Construction begins at Colombia's first gold mine in 20 years

Red Eagle Mining (TSXV:RD) is spending $120 million to open Colombia's first gold mine in two decades, an executive with the Vancouver-based company told Fox News Latino on Friday.

Colombia manager Rafael Silva said the junior explorer spent $40 million to survey and drill the San Ramon gold deposit, located in Antioquia province, with an additional $80 million expected to be needed to build the mine.

Construction of the underground mine began on July 29 after the company obtained an environmental license from the local environmental protection agency, according to Fox News. The mine will be the first in Colombia to operate under modern environmental permitting legislation.

Silva told the news outlet that construction should be finished by 2016, after which it would produce at a rate of 50,000 gold ounces annually for a minelife of eight years.

According to Red Eagle, the October 2014 feasibility study outlines a 1,000-tonne-per-day operation, with cash costs at $596 per ounce or $84 a tonne.

Reserves are 2,424,000 tonnes at a grade of 5.2 g/t gold for 405,000 ounces. The underground mine will use conventional shrinkage stoping mining methods with delayed backfill.  Processing incorporates single-stage crushing, SAG milling and floatation with concentrate re-grinding followed by conventional carbon-in-leach processing the combined float tails and reground concentrate to produce gold dore with 96 percent recoveries, Red Eagle states.

A $19.3 million private placement was completed on July 16 by Liberty Metal & Mining Holdings LLC, which will take a 19.99 percent ownership interest in Red Eagle Mining. The $39.56 million market cap company is down 10 percent year to date and currently trades at 27 cents on the Toronto Venture Exchange.