Scott Jobin-Bevans, immediate past-president of the Prospectors and Developers Association (PDAC), candidly assesses the political, environmental and technical challenges facing foreign companies exploring for gold and other minerals on the Caribbean island of Hispaniola. In this exclusive interview with The Gold Report, we learn that the majors are paving the way for junior mining firms on the island, which holds much buried treasure, despite environmental and political challenges.

The Gold Report: Scott, you live and work on Hispaniola, which is divided into two countries, Haiti and the Dominican Republic (DR). The island is bisected by a mountainous spine of precious metal deposits, with part of the resource in Haiti and part in the DR. Majescor Resources Inc. (MJX:TSX.V) and Newmont Mining Corp. (NEM:NYSE) are players in the Haitian space. The biggest player in the DR is a joint venture between majority partner Barrick Gold Corp. (ABX:TSX; ABX:NYSE) and Goldcorp Inc. (G:TSX; GG:NYSE). Since 2009, Barrick has been developing the Pueblo Viejo mine, estimated to hold gold reserves of 23.7 million ounces.

What is the history and significance of Pueblo Viejo?

Scott Jobin-Bevans: In 1975, a private company called Rosario Dominicana opened up the Pueblo Viejo mine. It was the largest open-pit gold mine in the Western Hemisphere. A few years later, the Dominican government bought out Rosario and ran the mine. The operation went through the oxide cap in the early 1990s. When it hit the sulfide ore, costs became prohibitive. Engineers didn't have the technology to efficiently process this type of ore. The government shut down the mine, leaving behind an environmental and political mess.

Even though Pueblo Viejo went dark, there were small operations around the island, including a number of alluvial miners panning for gold in rivers. There was also ferronickel. Falconbridge, which is now Xstrata Plc (XTA:LSE), was involved in nickel laterite production on the island. Alcoa Inc. (AA:NYSE) was working bauxite in the southwest part of the island. There was not much hard rock gold mining going on, but there was a fair amount of exploration.

In the early 2000s, things began to take off for the junior gold mining firms.

TGR: What drove the renaissance? Technology?

SJ-B: Geophysics or geochemical soil and rock sampling technologies are very useful. But the main thing is the amount of virgin ground with great targets that nobody had systematically explored. I believe it's a highly prospective and wide-open field for the juniors.

TGR: Why wasn't the space explored systematically before the millennium?

SJ-B: I think a lot had to do with the issues around government stability on the island. In Haiti, there are problems with permitting. The Haitian government is in disarray; it is difficult to move mining ventures forward. The DR may be on island time, but it is more advanced than Haiti. Permitting can be slow, but it gets done. Securing land tenure has been an issue. Now that land tenure in the DR is clear, systematic exploration using Canadian experience and know-how can be applied with confidence.

TGR: What is the political climate for mine operators in the DR?

SJ-B: Ask me after May 20th. That's the election date. Pueblo Viejo is a political card, but overall the desire for mining and exploration in the DR is positive. I've met with the director of mines and with local political people whose communities are affected by exploration and mining. They are all very positive. I think it all comes down to jobs and opportunities for the communities from a socio-economic point of view. When calculating the potential royalties from Pueblo Viejo, it's pretty tough for the government to say that it's against mining.

TGR: How do you win over the locals?

SJ-B: First and foremost is good communication with the affected communities. By holding community meetings to educate people on what we're doing we can demystify the exploration and mining processes before negative perceptions are created. Specific examples might include going into a community with a drinking water problem and helping it upgrade the drinking water system or by helping with hospital supplies or schools. Local philanthropy builds good relationships.

TGR: There have been international press reports of protests about Barrick's proposed use of cyanide refining methods at Pueblo Viejo. Can you talk about that?

SJ-B: Barrick is not hiding the fact it is going to be using cyanide. Cyanide is a natural part of most refractory gold recovery processes. It's very well managed. We've obviously had problems when things went wrong but it's not to be treated lightly. It's cyanide. It's poisonous. Cyanide breaks down very quickly under UV light like sunlight and dissipates within hours. An interesting analogy can be drawn between the presence of metallurgical cyanide as used in gold extraction and how cyanide occurs naturally in the environment.

This story comes from a colleague, Hugo Dominguez. Have you heard of cassava bread?

TGR: Sure.

SJ-B: It's made from the yuca plant, which has cyanide in it. When the Dominicans process the yuca to make cassava, they remove the cyanide with a water treatment. Where does that toxified water go? It goes into the drain. Arguably, cassava bread processing pumps more cyanide-laced water into village streets than any mining operation. But the cassava-cyanide water is ultimately not poisonous, because sunlight breaks down the cyanide. Same with mine wastes.

TGR: You're the immediate past president of a leading mining industry group, Prospectors and Developers Association of Canada, or PDAC. As president, you consistently supported socially responsible mining practices. Can you talk about some of the safety and environmental precautions that are in place in mines that you have seen on Hispaniola?

SJ-B: Barrick had a problem in the construction of its tailings ponds, which it has now corrected. It had to do with high volumes of rain during a freak storm. Luckily, the breach of one of its dams occurred when there was no production going on. But the engineers build things to survive failure. It's like NASA; there's redundancy built into the system.

Most hurricanes do not penetrate the inland region where Pueblo Viejo is located. But up in the hills, there is another problem: lightning. In addition to traditional safety systems on the mine, Barrick has designed and implemented a lightning warning system that alerts workers if there is danger of lightning in the area. I have never seen this before on a mine site and it is a credit to the conscientious effort Barrick is making toward providing a safe work-place.

TGR: How do utility and transportation infrastructures on the island affect mining costs?

SJ-B: Electricity is expensive. In my home, for instance, we are penalized for over usage. We start off at approximately $0.08/kilowatt and very quickly jump up to $0.33/kilowatt. In addition, the electrical distribution system really needs a lot of work. There are areas on the island with only 18 hours a day of power so really these are rolling blackouts. But the government is working very hard to take the whole island to 24/7 electricity. Although there is hydroelectrical power generation, there is a lot of power generation based on diesel fuel. That's expensive. I have noticed that the government is seriously looking at solar power and wind projects.

Barrick's processing facility is power intensive. Barrick bought a power generating station in Santo Domingo from the government after agreeing to feed a portion of the electricity back into the grid.

As for transportation, some of the roads are great but some are atrocious. You can get around most of the country because there is a large network of toll highways and secondary roads. I have a two-wheel-drive Jeep that gets me most places. But when I go into the field, I grab a four-wheel drive because with flash flooding a road can quickly become an off-road situation.

TGR: What about telecommunications?

SJ-B: It seems that everyone's got a cell; landlines are rare. I've had good cell service at about 95% of the places I've been on the island, including jungle trekking.

TGR: Barrick is the world's largest gold producer. How do other firms on the island stack up against Barrick?

SJ-B: In Haiti, the major gold producer is Newmont, which has optioned projects in the border region from Eurasian Minerals Inc. (EMX:TSX.V). Majescor is not a major company, but it is working in the same neck of the woods as Newmont, in the northeast region of Haiti. Jumping over the border into the Dominican Republic, we find Unigold Inc. (UGD:TSX.V) immediately east of Newmont. Further southeast are GoldQuest Mining Corp. (GQC:TSX.V) and Everton Resources (EVR:TSX.V; ERV:FSE; EVRRF:OTCQX). I should also mention that located near Everton is another producer, Perilya Ltd. (PEM:ASX), which operates the Cerro de Maimón copper-gold mine; it is a very successful operation.

TGR: Did the 2010 earthquake affect mining operations on the island?

SJ-B: The earthquake was centered around Port-au-Prince. As far as I know, further northeast, Majescor and Newmont weren't affected. But there are active fault lines everywhere on the island and mining and exploration companies are quite aware of that. New buildings are designed with earthquakes in mind and in many cases even core racks are cemented into the ground, so that they do not topple.

TGR: How does Majescor's SOMINE property in Haiti compare geologically to the Pueblo Viejo operation in the Dominican Republic?

SJ-B: There is a mineralized belt that runs through the Cordillera Central, the big mountains in the middle of the island. In Haiti, it looks as though Majescor and Newmont are dealing with copper-gold porphyry systems. But as we move southeast into the Dominican Republic, we find epithermal systems that appear to be more related to volcanogenic massive sulfide or VMS systems, although there is the chance for porphyry discovery. Either way the region is highly prospective for gold and copper mineralization.

TGR: Do these geological differences require different mining techniques?

SJ-B: If the deposits are narrow vein, it's usually not economic to do an open pit. In Haiti, Majescor has broad intercepts of very nice grade mineralization. It is working its way toward a porphyry open-pit scenario, maybe underground long term. Mining sulfide ore at Pueblo Viejo requires a very large open pit.

TGR: What work is your geological consulting firm, Caracle Creek International Consulting, doing for Everton in the DR?

SJ-B: André Audet, who is the head of Everton Resources, also started Majescor in Haiti years ago, but he has been working on the DR side for 10 years. Everton has a nice property package, including a concession named Ampliacion Pueblo Viejo, which is immediately west and northwest of Pueblo Viejo. The Ampliacion team is headed by Hugo Dominguez, a past president of the Geological Society of the Dominican Republic. He knows the geology; he's well connected. We are working with him on 3-D modeling, database management and targeting. We are also hoping to utilize Caracle Creek's proprietary geophysical system, EarthProbe. It's exciting because all of the fundamentals have been done and we believe we are at the stage where discoveries are just around the corner.

TGR: Let's talk about recovery of gold from tailings.

SJ-B: PanTerra Gold Ltd. (PGI:ASX) [previously EnviroGold] is recycling tailings and extracting gold and silver as part of cleaning up the environment around Pueblo Viejo. The company is applying the Xstrata-owned Albion process, which is a brand name for a metallurgical and processing recovery system that basically re-grinds the tailings and then uses cyanide to produce gold from tailings. PanTerra has about half a million ounces of gold and some silver outlined, which will carry it for six or seven years of production.

TGR: Do you have any stock picks for investors interested in exploring opportunities in Haiti and the Dominican Republic?

SJ-B: There are three junior explorers that I really like and all three have the potential to define gold and/or copper resources in the near term and make multiple new discoveries. Unigold, which was languishing around $0.09 less than six months ago, is now upward of $0.29 with intraday high of some $0.47 in mid-January on the back of some impressive drill results that included 73 meters at 2.36 grams per ton gold from the Lomita Piña project next door to its Candelones deposit. Unigold then raised $11 million (M) on a bought deal, a lot of which will be spent on its projects in the northwest.

Everton Resources also has numerous highly prospective projects in epithermal gold-copper and also in volcanogenic massive sulfide ore deposits (Cu-Au-Zn). GoldQuest could be on the verge of defining a million-ounce gold resource in the next few months. It announced the start of a drilling program in late February aimed at upgrading and updating its resources at the La Escandalosa property. All three of these companies are bargains but especially Everton and GoldQuest.

The Chinese-Australian company Perilya has a base metal mine called Cerro de Maimón near Pueblo Viejo. It bought this property for next to nothing from GlobeStar Mining Corp. (GMI:TSX) and paid it back within the first year of production. It's not huge, but it's got a number of productive years left. On the island, a capital expenditure of $50–75M can develop a small mine with a 10- to 15-year production life. This presents a great opportunity for a company like Everton Resources that has a number of projects similar to the Cerro de Maimón mine.

TGR: If Barrick is successful at Pueblo Viejo, will the island's mining infrastructure evolve to make it easier for the juniors?

SJ-B: Infrastructure is already building up from the service/supply side. Chemicals and other mining products, like drill rods, drill bits, muds, vehicles and portable shelters, are being imported into the country. That is good for exploration. The bottom line is that once Barrick starts producing a million ounces a year, the DR will get the notice it deserves and the whole island will be a hot bed for exploration and discovery.

TGR: Thanks for your time.

SJ-B: Thank you.

Dr. Scott Jobin-Bevans has more than 22 years in mineral exploration with public company experience as a director, officer and technical advisor. He has expertise in project evaluation and in leading multi-million dollar projects from generative stage through advanced exploration and into development. Jobin-Bevans is a member of the board of directors for a number of public and private companies and is the past president and director of the Prospectors and Developers Association of Canada. He is a co-founder of Caracle Creek International Consulting and was managing director from 2001 to 2008. In 2008, Jobin-Bevans stepped down as managing director and became part of the founding management team of TSX-listed Treasury Metals Inc., where he served as president, CEO and a director until April 2011. He returned to Caracle Creek in May 2011 as director of corporate development and is currently leading the Dominican Republic operations for Caracle Creek Dominican Republic.

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DISCLOSURE:

1) Peter Byrne of The Gold Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Gold Report: Goldcorp Inc., Majescor Resources Inc. and Unigold Inc. Streetwise Reports does not accept stock in exchange for services.

3) Scott Jobin-Bevans: I personally and/or my family own shares of the following companies mentioned in this interview: Everton Resources, Unigold Inc. and GoldQuest Mining Corp. I personally and/or my family am paid by the following companies mentioned in this interview: Caracle Creek International Consulting and Everton Resources. I was not paid by Streetwise Reports for participating in this story.