Graña y Montero, through its subsidiary STRACON GyM, which specialises in comprehensive services for the mining sector, is in charge of construction and will operate the San Ramón mine, located in Medellín, Colombia; which, upon completion, will be one of the top gold mines in that country. The mine, which belongs to the Canadian firm Red Eagle Mining Corp, has already started development of the gold deposit and production is expected to start in 2016.

The September 2014 feasibility study estimates $74 million in initial capital costs and cash costs of $596/oz. Post-tax project economics include cash flow $132 million, NPV5% $104 million, IRR 53% and payback within 1.3 years. Total Proven and Probable Reserves (oxide, mixed and sulphide) amount to 2.425 Mt at 5.20 g/t Au. The underground mining method selected is Mechanized Shrinkage with Delayed Fill (MSDF). The study outlines a 1,000 t/d operation producing an average of 50,000 oz/y.

Processing incorporates single-stage crushing, SAG milling and floatation with concentrate re-grinding followed by conventional CIL processing of the combined float tails and reground concentrate to produce gold doré with 96% recoveries.

The Santa Rosa gold project is located some 20 km southeast of the town of Santa Rosa de Osos, in the municipality of the same name, in the Department of Antioquia, 73 km northeast of the department capital Medellín in northern Colombia. The San Ramon deposit lies in the southeast part of concession B7560005 held by Red Eagle Mining. The project is accessible from Medellín via a paved highway for about 65 km, then via an unpaved road for approximately 8 km.

“We have closed a contract with Red Eagle Mining under which we have been awarded the services contract in the amount of $155 million to develop, start up and operate the San Ramón mine for eight years. Certainly, this contract will enhance the presence of Graña y Montero in Colombia and strengthen our participation in the mining sector regionwide”, said Steve Dixon, General Manager of STRACON GyM.

It should be noted that, as part of this contract, STRACON GyM purchased shares in Red Eagle Mining for $ 3.5 million. Furthermore, after executing the contract, STRACON GyM will make a new share purchase for the same amount, which would give it a minority interest of 19.94% in Red Eagle Mining.