Bluestone Resources (BSR) - $45M Spend Could Triple Their Fortunes

March 24 2021, 13:07 GMT

Bluestone Resources

  • TSX-V: BSR
  • Shares Outstanding: 148.29M
  • Share price C$1.68 (22.03.2021)
  • Market Cap: C$249M

Bluestone Resources is a single asset junior Gold developer with their flagship project Cerro Blanco in Southern Guatemala, a near-surface high-grade Gold deposit that was considered an underground resource until recently.

We spoke with Jack Lundin, CEO of Bluestone Resources, who have been busy recently. The Bluestone Resources management team has taken the decision to change direction at Cerro Blanco, and potentially triple the value of the resource by changing the mining method from an underground mine into a open pit surface mining operation. This is due to the near surface mineralisation at the resource and greater understanding of the project.

Company Overview

Jack Lundin joined in January 2020 to bring the project forward having previously worked at Fruta del Norte with Lundin Gold on the development of that project in Southern Ecuador. The Bluestone Resources team now understands the project to be worth much more than it was previously thought, so have made a strategic change to this new concept for the project and are now focused on continuing to drive this project forward through the new surface mining scenario.Bluestone Resources (BSR) - $45M Spend Could Triple Their Fortunes

Peculiarities of Mining in Guatemala

There is a history of mining projects that have run into trouble in Guatemala in the past but the Cerro Blanco project is in a different area to these past issues, in the southern part of the country says Lundin. They have the in country connections and the team in place to move forward with the project responsibly and have engaged with local stakeholders and met with the relevant Ministries to do that. Bluestone Resources feels it has good relationships with the Ministry of Mining and Energy, Ministry of Economy and the Ministry of Environment and is committed to sustainable development and responsible mining which has resonated very well.   

Mining can be a tough business but the processes are well understood and it is a case of systematically delivering on each stage and phase. Bluestone Resources realises that they are guests in Guatemala and need to do their best to maximise the benefit for everybody involved on the project through the engagement and the relationship building with various stakeholders. They are taking their time to set up what will hopefully be long-lasting relationships that bring success to everybody involved. 

Underground VS Open-Pit: Process of Changing Plans

The Cerro Blanco project was going fast forward with the underground scenario, until a moment towards the end of last year when they were ready to go, had de-risked the underground concept and the Senior Management Team had a change in direction. But why? The underground approach with the deposit at Cerro Blanco, being near-surface, had the problem of eliminating the opportunity of about 1.5Moz of Gold and much more Silver due to a higher cut-off grade and not able to access a lot of the deposit when going underground.

Bluestone Resources wanted to maximise the value of the mineral resource so decided to initiate a study with the open-pit concept before starting off on the underground project. The past 4 or 5 months has been extremely busy with the change in direction, but they believe that they’re making the right decision by making that strategic change. 

There were multiple considerations to take into account in addition to the economics and having a more robust project. They needed to consider the viability in the area and any environmental concerns of the open-pit strategy. The footprint is bigger but they are committed to world-class mining standards.  They are planning to have dry stack tailings rather than conventional aqueous tailings which comes at a higher cost and is more operationally cumbersome but better environmentally.  During the life of the mine there will be greater environmental disturbance, but they are committed to strong environmental performance when it comes to mine closure.  It is a bigger project with better economics but they will focus on mitigating and minimising negative impact.Bluestone Resources (BSR) - $45M Spend Could Triple Their Fortunes

Plans & Allocation of $45M  

Bluestone Resources raised CAD$92M in May and has since changed direction strategically. The share price hasn't moved since we spoke last January which suggests that not everyone is happy with the new direction and the need to get new permits. It was a big decision that took a lot of planning but they believe that to move forward with the new scenario will bring the most value and benefits to all stakeholders involved. 

The company had to weigh up a delay to production versus significantly increased recoveries. Changing direction has delayed production by about 2 years so they are now targeting the end of 2024 for the commissioning phase for first Gold production but the resource has been expanded from about 1M oz to 2.5M oz of recoverable Gold in the surface operation. There is an opportunity to see share price appreciation in the short-term, medium-term and long-term.

Local stakeholders are encouraged by the fact that Bluestone Resources has a long-term approach at Cerro Blanco. There will be a local hiring and training focus and local procurement with the Lundin Foundation looking at economic diversification too.  

Bluestone Resources has USD$45M in the bank and has plans to drill out the top of the resource to update the resource for the Feasibility Study. They also have plans to look at other exploration targets in the mining licence as there is a northerly trend of mineralisation, north of the Cerro Blanco deposit with an opportunity to add ounces through satellite pits, to the Cerro Blanco processing complex in the future. The USD$45M budget is for infill drilling on the top of the resource rather than for brownfield exploration at the moment.  

Management Shareholding & Potential for Expansion

The Lundin family owns about 26% of the outstanding shares and as the largest shareholder are committed to this project so they would increase that shareholding if there is ever an opportunity to do so. The Lundin group has 14 publicly traded companies in the natural resources sector including Lukara Diamond, Lundin Energy, International Petroleum, ShaMaran and they are big shareholders in other energy companies as well that are classified as Lundin Group companies. For the Lundin Group, oil & gas and mining are natural resources but are 2 very different sectors. They focus on keeping the core group of the team together but also focus on challenging each other which is what gives them such strength.  

The Lundin Foundation is pulling the group together across all industries and looking at how they can focus on ESG, responsible development and ensuring that they are first-movers in decarbonisation for oil and gas companies and mining companies so trying to harness the wealth of knowledge in the Lundin Group.

Importance of ESG & Improving the Mining Sector 

ESG means different things to different people and different companies approach it very differently but Bluestone Resources feels it is critical to the success of natural resources companies going forward. Their ESG focus is very strong which is why they developed the Lundin Foundation in 2006 to focus on supporting those other initiatives. There are a lot of components that go into building a successful project other than just minimising cost and maximising production. There is a need to set up long-lasting relationships with the host countries that have these projects. The ESG component for us at Bluestone also includes a project called the meta-geothermal project which is adjacent to the Cerro Blanco project and is currently licensed to generate up to 50 megawatts of renewable energy through this geothermal project. 

The geothermal project is not in production yet but it is something that they see as a serious opportunity to further differentiate from their peers. If they can produce low-cost and high grade Gold from Cerro Blanco but also produce renewable energy to offset some of their energy requirements at the mine and also to potentially sell into the grid, it is an added advantage for the company.  Bluestone Resources (BSR) - $45M Spend Could Triple Their Fortunes

The Cerro Blanco project will be focused on implementing real-time monitoring so they can make quick decisions without having to react when something happens.  Machine-learning AI  and automation is making its way into the mining industry and Bluestone Resources is keen to move in that direction.  The Lundin family recently donated to the University of Arizona because they are working on creating a school of mining with a focus on ESG, on innovation with AI and machine-learning. Jack Lundin sits on the Board. This will have a positive impact on mining and a positive impact on the world because the world needs petrochemicals, minerals and other natural resources but  we also need to focus on responsible mining which is a huge focus for the Lundin Group at Bluestone Resources. 

Telling the Story & Minimising Concerns 

Bluestone Resources needs to continue to promote their story and promote the brand to show that they’re confident they are going the right way about it locally and this will start to resonate and people will catch on to the Cerro Blanco story. It is thought that the Gold price will continue on an upward trajectory and once Bluestone Resources can show that there are some catalysts getting the Feasibility Study, getting permitted and moving into that next phase, the market will start to take notice. The company is focused on the strong engagement that they have with the country of Guatemala. They hope that the market will see that this is the right approach and that they've got the team and this is the time to be advancing Cerro Blanco which gives them the confidence to continue to move forward with the project.Bluestone Resources (BSR) - $45M Spend Could Triple Their Fortunes

We appreciate the update with Bluestone Resources and are looking forward to following their story and seeing how they get on with the Cerro Blanco project. They have a lot to deliver but have the cash to do it which is good news. We look forward to hearing more from the company going forward.

To find out more, got to  the Bluestone Resources Website

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