Cambridge Mineral Resources announces annual results

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Cambridge Mineral Resources Plc, the AIM listed mining explorationand production company primarily targeting precious metals in SouthAmerica, announces its results for the year ended 31 December 2007.
CHAIRMAN'S STATEMENT
2007 was another positive year for Cambridge Mineral Resources plcas it continued its progress and added value to its portfolio ofmineral projects. In particular, our drive towards precious metalproduction of 100,000 ozs gold per annum in South America advancedand we expect to commence gold production in Colombia later in2008.
Despite considerable turbulence and difficulties in the financialmarkets, Cambridge Mineral Resources plc (CMR) succeeded infinancing Quintana, its first gold mine in Colombia and alsoobtained a conditional finance facility for the development of twofurther gold mines in that country.
Precious and base metal prices continued to increase, addingfurther potential value to CMR's projects
Highlights during the year include:
Colombia
At our Quintana Gold Mine, we successfully completed a drillingprogramme in March followed in June by the completion of anindependently-verified feasibility study, which confirmed initialreserves and resources totalling 86,000 ozs of gold. Following areview of the economics we decided to proceed with the mine. Weapproached financial institutions to seek funding for the projectduring the second half of 2007 and were able to successfullyarrange and complete the funding in January 2008.
Peru
In February we obtained an option to purchase our partner's 50%interest in the Patachanca claim group, which we exercised inNovember. At our Rasuhuilca silver mine, underground developmentadvanced with positive results and we commenced a feasibilitystudy. Assuming a positive outcome to that study and obtaining therequired finance, we expect to commence production in 2009.
Bulgaria
In August, we announced our holding of 1.5 million pounds of U308uranium on one of our existing licenses. In October, ElectrumLimited, a private international exploration group, became ourjoint venture partners replacing Asia Gold. Under the terms ofthis agreement, Electrum has to spend US$2.2 million to earn 80% ofthe projects concerned. Their spend to date is US$0.8 million.
Spain
The Company's 100%-owned projects in the Iberian Pyrite Belt insouth-western Spain are: Lomero-Poyatos, a polymetallic undergroundmine on which we have previously completed a scoping study, andMasa Valverde, a base-metal exploration project containing thelargest unmined sulphide ore body in the region. In May anindependent NI 43-101 compliant study of our Spanish assets wascompleted, leading to discussions with third-parties regardingpossible opportunities to finance and advance these projects.
Corporate
During the year, the Company raised a total of £1,411,500before expenses in new equity via private placements. The majorityof the funds raised were applied to financing the development ofour South American projects. Further capital will need to be raisedin 2008.
The loss for the year was £646,399 (2006: loss of£797,636). CMR continues to seek to minimise administrationexpenditure, notwithstanding the increasing burden of regulatorycompliance costs.
Finally, the Company's South American assets have continued todevelop. Our strategies for gold and silver production are oncourse in South America against a background of strong metalprices. We look forward to joining the ranks of junior gold andsilver producers during the current financial year. To conclude, Iwould like to thank our shareholders for their continued supportand our staff for their dedication and hard work.
Neil Maclachlan
Chairman
OPERATIONS REPORT
Colombia
Introduction
CMR entered Colombia at the end of 2005 and holds its intereststhrough its wholly owned subsidiary, Colgold Inc. During 2007 theCompany acquired two further concessions within the world-classFrontino Gold Belt in the Antioquia Department of north-westernColombia.
In total Colgold now holds 52,745 hectares of land under concessionor application in Colombia, of which 35,135 hectares is held forits potential to host copper and gold porphyries in the CaucaDepartment of south-west Colombia.
During the year Colgold employed up to 65 sub contractors at itsoperations in Colombia. Colgold's recently assembled in-housediamond drilling team completed approximately 2,500m of drilling onCompany properties at an average cost of approx US$75 per metre(less than 50% of third party commercial rates). During the secondhalf of the year, the drill rig and crews were contracted out tothird parties, to ensure maximum return on the investment and toproduce some additional income for the Company. Expressions ofinterest and confidentiality agreements have been signed with anumber of major companies regarding Colgold land holdings in theThree Hills area of south-west Colombia.
Frontino Gold Belt
CMR continued to focus on the Frontino Gold Belt in the AntioquiaProvince, as this area has historically produced approximately 45%of the country's gold and continues to do so. This belt is one ofthe world's greatest mesothermal gold fields, with estimatedproduction of 8-9Mozs from the Segovia-Remedios region alone.Mineralization occurs within extensive vein structures typicallyexhibiting widths from a few centimetres to several metres buttypically in the 1 to 2m range. These veins are eithernear-vertical or dip at 30-45 degrees and are formed byribbon-banded quartz with subordinate pyrite, sphalerite and galenacontaining free gold and have simple metallurgical profile withexcellent recoveries. Veins have been traced along strike forseveral thousand metres and at distances of up to 1,800m down dip.
CMR has 3 main projects within a 20km radius of Segovia-Remedios:Quintana, La Rosaleda and El Cinco. The eventual construction of acentral processing plant offers a rapid method to enable multi-minestart-ups and the Company plans to develop this to a capacity of inexcess of 100,000ozs per annum over the next 4 years.
Quintana
The Quintana Project, which includes the Las Camelias property, ismade up of 6 mining titles and one application and totals 7,667hectares.
The Quintana Vein is a mesothermal quartz-sulphide gold veindipping at 40 degrees to the east and averages just over 1m truethickness in the mine. A 10 drill hole programme completed in 2007,proved the existence of the vein 300m down dip and returned highergrades than seen so far in the mine and also generally better truewidths. At Quintana progress has been achieved by undergrounddevelopment with development completed on three levels to more than100m down dip from the surface. Combined with the drill programme,this work has enabled the definition of a JORC compliant resourcestatement which has defined 109,852 tonnes at 24.58g/t gold,19.85g/t silver (measured, indicated and inferred) containing86,822ozs of gold.
This resource is still open along strike and at depth below thedeepest drill intersects. In June 2007 CMR completed a feasibilitystudy as to the viability of the Quintana operations, whichconcluded that the project would give an NPV of US$10.8m at a 10%discount rate, based on a 50 t/d operation over 5.5 years and agold price of US$600.
The initial capital expenditure was estimated at US$4.54m, with anaverage cash operating cost of US$131/oz over the mine life. InJanuary 2008, CMR reported the completion of Project Finance toallow commencement of the necessary plant and infrastructureconstruction at the project, with the aim of achieving goldproduction within approximately six months. Work commenced on sitein February and is currently proceeding according to schedule.
The Quintana Mine is expected to commence production in Q4 2008 ata rate of ~15,200 ozs of gold and 6,000 ozs of silver per annum. Drilling currently underway may lead to further resources beingdefined and this production rate being increased.
El Cinco
CMR completed the negotiation of the Colina Negra Project, to giveit majority interest in a contiguous block of 7,400 hectares (6concessions and one application) around the El Cinco and ColinaNegra mines. Work on site in 2007 included the successfulcompletion of the Chingale exploration programme as well ascommencing exploration on the Colina Negra vein system and othermineralized structures, and completing initial prospecting of thesurrounding areas held by the Company.
At Colina Negra, the following results were obtained across thevein: 1.0m at 114.31g/t gold, 1.0m at 66.2g/t gold, 1.5m at 35.2g/tgold, 1.0m at 22.5g/t gold, 1.0m at 10.4g/t gold and 1.57m at10.1g/t gold. Prospecting results from the surrounding areasidentified five areas for further exploration, with resultsincluding 19.68 g/t gold and 40 g/t silver over 0.7m in quartzfloat and 5.76 g/t gold and 10.2 g/t silver over 1m in an outcropof the main vein nearby, as well as 1.79 g/t gold, 318.4 g/t silverand 20.23 g/t gold, 7 g/t silver from old waste dump piles of nowabandoned trial workings. CMR is in the process of commencing roadconstruction to the site, to facilitate a significant (>8,000m)diamond drilling campaign to test the Chingale and Colina Negraveins at depth.
Success of this programme will lead to underground accessdevelopment for an exploration/ production programme, which shouldin turn lead to the definition of resources to permit thecommencement of a feasibility study as to whether these veins canbecome the second and third mine developments.
La Rosaleda
The La Rosaleda project is CMR's third project in the Frontino GoldBelt and comprises 566.2 hectares in three concessions and threeapplications, to the immediate south of Frontino Gold Mines in theSegovia-Remedios area. Initial exploration on the projectcommenced in May 2007 with a surface-prospecting programme and todate over sixty old artisanal mine workings have been identifiedwhich reflect the three main structural trends seen in thedistrict. In addition two currently active artisanal mines arelocated just outside the area of the agreement, returning grades of6.89g/t gold and 57.6g/t silver over 0.9m. It is planned to movethe project to the drill ready stage by the end of 2008.
Mina del Sol
The Mina del Sol project also lies in Antioquia Province some 45kmnorth-east of Medellin and comprises 578.2 hectares in two permits.
During 2007 CMR completed a five drill hole, 700m programme tofollow up its trenching programme, which had returned grades up to70.72m at 1.41g/t gold. The first drill hole was mineralizedthroughout its entire length, giving an average grade of 1.46g/tgold over 90.0m. Follow up drill hole ERD-0704 carried 138.84m at0.16g/t gold and hole ERD-0705 148.5m at 0.19g/t gold. Although notof economic grade, the width and continuity of this mineralizationis considered to be highly significant and prospective for thediscovery of a major intrusion-related gold deposit.
It is important to note that this is the first drilling at Mina delSol. Consequently, the controls of mineralization are as yet notfully understood, so that some of the drill holes missed theintended target. However, the information gained from this initialdrilling will enable the next phase of drilling to be bettertargeted by refining the geological model in terms of theorientation and controls of the mineralization.
Mina la Linda
The La Linda project lies to the south-west of Medellin just acrossthe border between Antioquia and Caldas Provinces. During 2007 CMRcompleted horizontal underground development on the La Linda vein,which has now been completed to 51m from the adit portal. At thelevel of the adit a complex faulted section was encountered between31-49m, which has the effect of both thinning the vein and reducingthe gold grade. As a result, the weighted average for the veinalong its entire exposed length in the adit reduced to 6.02g/t goldand 13.9g/t silver over 0.68m. It is believed that the fault zoneencountered has now been passed and it is planned to continuefurther adit development for an additional 50m beforecommencingvertical development to allow for definition of the vein in threedimensions.
Three Hills
The Three Hills project comprises 35,135 hectares of explorationterritory situated in the western Cordilliera of Colombia in CaucaDepartment. Due to adverse weather conditions in Colombia duringthe first half of 2007, it was not possible to complete theproposed follow-up prospecting programme of the Three Hillsproject.
Further to the initial field expedition to the area which notedextensive artisanal alluvial gold workings in the streams drainingthe area. It is hoped that during 2008 it will be possible tocomplete this programme and define the source of alluvial goldcurrently being exploited in the streams. CMR has commenceddiscussions with a number of major international mining companiesregarding the possibility of entering into a joint venture to fasttrack exploration on the property.
Peru
During the year CMR completed the acquisition of the outstanding50% of the three Patacancha permits that it did not previously holdfor a cost of US$265,000. Following this acquisition the titleswere formally transferred to CMR's wholly-owned subsidiary, MineraPeru Gold S.A.C.
Rasuhuilca
Development activities continued during the first quarter of 2007with the completion of 235.1m of vertical and lateral undergrounddevelopment to provide vertical contiguity of sample data and alsoas primary stope development. Following completion of thisunderground development and return of assay values from this andthe pre-existing workings it has been possible to develop a blockmodel and to estimate the Measured, Indicated and Inferred Resourceto JORC Standards.
The overall Rasuhuilca Main and west zones contain 321,100 tonnesat 2.15g/t gold, 185.2g/t silver (252g/t silver equivalent) at a75g/t silver equivalent cut-off. Additional potential to expandthese resources exists to the west within the Rasuhuilca north-westand Rasuhuilca south areas around the 4941m Level. Within thisResource a proven and probable reserve (JORC Standard) of 168,700tonnes at 3.05g/t gold, 216g/t silver (368 g/t silver equivalent)has been defined in the mining plan for the main zone.
This mining plan envisages the blasting of 50,300 tonnes assub-level and stope development ore and a mere 2,500 tonnes ofwaste development thanks to the extent of the pre-existingdevelopment. Metallurgical testwork has indicated that the averagegold recovery will be ~85% whilst the average silver recovery willbe ~65%. The lower silver recovery is believed to be due to certainsoluble silver minerals not being recoverable via cyanidation andMerrill-Crowe process fixation.
Notwithstanding this the average recoverable value per tonne isestimated to be~US$155 per tonne (at current metal prices) with atotal cost of mining and processing (inclusive of capital costs)being ~US$41.9 per tonne of ore milled over the life of mine. Onthis basis the average total production cost of silver is estimatedto be ~ US$4.89/oz. CMR expects to complete the feasibility studyon Rasuhuilca in 2008 and has already commenced procedures toacquire the requisite permits from the Peruvian central andregional government departments in order to initiate mineoperations in 2009.
Patacancha Area
The Patacancha permits cover a total area of around 1,800 hectaresand, in addition to Rasuhuilca, contain a number of alreadyidentified prospects with excellent potential. CMR is presentlynegotiating with a number of companies who have expressed seriousinterest in exploring the permits for the potential to host bulktonnage gold and gold-copper mineralization.
New Projects
During the year CMR was offered several small gold mining projectsin the vicinity of Patacancha and elsewhere in Peru. Thus far noneof these has been pursued as none was believed to have immediateproduction potential. CMR will continue to examine anyopportunities that present themselves to the Company.
Bulgaria
During the year CMR completed a joint venture agreement in Bulgariawith a subsidiary of the Electrum Global Gold Group. This earn-injoint venture agreement gives the option to Electrum to earn up toan 80% interest in a number of exploration permits and applicationspresently held in Bulgaria by expending US$2.2 million within fiveyears and making an initial investment of GBP50,000 for theacquisition of 833,333 ordinary shares in the Company.
Electrum Global Gold Group is a privately-held gold explorationcompany with one of the largest and most diversified explorationportfolios in the world. Electrum holds interests in over 70projects located in the western United States, Africa, SouthAmerica, Asia, and now, Eastern Europe.
Its management services company, Electrum USA Limited, isheadquartered in Denver, Colorado. During the year Bulgaria becamea full EU member and the government has made a successful stepforward to make the environmental, mining and concessionlegislation of the country EU compliant. Such work has caused somedelays in the processing and granting of new exploration permits incountry but CMR is now optimistic that all new pending applicationsfor gold and uranium will be issued in 2008.
Dobroselets
Exploration activities accelerated in the last quarter of 2007 onthe Dobroselets permit. This area includes a historically evaluateduranium deposit containing ~1.5 million lbs of U308 and also theChaira gold deposit, containing 450,000 ozs of gold. The Chairamineralization comprises complex multi-directional sheeted veins ofquartz and pyrite cutting structural zones within a Cretaceousgrano-diroritic intrusion with extensive and widespread alteration.
The scale of alteration and mineralization suggests the presence ofa major intrusion-related gold mineralizing system that willrequire extensive evaluation but has excellent potential to host aneconomic gold deposit.
The first drilling campaign at Dobroselets for 2,450m, commenced inearly December 2007, and was planned for ~1,200 metres ofverification diamond drilling in Chaira and ~1,250 metres on theMogilite area, which is the shallow, near surface extension of theChaira mineralization.
Rozino
CMR recently completed a scoping study evaluating the Tashlaka Hillgold resource in readiness for application to the Bulgariangovernment to register a "Commercial Discovery" and subsequently toapply for a "Mining Concession".
Tashlaka Hill is a low-sulphidation sediment-hosted depositcontaining over 285,000 ozs of gold. At this stage of work theCompany is legally entitled to an extension for one year to enablethe completion of the financial, social and environmental analysisfor a mining development. The Company is also entitled to completeadditional verification field work and in-fill drilling, whichmight be required to enable the completion of the subsequentconcession application.
CMR believes that its new joint venture partner will bring a wealthof experience with them as well as substantial financial strength.Such contribution will be of significant help in accelerating theoverall exploration programme in country and lead the joint ventureCompany to the next stage of becoming a gold miner in Bulgaria.
Uranium
During the year CMR identified and prepared seven applications fornew exploration permits which were lodged with the government ofBulgaria. These areas cover both existing known uranium resourcesand also have excellent potential to host presently undiscovereduranium mineralization. Delays by the Ministry of Environment (therelevant licensing authority) during 2007, which have impacted onmost companies throughout the natural resources sector, areexpected to ameliorate during 2008 and the expectation is that thepermits will be issued as soon as possible.
Spain
CMR wholly owns two projects in the Iberian Pyrite Belt insouth-western Spain, a region world renowned for the presence ofnumerous 10-100Mt base metal sulphide deposits.
Lomero-Poyatos
This comprises a polymetallic volcanic hosted massive sulphidedeposit formerly mined for production of sulphuric acid, andestimated to contain significant quantities of both precious andbase metals. CMR has conducted extensive exploration in the 326hectares licensed, including 10,082 metres of drilling, and anindependent Scoping Study was completed in 2005, resulting inIndicated Resources of: