Colossus shocks market with cancelled financing, low resource estimate – by Peter Koven (National Post – December 24, 2013)

The National Post is Canada’s second largest national paper.

TORONTO – A Canadian miner on the brink of financial collapse has surprised investors by releasing a shockingly low resource estimate for its flagship gold project.

Late Friday night, Colossus Minerals Inc. unveiled potentially fatal news to the market: that a desperation financing agreement with Arias Resources Capital Management has fallen apart. The Toronto-based miner, which has a small interest payment due on Dec. 31, warned it may not be able to raise capital to carry on business past that date.

Finding that money may not become any easier after what Colossus reported on Monday.

The company released a mineral resource estimate for its Serra Pelada project in Brazil that identified a miniscule 274,000 ounces of gold. Given that Colossus has raised more than $380-million for development of Serra Pelada, and the mine is close to production, this resource figure is absurdly low. Investors figured Colossus possessed millions of ounces at Serra Pelada, a past-producing property.

According to experts, that is likely the case. They said this calculation is probably much too low, which reflects the fact the geology of the Serra Pelada deposit does not mesh well with resource reporting rules in Canada. Many of the high-grade portions of the deposit did not get into the estimate.

“We believe that the resource can be substantially larger, but the unique characteristics of the deposit require additional in-fill drilling in order to report a larger [National Instrument] 43-101 [resource] calculation,” said a Colossus investor, who asked not to be named. The company also said more drilling would be needed to get an accurate figure.

The resource was compiled by Roscoe Postle Associates Inc. (RPA), a team of geologists that is known to be very conservative and disciplined when calculating resources.

For the rest of this article, click here: