Proactive investors

Cuervo audio intervew transcript with Brian Berner, Chairman and CEO

Harry Norman:  Hello this is Harry Norman for Proactive Investors and welcome to another Proactive Audio Interview.  Today is the 19th January 2010 and I am talking with Brian Berner, Chairman and CEO of Cuervo Resources; listed on the CNSX Toronto exchange stock ticker FE; share price 35 cents Canadian;  Market cap $12.07m Canadian.   Cuervo Resources is also listed on Frankfurt exchange.  Web address: www.cuervoresources.com . Brian, thank you very much for joining us for this interview.

Brian Berner:  You’re welcome.

What is Cuervo Resources’ business model and what makes Cuervo Resources stand out from the other iron ore junior companies?

Cuervo Resources’ business model is basically, find it, prove it and sell it.  I don’t know how different it is from other iron ore junior Companies, that you would have to ask them. But basically our belief is a junior company is best suited for exploration not moving into production.

The Cerro Ccopane Project has a measured and indicated resource of 56 million tonnes at 46.8% iron with an inferred resource of 51 million tonnes at 43.7% iron.  What is the potential of Cerro Cccopane and are you planning to do more drilling this year?

The geophysical potential of Cerro Ccopane is close to two and a half billion.  The compliant resource that’s been drilled off is at 100 million.  We have two other areas that have over a billion tonnes each in potential.
Our plans for drilling this year are dependant on establishing a joint venture partner to fund the drawing necessary to take the geophysical potential into an inferred category in the next 15 months.

Cuervo Resources has recently sold its Pampa de Pongo iron deposit in Peru to Chinese interests for $100 million US.  What does this imply about the value of the Cerro Ccopane project?

The comparison is a little bit of apples and oranges in the sense that the Cadero Project is underground mining and on the coast and we are open pit mining in the Andes.  So, in my opinion it certainly gives the minimum value to Cuervo of $100 million for its property in Cerro Ccopane in the sense that the transportation costs versus mining costs of underground mining are offsetting each other.

And Cadero has an inferred resource based on 30 drill holes.  So again, the object of the drill campaign with a joint venture partner gives the potential for Cerro Ccopane to be worth many multiples of what Cadero’s property is worth if the drilling comes in.

What can you tell us about progress towards finding a Joint Venture Partner, to take Cerro Ccopane forward Brian?

At present talking to four or five interested parties and talks remain at the confidential stage.  When an agreement has been reached that’s a closable deal, as I like to call it, we would put out a press release.

Does the location of the Cerro Ccopane project lend itself to the export of iron ore to steel mills in Asia?

Yes, because Peru is on the Pacific coast.  Asia is Pacific access.  So we have a shorter shipping route than stuff coming from Eastern Canada.

What are the significant findings of Sandwells Engineering Transportation study focussed on the Cerro Ccopane Iron ore project Brian?

That a slurry pipeline is the most efficient way both from a capital  cost viewpoint and from a variable costs viewpoint of transporting the iron from the Andes to the coast.  There is also the side benefit of fresh water in the Andes and desert climate on the coast.  So distribution of the water after it reaches the coast would be a potential economic benefit to the project.

How critical are transportation costs in the iron ore business Brian?

Transportation probably makes up a good 50% of the cost of the iron ore to the steel industry.  At Cuervo, through the pipeline we have indicated a transportation cost of $8 - $10 a tonne from mine site to the coast. And as mentioned earlier we have that distance advantage over Eastern Canada of about 3000 nautical miles in distance to get from Peru to China.  So they are a key cost but we have a competitive transportation scenario.

What is Cuervo Resources’ financial situation?

We are properly funded until the end of July.  We have significant share holders that, should more capital be needed, would provide it.  We hope we don’t need to raise anymore money but we may just to ensure we are fully funded.  That decision has not been made as of yet.

What can investors expect form Cuervo Resources over the next 12 to 18 months Brian?

I would suggest that we would be able to announce a strategic joint venture partner and have begun drilling Bob One Huillque North, the two billion plus targets.

Are your investors comfortable with your listing on the CNSX, Canadian National Stock Exchange?

Yes.  The investors are comfortable although they have a preference for a higher level listing at the TSX level which again would coincide with a joint venture agreement.  We would then be able to qualify for the TSX and would move from the CNSX to the TSX.  But the CNSX is the proper exchange for us at the present time.

What are the processing characteristics of the iron ore at Cerro Ccopane?

Basically the sulphur is coarse which means the impurities can be removed easily by magnetic separation which adds a cost of about a buck to a buck and a half a tonne.  So there has been no metallurgical problems established with the ore at all.  It upgrades to steel industry standards.

Why iron ore at this time?

Iron ore is the building block of economic expansion and it is as essential to third world economic growth as oil is.  In other words if you are going to build infrastructure you are going to need steel.  Steel requires iron.

What are your thoughts about operating in Peru?

Peru has recently been upgraded to investment grade; it is a democracy; it’s got a long history with mining; excellent banking system; excellent mining laws; excellent court system. To me it’s one of the top three countries in South America to operate in.

How many other iron ore concessions does Cuervo Resources hold in Peru?  What makes them attractive and what priority do they have at this stage?

We have another 10,000 hectares we have not investigated because the significant find at Cerro Ccopane is the main focus.  Two and a half billion tonnes of iron ore is a world class deposit.  The board will probably review our other holdings. We have done no geological exploration on them. At this time they just are high potential but again we intend to stay focussed on the two and a half billion tonnes.

What does the measurement team of Cuervo Resources bring to the job?

Basically we’ve got a Board of Directors with a hands on approach. We meet monthly at a minimum, bi-monthly during busy times.

We have Gord Watts with forty plus years in the business.  He is a mineral economist and has worked on over 200 mining projects worldwide.  And then I have Vel Spring who has over 45 years experience, 11 of which was Exploration Manager for South America for Noranda - so sort of an expert in how things are done in South America.  But the key to both of them is they have experience in iron ore and understand the iron ore market.

Brian Cloney is basically the Board’s Financial Audit Committee Chairman and brings 35 years of accounting experience on that front.  John Siriunas is the President and Head of the Exploration.  Again, over 30 years experience as an Exploration Geologist.

Myself, my expertise is investment and finance so I keep the company funded and try to manage the financial aspect and again negotiate the Joint Venture. And then we have Dan Hamilton, he is our chief Financial Officer who brings 20 years experience in the mining business there.

So that we think is a solid management team and it’s an active management team and we think we can get the job done in iron.