Cuervo Resources Inc. (CNQ: FE) is a public Canadian exploration company that completed an initial public offering on May 30, 2007. The company has acquired and is drilling properties prospective for iron ore in Perú through its Peruvian subsidiary Minera Cuervo S.A.C. Cuervo Resources Inc. The company's current exploration focus is on the 13,600 ha Cerro Ccopane property.
Cuervo holds an unencumbered 100% interest over 25,000 ha of iron prospective properties in Perú. These properties hold good prospects for finding upwards of a billion tonnes of commercially exploitable iron mineralization.
Cuervo Resources opens door to joint venture partners to develop Cerro Ccopane Iron Ore Project
Peru is already a significant producer of silver, gold, copper and zinc - but other minerals are waiting for development, including iron ore. In recent years mining has been the country’s most important foreign exchange generator and currently accounts for approximately 40% of Gross Domestic Product. This is due to a combination of sound banking and legal systems, good transportation and infrastructure, and free trade agreements with Canada, the United States and China. The Fraser Institute ranks Peru as the 13th best mining destination in the world owing to its mining friendly regulatory environment and vast mineral riches.
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.
