Going for Pre-Olympic Gold

They aren't athletes and a trip to Beijing isn't in the cards, but geologists working for one of the world's leading copper producers are on a quest for gold. In Peru.

Southern Copper's (NYSE: PCU  ) focus is on -- you guessed it -- copper, but since copper and gold are often found in shared geological structures, and given the forecasts for continued strength for gold, the company now appears to be molding gold into a strategic objective.

At a mining conference in Peru this week, Southern Copper CEO Oscar Gonzalez informed reporters that geologists will be working in three separate regions of Peru. If a commercially viable gold deposit is found, the company envisions a joint venture with a gold mining company, where Southern Copper would maintain a nonoperating majority stake.

Southern Copper is currently developing a copper/gold project called Tantahuatay, and is targeting production to mid-2010. The property is located just 30 kilometers (18.6 miles) from the prolific Yanacocha mine, which is operated by Newmont Mining (NYSE: NEM  ) in a joint venture with Peruvian miner Buenaventura (NYSE: BVN  ) . With an estimated 1 million ounces of gold in the ground, Tantahuatay is small potatoes compared to Newmont's 27.5 million-ounce Yanacocha mine, but those are some tasty potatoes.

Because of the geology, Southern Copper has devised an unusual joint venture with Buenaventura to develop Tantahuatay. The Tantahuatay deposit consists of a clearly delineated layer of gold-bearing material set atop a layer of copper ore. According to Gonzales, the plan under consideration would have Buenaventura mine the gold, after which Southern Copper would step in to mine the copper. As envisioned, the venture draws logically upon the strengths of each company, and looks to this Fool to be an efficient strategy for production.

Between the tantalizing Tantahuatay project and the concerted effort to locate additional gold deposits in Peru, Southern Copper continues to impress me with its profit potential. Toss in the roughly 18 million ounces of silver and 36 million pounds of molybdenum sold in 2007, and it might be time for the company to consider a more inclusive name.

Further Foolishness:

Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found acting foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Buenaventura. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 23, 2008, at 5:42 PM, XMFSinchiruna wrote:

    Correction: Paragraph 4... should read "targeting production in mid-2010" rather than 'to'.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 651640, ~/Articles/ArticleHandler.aspx, 9/2/2014 5:31:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement