zones have indicated the potential for a substantially larger 2.65 billion tonnes of iron ore.

An independent transportation study carried out earlier this year concluded that transporting ore from Cerro Ccopane to a Pacific tidewater port on Peru’s coast via a dedicated pipeline or rail was feasible and did not entail unique logistical challenges. The report considered either a 5 million tonnes per annum (mtpa), 10 mtpa or 20mtpa project over a 20 year mine life.

Peru also has one more advantage in its favour - the country is situated on the Pacific, enabling direct seaborne routes to Asia’s hungry economies.

Cuervo Resources: Find it, prove it, sell it

One company taking full advantage of Peru’s iron ore mineral potential is Cuervo Resources (CNSX: FE) (FWB: CRR) a Canadian company listed on the Canadian and the Frankfurt stock exchanges. Cuervo is focused entirely on iron ore in Peru, and has secured a strategic footprint in a highly desirable region with world class iron ore potential.  The business model for Cuervo is simple: find it, prove it, sell it. 

The company has a 100% interest in over 25,000 hectares of land throughout iron-rich belts of Peru. The most advanced area of exploration being the 13,600ha Cerro Ccopane property which management believes to be the jewel in their crown and where the company has invested C$13 million in exploration to date.

This attention has reaped benefits for Cuervo Resources, who have already reported 56 million tonnes, measured and indicated, grading 46.7% Iron and 51 million tonnes inferred, grading 43.7% Iron from just 121 holes on the Orcopura zone.

Importantly, the Orcopura zone is one of six zones identified on the Cerro Ccopane property by surface showings and geophysics. The group has however completed gravity and geophysical testing and modelling on five of the six zones and the results indicate the potential for a substantially larger 2.65 billion tonnes of iron ore.

What about the metallurgy? In November 2007 the company initiated metallurgical testing of core samples to determine the amenability of the material to magnetic separation of contaminants and by-products. That testing has indicated that most contaminates (sulphur and copper) can be removed, yielding an upgraded iron concentrate, grading 66% to 69% - exactly the desired grade for international markets.

An independent transportation study was also completed in February 2009 by Sandwell Engineering and PSI Engineering, which concluded that transporting ore from Cerro Ccopane to a Pacific tidewater port on Peru’s coast via a dedicated pipeline or rail was feasible and did not entail any unique logistical challenges. The report considered either a 5 million tonnes per annum (mtpa), 10 mtpa or 20mtpa project over a 20 year mine life. To put this into perspective, the largest iron ore operation in Peru is the 5mpta, 1.5 billion tonne Marcona Mine operated by Shougang Hierro Peru.

Now that Cuervo has found the iron and shown that it has the potential to support development criteria, the company is seeking to negotiate a joint venture to develop the project further.  As we mentioned before, Cuervo’s business model is to find, prove and eventually divest of any project with development potential, unlocking value for its shareholders along the way.

It is worth noting that Cardero Resources (TSX: CDU), who are also in Peru, have entered into an agreement for the sale of a 12,200ha iron ore property in Peru with an inferred resource of 863Mt to Chinese interests for US$100 million. Using Cardero as a benchmark, it is easy see why Cuervo believe they can secure a joint venture for Cerro Ccopane.

Iron Ore Market

It is estimated around 98% of iron ore is consumed in the manufacture of iron and steel, so given the recent global economic slowdown there was inevitably a drop in iron ore prices. However, recent figures suggest that demand is returning to normal, and spot iron ore prices have been steadily increasing in recent months to reflect this. The industry trade body, The World Steel Association, is forecasting the global steel market will grow by 9.2% over the next year owing to increased production, and underpinning demand for iron ore. 

The health of the iron ore market can also be gauged from sound bites from the three dominate players in the global seaborne iron ore market: BHP Billiton (LSE: BLT, ASX: BHP), Rio Tinto (LSE, ASX: RIO) and Vale (NYSE: VALE). BHP Billiton recently said that its first quarter iron ore production rose to record levels due to a rebound in global steel demand, these comments were echoed by Rio Tinto and Vale.

This recovery in demand has ignited another round of investments from Asia into both early stage and advanced iron ore projects across the globe. Why?  Quite simply, China is concerned about its dependence on “the big three” for iron ore. As part of its strategy to diversify its security of supply, China has invested heavily in other projects and companies.

This bodes well for junior iron ore players, including Cuervo, who recently appointed Brian Berner to the role of CEO. Berner is one of the founders of the company, and also brings four decades of experience in finance and as a consultant to the mining industry through his own capital markets consulting firm.  The appointment of Berner to the position of CEO sent a clear signal that the company was shifting its emphasis towards securing a joint venture partner.

Berner is supported by President and Director John Siriunas, who has over 30 years in the mining sector as an independent consultant to the mining industry. Mr. Siriunas has also served in various management capacities with mining exploration companies. The rest of the board brings plenty of experience to the table too, including Gordon Watts, who has over 40 years of experience in the mining industry in exploration, development and operations; Velasquez Spring who has 45 years of experience in the mineral industry with a solid background in the planning and managing of exploration programs, due diligence, feasibility studies, and valuations of both large and small deposits, and operating mines; and Daniel Hamilton who has over 25 years of experience in financial management and accounting.

In summary the world’s biggest consumer of iron ore, China, has made it clear they want to decrease their reliance on “the big 3” for iron ore supply by buying up their own assets. This bodes very well for iron ore juniors like Cuervo who are actively seeking a partner. It is still early days for Cuervo Resources but the company’s “find it, prove it, sell it” strategy could reward loyal shareholders handsomely.