For a junior company trading for pennies, Antioquia Gold (TSXV: AGD; US-OTC: ANTZF) has a lot of fire power behind it.

Consorcio Minero Horizonte (CMH), a privately held mining company in Peru, learned about Antioquia's Cisneros project in Colombia about five years ago, and since then has become the junior's largest shareholder, with an ownership stake of about 54%.

Equally exciting is that CMH has agreed to pony up half of the US$40 million Antioquia will need to build an underground mine at Cisernos, freeing the junior from having to raise money through a dilutive equity financing.

The remainder of the funds will be generated from the cash that is expected to start to flow next year from the small 500-tonne-per day mining operation. Antioquia believes the underground mine, 55 km northeast of Medellin, will start operating in mid-2016.

"CMH were looking for opportunities outside of Peru and were particularly attracted to us because of the similarity of our high-grade gold deposit to their existing mine at Parcoy," Jim Decker, the company's executive vice president, says in an interview from his office in Calgary. "Cisneros and Parcoy are both high-grade deposits that get richer at depth, and so they recognized the type of deposit we had and got very interested, and have invested in us ever since."

Antioquia acquired the 5,622-hectare Cisneros property, where artisanal miners have been active for decades, in two separate deals in June 2007 and October 2008. It paid about US$2 million for the land package and committed to spend another US$2 million on exploration by 2010.

"When offered the deal, I made a site visit, took five random grab samples from three different areas, and all of them produced gold results, the best being about 45 grams gold per tonne," Decker recalls. "The rest is history."

Several years and 209 drill holes later, Antioquia reported a resource on two of the deposits on the property - Guayabito and Guaico. Based on 45,400 metres of drilling, the company outlined measured and indicated resources of 599,056 tonnes grading 5.04 grams gold per tonne for 97,092 ounces of contained gold. Inferred resources add a further 1.10 million tonnes grading 4.90 grams gold for 172,861 oz. of contained gold.

Last week, Antioquia's board announced that it had decided to proceed with plans for an underground mine at Cisneros, and management says it is confident that exploration from underground will easily find more ounces of the precious metal.

"We made a corporate decision that the 270,000 ounces of gold was sufficient to get a mine of this size started, because to double that resource would have required spending another US$3-5 million on exploration and it probably would have taken another two years to get to that level," Decker says.

"We determined that we had sufficient reserves for a five-to-seven year mine life at 30,000 oz. gold a year, and we felt that will generate significant cash flow to fund the additional drilling required to increase the resource."

Decker estimates that Antioquia should be able to pay back the US$20 million loan from CMH within about nineteen months. (The loan is unsecured and bears an interest rate of 7.13%.)

"By the end of 2016 we should be spinning off about US$3 million a month in revenue from the production of about 2,500 ounces a month using a price of US$1,200 per oz. gold," the mining executive calculates. "So no matter how slow our start-up is, this thing pays off that loan in less than two years. That's why it's a good deal and why our partners are keen to loan us the money because they recognize that."

The mine plan envisions that ore from Guayabito and Guaico will be sent to a central processing plant. The two deposits are about 2 km apart, and mine development will start at Guaico first.

Civil works and infrastructure are slated to begin in September 2015 and completed before the end of the year. Tunnel and mine development will also start in September and finish in July 2016, Decker says.

Antioquia expects to receive its environmental and mining permit for Guayabito in December 2015, and start civil works and infrastructure development there in May 2016, with tunnel and mine development work to follow in July 2016.

Final basic engineering and design of the processing plant will be completed in July 2015, with construction and commissioning finished by July 2016.

Decker expects that down the road, the two deposits will be linked by a tunnel so there will be just one delivery system to the central mill.

Antioquia has also decided to spend a bit more money (Decker estimates roughly between US$500,000 and US$1 million) to build a dry-stacked tailings disposal system, rather than a more conventional wet tailings pond.

"The minute you mention cyanide and tailings ponds, regulators get very nervous," Decker says. "We knew that if we did dry tailings it would make the permitting process much less rigorous. So from day one, we decided that we would incorporate the additional capital expense and go with dry tailings."

Decker also notes that dry tailings will take up far less space than a wet tailings pond, and given that Cisneros is in a semi-agricultural area where the main crop is sugar cane and land costs are at a premium, it makes more economic sense in the longer term. "We'll save at least US$10 million by doing it this way, and we're doing it in an environmentally friendly manner."

In terms of permitting, Decker says it took about 24 months from the start of the application process for Guaico to getting approval for an underground mine. But he is quick to add that that timeframe is not indicative of the process today, because it was "early days" for both the Federal and Departmental governments, and there was a lot of uncertainty at the time about which group had jurisdictional authority.

"The Mines Ministry has significantly revamped the application process and has committed to swift action for those applications that have been prepared properly," he says. "In the case of [permitting] Guayabito, we anticipate a period of four to six months, maximum."

As for exploration upside, the hills around Cisneros, situated within the late Cretaceious Antioquia Batholith, contain gold, Decker Canterel says, noting that there are six other good targets on the property that warrant follow-up.

"Gold mining has been going on in this valley for more than 100 years," he says, adding that AngloGold Ashanti (NYSE: AU) and B2Gold Corp.'s (TSXV: BTO; NYSE: BTG) Gramalote project is just 15 km to the east, while Red Eagle Mining's (TSXV: RD; US-OTC: RDEMF) San Ramon project is about 55 km to the northwest.

"There are gold occurrences literally across our 5,000-plus-hectare property," he says. "Most of it is covered by 5 metres to 20 metres of overburden, but panning samples have been corroborated by geophysical and geochemical results as well."

Decker also notes that Antioquia has a good relationship with the local community and that the majority of the company's workforce will come from there. "They're good miners and will be delighted to work with modern mining machinery, a far cry from their previous artisanal methods."

As for working in Colombia, Decker says the election in 2002 of President Alvaro Uribe greatly increased security and that the threat of kidnappings and extortion from narco-guerillas, like the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN), has abated in the majority of the country.

Decker should know. He spent three years in the late 1980s in Colombia working as a production manager for Exxon, which at the time owned 50% of a large coal mine called Cerrejon. He has also spent time since then doing consulting work in the country, and says that by 2006, security issues "had been resolved very well."

"In reality, Colombia is safer today than Mexico," he says. "When Uribe came in, he openly solicited the help of the United States and he drove the FARC into the jungles and that's where they are right now."

Uribe also negotiated with them to lay down their arms in exchange for pardons, which has effectively gutted their organization from about 23,000 members down to about 9,000, Decker says. Many of those remaining would like to negotiate similar pardons from Uribe's successor, President Juan Manuel Santos, who came to power in 2010, Decker says.

Of course, there are still parts of the country that Decker says should be off limits to exploration companies, such as areas within 100 km of Colombia's borders with Panama, Venezuela and Brazil, but the rest of the country, he maintains, is safe.

"We're only 55 km from Medellin, the second largest city in Colombia," he says. "We're in a highly populated area and FARC activity is absolutely minimal. Yes, we have security measures in place, but they're really not overly dramatic or expensive."

As for the government, he says, it is very proactive in supporting mining efforts and the economy is very business-oriented. "It's the only Latin American country that has never had its currency devalued," he continues. "It is self-sufficient in oil and gas; it is one of the most significant coffee producers; it's a very rich country in its own right; the people are very professional; the laws are very modern; and a lot of them are modeled after Canadian laws."

"The simple reason we chose Colombia was because of its high potential and because it was also a secure place."