LINE BY LINE ANALYSIS OF THE âCHILE EXPLORE REPORTâ ARTICLE ON AMC DATED OCTOBER OF 2017
[ I thought that this article had a lot of excellent information contained within it. My comments will be in CAPS and in brackets. I apologize to those who are offended by the use of CAPS.]
âADL WAITS RAMP UP PRODUCTIONâ
âProduction may resume during the next few weeks to commission the Altos de Lipangue project.â
[THE TERM âCOMMISSIONâ SUGGESTS TO ME THAT THE PREVIOUS PRODUCTION FROM THE LARISSA ADIT (ADIT #3 OF 3) INVOLVING THAT 28-METER STRETCH IN BETWEEN TOPOGRAPHICAL LANDMARKS LC-3 AND LC-6 WAS PROBABLY CONSIDERED A âBULK TEST SAMPLINGâ FROM A PERMITTING POINT OF VIEW. IN FACT, AMCâS PRESS RELEASE REFERRED TO THESE SHIPMENTS AS âTEST PRODUCTION RUNSâ. I WOULD ASSUME THAT ENAMI AND AMC WERE STILL TINKERING WITH METALLURGY, MESH SIZES, AND THE MOST EFFICIENT RECOVERY PROTOCOLS FOR THE ORE BEING SHIPPED. RECALL THAT AMC STATED THAT THEY HAD REQUESTED A âFULL GRANULOMETRIC ANALYSISâ (OF PARTICLE SIZES) OF THE ORE.
MY TRANSLATION OF THE âPRODUCTION MAY RESUMEâ PHRASE WOULD BE THAT FINAL PERMITTING AND THE CHECKING OFF ON THE SAFETY CHIMNEYS IS EITHER IN HAND NOW OR EXPECTED TO BE IN HAND WITHIN âTHE NEXT FEW WEEKSâ FROM THE TIME OF THE INTERVIEW.
THE QUESTION THEN BECOMES WHAT EXACTLY IS THE SIGNIFICANCE OF âCOMMISSIONINGâ PRODUCTION IN AN AREA WITH GRADES LIKE THOSE CITED AT SURFACE VIA TRENCHING (ABOUT 3 GPT GOLD AVERAGE), WITH THE GRADES FOUND IN THE AREA WHERE THE PLATEAU TRANSITIONS INTO THE NORTHERN AND SOUTHERN DOWNSLOPES (7-10 GPT GOLD), AND THE GRADES FOUND AT THE 140 METER DEPTH LEVEL IN THE CAREN MINE (UP TO 201 GPT GOLD) AS WELL AS THOSE GRADES FOUND HISTORICALLY AT THE FORTUNA MINE (60 TO 90 GPT GOLD).
AS FAR AS THE EPITHERMAL VEINS GO AT THE ADL, IâD ENCOURAGE YOU TO LOOK UPON THEM AS A âPACKAGEâ OF ABOUT 6 MAIN PARALLEL VEINS ALL STRIKING IN A NW DIRECTION (EXCEPT FOR MERLIN 3 WITH AN E TO W STRIKE). SOMETIMES ARRAYS OF VEINS LIKE THIS ARE REFERRED TO AS âSHEETED VEINSâ OR âPARALLEL SHEETED VEINSâ OR âEN ECHELONâ QUARTZ SULFIDE VEINS.
IN A PORPHYRITIC ENVIRONMENT LIKE THIS, THESE TYPES OF VEINS ARE OFTEN SAID TO âTELESCOPEâ OUT OF THE UNDERLYING PORPHYRY STRUCTURE. GREG CORBETTâS (P. GEO. FROM AUSTRALIA) FAMOUS PICTORIAL OF THE PROTOTYPICAL PORPHYRY DEPOSIT SHOWN ON THE AMC WEBSITE SHOWS PARALLEL âSHEETED VEINSâ EMANATING FROM THE CENTRALIZED âPORPHYRY STOCKâ UPWARDS TOWARDS THE SURFACE. THE FAULTS THAT HOST THESE VEINS IN VARIOUS PORPHYRY DEPOSITS HAVE A TENDENCY TO ALIGN IN âPREFERRED ORIENTATIONSâ THAT ARE OFTEN ALSO PARALLEL. THE ORIGINAL FAULT ORIENTATION IS THE âSTRUCTURAL CONTROLâ FOR THE VEINS. IN ESSENCE, THE LOCATION OF THE METAL-BEARING ORE IS âCONTROLLEDâ BY THE FAULTS/CRACKS IN THE EARTH (THE âSTRUCTURESâ) THAT PROVIDE A FINAL RESTING PLACE FOR THE HYDROTHERMAL FLUIDS THAT COOL AND PRECIPITATE OUT OF SOLUTION THE ORE THAT THEY CARRY.
THE âBANDINGâ FOUND IN THESE VEINS SUGGESTS THAT THE MINERALIZING EVENTS WERE âPOLYPHASALâ WITH EACH SEPARATE EVENT RESULTING IN ONE LIGHT (OFTEN CHALCEDONY WHICH IS A QUARTZ-LIKE SILICATE) PLUS ONE DARK (âGINGUROâ) COLORED âBANDâ THAT TYPICALLY HOSTS THE SOUGHT AFTER METALS.
WHAT EXACTLY DO WE NOW KNOW ABOUT THIS âPACKAGEâ OF ABOUT 6 VEINS? WE KNOW THAT 5,000 LINEAL METERS OF THESE VEINS WERE DETECTED DURING A SOMEWHAT EXHAUSTIVE AMC TRENCHING PROGRAM AS HAVING MADE IT TO SURFACE. THESE VEIN STRUCTURES REMAIN âOPEN IN ALL DIRECTIONS WITHIN THESE STRUCTURAL CORRIDORSâ. THIS MEANS THAT THE ACTUAL LINEAL MEASURE WILL END UP BEING A LOT MORE THAN 5,000 METERS. THE IP/IR SURVEY RESULTS SUGGEST MANY INDUCED âPOLARIZATIONâ AND âRESISTIVITYâ ANOMALIES THAT DID NOT MAKE IT TO SURFACE. THE HYPERSPECTRAL SATELLITE SURVEY OF C.S. PEREZ REVEALED A 7 KM SWATH OF ABOUT A DOZEN INTRUSIVES IN THIS AREA. ALTHOUGH THE INDIVIDUAL VEINS MIGHT AVERAGE A LITTLE LESS THAN A METER IN WIDTH, WE KNOW THAT WHATEVER THE AVERAGE âREPRESENTATIVEâ GRADE ENDS UP BEING FOR THIS âPACKAGEâ OF VEINS THERE IS NO DOUBT A FAIR AMOUNT OF TONNAGE HERE AND A SIGNIFICANT MINE LIFE IF ANYTHING EVEN NEAR THESE GRADES HOLD TRUE IN YET TO BE EXPLORED AREAS. THUS THIS EVENT APPEARS TO BE THE âCOMMISSIONINGâ OF A SOMEWHAT LONG TERM PROJECT.
OF THE 6 VEINS, WE KNOW THE MOST ABOUT THE FORTUNA CENTRO VEIN (WHICH IS ONE OF THE EASTERNMOST OF THE VEINS) BEING THAT IT WAS MINED HISTORICALLY OVER 7 DIFFERENT LEVELS FOR MANY YEARS. THE GRADES REPORTED WERE IN THE 60 TO 90 GPT GOLD RANGE. THESE VEINS ALSO FEATURED AN APPROXIMATELY 30 TO 200 METER WIDE HALO OF ARGILLIC ALTERATION (KAOLINATE AND SMECTITE CLAYS) WITHIN THE GRANODIORITE SUGGESTING AN IMPRESSIVE âPLUMBING SYSTEMâ ABLE TO FACILITATE THE UPWARD MIGRATION OF METAL-LADEN HYDROTHERMAL FLUIDS THAT DID THE âALTERINGâ. THUS THE EASTERN FLANK OF THIS âPACKAGEâ OF VEINS IS VERY PROMISING AND HAS A SOLID HISTORY. AT A MEDINAH AGM, ACA HOWEâS REP CITED THAT THE SURFACE HASNâT EVEN BEEN SCRATCHED AT THE FORTUNA VEIN SYSTEM YET.
THE MASSIVE TRENCHING PROGRAM OF AMC INVOLVING THE ENTIRE âPACKAGEâ OF VEINS WITH OVER 1,600 SAMPLES TAKEN REVEALED THAT EVEN AT THE VERY SURFACE THE GOLD WAS RUNNING AT ABOUT 3 GPT WHICH IS EXTREMELY RICH FOR SURFACE GRADES. THUS THE TOP OF THIS âPACKAGEâ OF VEINS IS ALSO VERY IMPRESSIVE IN BOTH CONTINUITY AND GRADE. THEORETICALLY, DEPOSITS LIKE THIS ARE SUPPOSED TO BE OVERLAIN WITH A âBARREN LITHOCAPâ CONTAINING IRON OXIDES IMMEDIATELY ABOVE THE âOXIDE ZONEâ AND NOT ORE CONTAINING 3 GPT GOLD.
IN ORDER TO PROVIDE SOME CONTEXT, THE AVERAGE GRADE OF GOLD BEING MINED IN A GOLD MINE TODAY IS ABOUT 1.6 GPT GOLD USUALLY AT SIGNIFICANT DEPTHS. WE KNOW THAT AS THE PLATEAU TRANSITIONS ONTO THE NORTHERN AND SOUTHERN DOWNSLOPES THE VEINS WERE CARRYING ABOUT 7 TO 10 GPT GOLD AGAIN RIGHT AT SURFACE. THERE IS EVEN EVIDENCE OF ARTISANAL âPLACERâ MINING EVENTS ON THE PLATEAU ITSELF. DUE TO THE STEEPNESS, AMC COULDNâT CONTINUE TO TRENCH FURTHER DOWN THE DOWNSLOPES OFF OF THE PLATEAU OTHERWISE WE MAY HAVE GOTTEN A CLEAR PICTURE OF GRADE AS A FUNCTION OF DEPTH BELOW THE PLATEAU.
THE WESTERNMOST VEIN OF THE 6 IS THE MERLIN 1 VEIN. WE KNOW THAT IT (OR A SUBPARALLEL VEIN VERY CLOSE TO IT) FEATURES VERY HIGH âBONANZAâ TYPE GRADES NEAR THE ADITS ON THE NORTHERN DOWNSLOPE AT ABOUT 140 METERS IN DEPTH BELOW THE PLATEAU. WE KNOW ABOUT THE 28 AND 42-METER HIGH GRADE INTERSECTIONS FOUND WITHIN THE LARISSA ADIT (ADIT #3). I BELIEVE IT IS FAIR TO SAY THAT THE PRELIMINARY IMPLICATION IS THAT THE GRADES IMPROVE WITH DEPTH WITHIN THIS âPACKAGEâ OF VEINS.
THE LAST WE HEARD FROM AMC WAS THAT THE 42-METER VERY HIGH GRADE INTERSECTION DOES NOT APPEAR TO BE THE SAME VEIN AS THAT CARRYING THE âBONANZAâ GRADES FOUND IN ADIT #2 BUT THAT AMC ANTICIPATED HIGHER GRADE INTERSECTIONS WITHIN ABOUT 20 METERS OF WHERE THEY WERE AT THE TIME OF THIS INTERVIEW. THUS THE WESTERN FLANK OF THIS âPACKAGEâ ALSO LOOKS VERY ENTICING. THE DEPTH IS WHAT WE PROBABLY KNOW THE LEAST ABOUT BUT 400 TO 500 METERS IS NOT ATYPICAL IN EPITHERMAL SYSTEMS. THE LOWEST LEVELS OF SOME OF THESE VEINS OFTEN CONVERT TO ZINC AND LEAD BEARING BASE METAL VEINS.
WE ALSO KNOW THAT THE WIDTH OF EPITHERMAL VEINS LIKE THESE TEND TO INCREASE WITH DEPTH. WE KNOW TO EXPECT THE HIGHEST GOLD GRADES IN THE HISTORICAL âBOILING ZONEâ WHERE THE QUARTZ GANGUE BECOMES âAPHANITICâ OR âCRYPTOCRYSTALLINEâ (GLASSY) AND THE INDIVIDUAL CRYSTALS ARE TOUGH TO DISCERN. THESE âBOILING ZONESâ ARE OFTEN SEVERAL HUNDRED METERS IN VERTICAL WIDTH. WE KNOW THAT ALL FOUR OF THE MAIN VERTICAL LEVELS OF THESE PARTICULAR EPITHERMAL VEINS (INCLUDING THE CARBONATE LAYER) IS REMARKABLY WELL-PRESERVED AND UNERODED. THE ENERGY RELEASE FROM THE âBOILINGâ PROCESS SEVERS THE BOND BETWEEN THE GOLD AND THE THIO-SULPHATE (SULPHUR CONTAINING) COMPLEXES IT TRAVELS WITH. THIS ALLOWS THE GOLD TO PRECIPITATE OUT OF SOLUTION AND NESTLE INTO THE CRACKS FOUND IN THE LOCAL AREA.
I BELIEVE IT FAIR TO SAY THAT THIS âPACKAGEâ OF VEINS LOOKS VERY PROMISING ESPECIALLY IF THE AREAS IN BETWEEN THE M-1 VEIN TO THE WEST AT THE 140 METER LEVEL AND THE FORTUNA VEIN TO THE EAST AT ITS LEVEL 7 ARE SOMEWHAT SIMILAR. THE PLAN IS TO DRIFT A âCROSSCUTâ FROM THE LARISSA ADIT TOWARDS THE EAST AFTER THE VEIN BEARING THE âBONANZAâ GRADES WAS HOPEFULLY LOCATED.
NOW IF YOU WRAP ALL OF THESE FINDINGS UP AND PLACE IT INTO THE INFRASTRUCTURE ALREADY PRESENT AT THE ADL (WITH READY ACCESS TO POWER AND WATER, PROXIMITY TO SANTIAGO, LOW ELEVATION, A MINING FRIENDLY COMMUNITY, ETC.)WHICH STRONGLY SUGGESTS A LOW CAPEX ENVIRONMENT THEN THE PICTURE MIGHT BECOME CLEARER PENDING FURTHER DEVELOPMENT WORK TO FILL IN THE BLANKS. WHAT WE WANT TO MONITOR FOR NOW ARE SIMILAR GRADES TO THOSE THAT HAVE BEEN FOUND AT THE LARISSA ADIT AS AMC WORKS TOWARDS THE EAST AND AS THEY WORK UPWARDS TOWARDS SURFACE FROM THE LARISSA ADIT.
TO ME, IF PRODUCTION DOES INDEED COMMENCE IN NOVEMBER, THIS IS A VERY BIG DEAL FOR MEDINAH/AMC/CERRO AND IT REPRESENTS A GIANT STEP FORWARD AS FAR AS âDERISKINGâ THE CAREN PROJECT FROM THE POINT OF VIEW OF POTENTIAL INVESTORS AND/OR ANY INTERESTED SUITORS (NOT THAT ITâS FOR SALE) LOOKING FOR A TURNKEY OPERATION OR POTENTIALLY DESIRING TO PURCHASE A âROYALTY STREAMâ OR SIMPLY MAKE AN INVESTMENT. THE OPTION TO ROLL THE PROCEEDS FROM THIS MINING OPERATION INTO FURTHER DEVELOPMENT EFFORTS ELSEWHERE IN THE ADL MINING DISTRICT PROVIDES AMC WITH SOME LEVERAGE AT ANY NEGOTIATING TABLE DEALING WITH THE PEGASO NERO OR THE LDM SUBDIVISIONS OF THE DISTRICT.
THE SIGNIFICANCE OF GOING INTO PRODUCTION IN A DEPOSIT LIKE THIS WITHIN THIS TYPE OF INFRASTRUCTURE IS ENCASED WITHIN THE STATISTICS. APPROXIMATELY 1-IN-1,000 JUNIOR MINERAL EXPLORERS NOT ONLY MAKE A SIGNIFICANT DISCOVERY LIKE THIS BUT ALSO GAIN ACCESS TO THE FINANCIAL WHEREWITHAL AND TECHNICAL EXPERTISE TO GET IT PERMITTED AND INTO PRODUCTION ESPECIALLY WITHOUT UNDERGOING MASSIVE DILUTION. I COULDNâT TELL YOU WHAT THE ODDS ARE OF A MAJOR STARTING FROM SCRATCH TOMORROW AND FINDING AN 11,000 HECTARE âPACKAGEâ LIKE THIS JUST OUTSIDE OF SANTIAGO, CHILE IN AN AREA WITH POWER AND WATER ALREADY PRESENT AND WHOSE RESIDENTS KNOW AND APPRECIATE ENVIRONMENTALLY RESPONSIBLE MINING EFFORTS.
THERE ARE SEVERAL STATISTICS THAT NEED TO BE OVERLAID IN ORDER TO PROVIDE SOME CONTEXT HERE. FIRST YOU HAVE THE 1-IN-1,000 ODDS AGAINST EVER MAKING THE DISCOVERY AND GETTING IT PERMITTED AND INTO PRODUCTION. SECONDLY, YOU NEED TO FACTOR IN THE WORLD GOLD COUNCILâS DATA THAT FOR THOSE LUCKY 1-IN-1,000 JUNIOR EXPLORERS MAKING IT INTO PRODUCTION IT TAKES AN AVERAGE OF 27 YEARS FROM THE COMMENCEMENT OF EXPLORATION TO GOING INTO PRODUCTION. KEEP IN MIND THAT MANY DEPOSITS HAVE HAD SERIAL OWNERS PRIOR TO ONE OF THEM GETTING LUCKY AND MAKING A DISCOVERY. THIRDLY, WE NEED TO OVERLAY UPON THAT THE FACT THAT THE MINING INDUSTRY IS IN THE MIDST OF A 25 YEAR LOW IN NEW DISCOVERIES PARTLY BECAUSE THE MAJORS HAVE PRETTY MUCH DROPPED IN HOUSE EXPLORATION EFFORTS AND MANY OF THE JUNIORS HAVE HAD A TOUGH TIME GETTING FINANCED.
THESE STATISTICAL REALITIES HAVE GIVEN RISE TO THE OFTEN-QUOTED SENTIMENT THAT ALL OF THE âLOW HANGING FRUITâ IS NOW GONE. THESE THREE STATISTICAL REALITIES COMBINED AFFECT THE CONCEPT OF THE âVALUEâ OF A NEW âPRODUCTION PERMITTEDâ DISCOVERY BEARING IN MIND THAT MINING MAJORS NEED TO CONSTANTLY REPLACE THEIR ALWAYS DWINDLING RESERVES VIA ACQUISITION WHEN THEY CHOOSE TO SHUT DOWN THEIR IN HOUSE EXPLORATION EFFORTS.
BY DEFINITION, A âPRODUCTION PERMITTEDâ PROJECT HAS PASSED AN AWFUL LOT OF SCRUTINY AND ITS âVALUEâ IS A LOT HIGHER THAN A YET TO BE âPRODUCTION PERMITTEDâ PROJECT. ONE WAY TO CONCEPTUALIZE âVALUEâ IS TO CONSIDER THE âREPLACEMENT VALUEâ IF A MAJOR MINER WERE TO START FROM SCRATCH TOMORROW AND TRY TO FIND A âPACKAGEâ OF THIS DESCRIPTION. WHAT MIGHT IT COST IN TERMS OF TIME AND MONEY AND WHAT MIGHT THE STATISTICAL PROBABILITY OF MAKING AN ECONOMIC DISCOVERY BE?
THE CONSOLIDATION OF 11,000 HECTARES OF ONCE DISPARATE MINING CONCESSIONS ALONE COULD TAKE A DECADE. ANOTHER WAY TO LOOK AT âVALUEâ IS VIA THE SUPPLY OF AND DEMAND FOR DEPOSITS OF THIS DESCRIPTION AT A TIME WHEN NEW MINERAL DISCOVERIES ARE AT A 25-YEAR LOW. IN MINING PARLANCE, AN ASSET IN PRODUCTION HAS MOVED FURTHER ALONG THE âDERISKING CURVEâ THAN AN ASSET THAT HAS NOT BEEN QUALIFIED FOR PRODUCTION.
THE STATUS OF âPRODUCTION PERMITTINGâ IS ESPECIALLY CRITICAL AFTER THE RULES AND REGULATIONS TIGHTENED UP SUBSEQUENT TO THE 33 MINERS BECOMING TRAPPED IN 2010 AT THE SAN JOSE MINE. PERMITTING TAKES LONGER NOW AND IT IS MORE EXPENSIVE THAN IT WAS BEFORE. âPRODUCTION PERMITTEDâ PROJECTS THEREFORE CARRY MORE âVALUEâ TO POTENTIAL SUITORS. MINING MAJORS NEEDING TO REPLACE THEIR CONSTANTLY DWINDLING MR/MR (MINERAL RESERVES AND MINERAL RESOURCES) DONâT HAVE EITHER THE TIME TO ENGAGE THESE TIME CONSUMING PROCESSES NOR THE RISK TOLERANCE TO GO OUT AND EXPLORE ON THEIR OWN AND MAYBE NOT FIND ANYTHING THAT IS âECONOMICâ AFTER SIGNIFICANT EXPENDITURES. IN THE MINING SECTOR, THE âLOW HANGING FRUITâ REALLY IS PRETTY MUCH GONE ESPECIALLY IN GEOPOLITICALLY LOW RISK COUNTRIES LIKE CHILE. MAJOR MINERS ARE NOW DIGGING DEEPER AND DEEPER FOR LESSER AND LESSER GRADES NEAR THEIR FLAGSHIP DEPOSITS OR IN MORE AND MORE GEOPOLITICALLY RISKY ENVIRONS. ODDLY ENOUGH THE HOTTEST MINING SPOT ON THE PLANET RIGHT NOW IS IN CANADAâS YUKON WHERE SUPPLIES NEED TO BE HELICOPTERED IN AND POWER IS PRETTY MUCH NONEXISTENT.
THE PERMITTING PROCESS IS CHALLENGING BUT SINCE AMC HAS THEIR ENVIRONMENTAL BASELINE STUDIES ALREADY COMPLETED BY IAL AMBIENTAL INERCO THEN I WOULD THINK THAT THE PERMITTING AUTHORITIES ARE RATHER IMPRESSED WITH AMC. THE AMC TEAM ALSO FEATURES SEVERAL ENVIRONMENTAL SPECIALISTS WITH IMPECCABLE CREDENTIALS.
AN AREA OF INTEREST FOR ME IS ON THE EASTERN PLATEAU WHERE THE âM-3â, THE âFORTUNA OESTEâ (FORTUNA WEST), AND FORTUNA CENTRO VEINS CONGREGATE. WITH A LITTLE LUCK THIS AREA COULD BE OPEN PITABLE IF THE DENSITY OF VEINS WILL ALLOW THAT.
AT THIS STAGE OF DEVELOPMENT AT THE ADL MINING DISTRICT, A LOT OF THE ATTENTION IS ON THE EPITHERMAL VEINS AND THE CAREN AND FORTUNA MINES. WHEN TALKING ABOUT THE âVALUEâ OF MEDINAHâS 27% STAKE IN AMC OR THE âVALUEâ OF AMCâS ASSETS WE HAVE TO KEEP IN MIND THE PERCENTAGE OF THE OVERALL MINING DISTRICTâS âVALUEâ THAT THE EPITHERMALS MIGHT REPRESENT. THE ELEPHANT IN THE ROOM IS THE PEGASO NERO. THOSE WONDERFUL GRADES FOUND IN THE EPITHERMALS CAME FROM HYDROTHERMAL FLUIDS EMANATING FROM UNDERLYING MAGMA CHAMBERS AND PORPHYRY STOCKS DOWN BELOW. THE DEVELOPMENT OF THE VARIOUS SUBDIVISIONS OF THE ADL MINING DISTRICT LIKE THE DOS MARIAS AND THE PEGASO NERO WILL NO DOUBT BE HAPPENING IN PARALLEL WITH THE DEVELOPMENT OF THE EPITHERMALS AND QUITE POSSIBLY BY DIFFERENT PARTIES. THE KEY WITH THE ADL EPITHERMAL VEINS IS RAPID CASH FLOW AND SCALABILITY.
THE OTHER ELEPHANT IN THE ROOM
EARLY CASH FLOW FOR MEDINAH HAS SPECIAL SIGNIFICANCE DUE TO THEIR $51 MILLION NET OPERATING LOSS (NOL) CARRYFORWARD. IT APPEARS THAT A SIGNIFICANT AMOUNT OF MEDINAHâS PORTION OF ANY EARLY PROFITS MIGHT BE SOMEWHAT SHELTERED FROM THE TAX AUTHORITIES. MEDINAHâS âNOL CARRYFORWARDâ IS ABOUT 19 YEARS OLD BUT THE IRS ALLOWS UP TO A 20 YEAR CARRYFORWARD. WITHOUT EARLY CASH FLOW OPPORTUNITIES THIS CARRYFORWARD WOULD SIT ON THE BOOKS GATHERING DUST AND SLIGHTLY DISSIPATING OVER THE YEARS. THE SYNERGIES PRESENT BETWEEN THE NOL CARRYFORWARD AND EARLY CASH FLOW FROM THE VERY HIGH GRADE CAREN AND FORTUNA PROJECTS IS BEYOND NOTEWORTHY BUT IN MY OPINION GROSSLY UNDERAPPRECIATED.
PRIOR MANAGEMENT OF MEDINAH ISSUED A LOT OF SHARES OVER THE LAST 20 YEARS TO RAISE THE $51 MILLION THEY INVESTED. FROM THE ALL-IMPORTANT âAFTER TAXâ POINT OF VIEW, A SIGNIFICANT AMOUNT OF THAT DILUTION IN A SENSE (BUT NOT AT FACE VALUE)ESSENTIALLY GETS âREVERSEDâ AND WITH EARLY CASH FLOW THOSE TAX SAVINGS OCCUR UP FRONT. FOR EXAMPLE, IF MEDINAHâS SHARE OF THE PROFITS WERE TAXED AT 30% AND IF THEIR FIRST $51 MILLION WORTH OF PROFIT IS SHELTERED FROM TAXATION THEN THIS REPRESENTS A $15 MILLION ASSET IF (AND ONLY IF) SERIOUS PROFITS START ROLLING.
THIS IS WHY I CONSIDER THE EARLY CASH FLOW OPPORTUNITIES FROM THE VERY HIGH GRADE CAREN MINE AND THE FORTUNA MINE AS BEING A TOTAL GODSEND FOR MEDINAH. AT THE LAS VEGAS âINFORMATIONAL MEETINGâ, MAURIZIO CITED HIS GOAL OF RAPIDLY BECOMING A MID-SIZED GOLD PRODUCER. IN AN INTERVIEW WITH CHILE EXPLORE REPORT, MAURIZIO CITED THE ABILITY TO SIMULTANEOUSLY PRODUCE FROM 14 DIFFERENT âPRODUCING ADITSâ IN THE CAREN MINE WHILE DRIFTING A âCROSSCUTâ TO THE EAST TO EXPLORE THE AREAS EAST OF THE MERLIN 1 VEIN.
IâM NOT CLEAR ON HOW MEDINAH IS GOING TO TAKE ADVANTAGE OF THIS CARRYFORWARD IF THEY WERE TO DISTRIBUTE THEIR 27 OR SO MILLION AMC SHARES TO THEIR SHAREHOLDERS IN SOME FORM OF AN ASSET DISTRIBUTION. I WOULD THINK THAT ANY PROFITS WOULD FIRST BE RUN THROUGH THE MEDINAH CORPORATE ENTITY PRIOR TO ANY ASSET DISTRIBUTION. FROM HOW I INTERPRET THE IRS STATUTES (ITEM 382?), A CORPORATION CANNOT âBUYâ THE CARRYFORWARD FROM A DIFFERENT CORPORATE ENTITY LIKE MEDINAH IF OVER 50% OF THE âCONTROLâ OF THAT ENTITY IS AFFECTED. I ASSUME WEâLL HEAR MORE ABOUT THIS AS TIME PROGRESSES. ITâS THE APPROXIMATELY 27% STAKE IN AMC THAT MEDINAH OWNS THAT WILL BE DOING THE âEARNINGâ OF ANY PROFITS NEEDED TO TAKE ADVANTAGE OF THAT CARRYFORWARD AND IF THOSE PERCENTAGE POINTS ARE DISTRIBUTED TO INDIVIDUAL SHAREHOLDERS THEN THEREâS NOTHING LEFT TO BE DOING ANY âEARNINGâ WITHIN THE MEDINAH CORPORATE ENTITY THAT HOUSES THAT CARRYFORWARD.
AS AN ASIDE, IT WOULD BE INTERESTING TO BE ABLE TO COME UP WITH AN âEFFECTIVEâ NUMBER OF SHARES OUTSTANDING FROM AN âAFTER TAXâ POINT OF VIEW FOR A COMPANY LIKE MEDINAH WITH A HUGE NOL CARRYFORWARD AND A VERY LARGE MINERAL DISCOVERY FEATURING EARLY CASH FLOW OPPORTUNITIES. I ASSUME THE CALCULATION WOULD INVOLVE TAKING THE ACTUAL NUMBER OF SHARES O/S (ABOUT 2.9 BILLION) AND MULTIPLY THAT BY THEIR TAX BRACKET AND SUBTRACT THE LATTER FROM THE FORMER??? NOTE THAT âSHAREHOLDER REWARDSâ LIKE CASH DIVIDENDS AND SHARE REPURCHASES, WHICH IS WHAT INVESTING IS ALL ABOUT, ARE TIED TO âAFTER TAXâ PROFITS.
AS NOTED IN THE STUDY GUIDE, AMC DID GET VERY PROMISING RESULTS (11.5 GPT GOLD AND 1.6% COPPER) VIA BULK SAMPLING IN THAT 28-METER INTERSECTION IN THE LARISSA ADIT. THIS EQUATES TO $592 âROCKâ ($ PER TONNE AT 10/15/17 METALS PRICES) FROM THE FIRST âTEST PRODUCTIONâ TRUCKLOAD (OF 5). IT WEIGHED IN AT 12.4 TONNES. WHAT DOES THIS REALLY MEAN? THIS IS WHERE IT GETS CONFUSING FOR THOSE USED TO READING ABOUT GRADES CONTAINED IN DRILL INTERCEPTS. THESE OUTSTANDING GRADES, HOWEVER, ARE âBULK SAMPLINGâ NUMBERS IN A PRODUCTION ADIT. THEY ARE NOT MERE 1 KILOGRAM âGRAB SAMPLESâ AT SURFACE OR EVEN THE MORE SOPHISTICATED âCHANNEL SAMPLESâ IN A TRENCH. THIS IS NOT A DRILL INTERCEPT 500 METERS BELOW THE SURFACE IN A DEPOSIT WITH NO POWER OR WATER LOCATED AT THE SUMMIT OF THE ANDES. THIS IS ALREADY A PRODUCING ADIT. THIS ORE IS A TRUCK RIDE AWAY FROM A PAYCHECK.
PRODUCTION SAMPLES WEIGHING IN AT 12 TONNES ARE BY DEFINITION SOMEWHAT REPEATABLE IN A VEIN TRACED FOR 1.8 KM AT SURFACE AVERAGING ABOUT 3 GPT GOLD AT SURFACE. THERE IS NO âNUGGET EFFECTâ TO WORRY ABOUT AS THERE IS IN AN HQ OR NQ DRILL CORE. THIS IS THE REAL STUFF THAT IS MORE âREPRESENTATIVEâ OF WHAT A MINING OPERATION MIGHT YIELD BEFORE ANY RELATIVELY INEXPENSIVE TO DO GRAVIMETRIC CONCENTRATION IS DONE. MAURIZIO MENTIONED AT THE âINFORMATIONAL MEETINGâ THAT THE FALCON GRAVIMETRIC CONCENTRATING SYSTEM WAS ABLE TO CONCENTRATE THE LARISSA ADIT ORE AT A 100-TO-1 RATIO.
AS NOTED EARLIER, THE WORLD GOLD COUNCIL HAS STATED THAT THE AVERAGE TIMESPAN IN BETWEEN THE COMMENCEMENT OF EXPLORATION AND THE COMMISSIONING OF PRODUCTION FOR THE FORTUNATE MINERS WITH AN ECONOMIC DISCOVERY NOW APPROXIMATES 27 YEARS. THIS STATISTIC SEEMS INSANE UNTIL YOU RECOGNIZE THAT MANY DEPOSITS HAVE SERIAL OWNERS THROUGH THE YEARS UNTIL ONE OF THEM FINALLY FINDS ECONOMIC ORE. THIS STATISTIC EXPLAINS WHY ALREADY PRODUCING MINES, ESPECIALLY THOSE WITH VERY LONG PROJECTED MINE LIVES, ARE SO VALUABLE. AFTER MINING OUT A DEPOSIT, A MAJOR MINER HITTING A 27-YEAR âRESETâ BUTTON MAKES NO SENSE.
THIS IS WHY THE MAJORS NEED TO âACQUIREâ ASSETS HOPEFULLY EITHER IN OR CLOSE TO BEING IN PRODUCTION. THE LITANY OF HOOPS AND HURDLES THAT NEED TO BE NEGOTIATED PRIOR TO COMMENCING PRODUCTION IS SEEMINGLY ENDLESS AND THE MAJOR MINERS WOULD JUST AS SOON PAY UP FOR AN ASSET IN WHICH THE JUNIOR EXPLORER ALREADY SPENT ALL OF THE NECESSARY TIME AND EFFORT TOWARDS PERMITTING AND PUTTING THE ASSET INTO PRODUCTION.
I WOULD ASSUME THAT THE SINGLE LARGEST âVALUEâ ENHANCING EVENT FOR ANY MINING ASSET WOULD BE GETTING THE PROJECT PERMITTED AND INTO PRODUCTION. PRODUCTION LEVELS TYPICALLY RAMP UP/âSCALE UPâ THROUGH TIME AND THE VARIOUS LEVELS OF PERMITTING. THE âECONOMICSâ OF THE PROJECT WOULD HAVE BEEN ALREADY EVALUATED PRIOR TO SPENDING THE AMOUNT OF MONEY NEEDED TO PUT THE ASSET INTO PRODUCTION. THERE IS A LONG SERIES OF âGO, NO GOâ DECISIONS TO HAVE BEEN MADE PRIOR TO PRODUCTION. THE PROJECTED MINE LIFE IN THIS EPITHERMAL AREA IS GOING TO BE EXTENSIVE BECAUSE OF THE 5,000 METERS OF EPITHERMAL VEINS IDENTIFIED VIA TRENCHING TO HAVE MADE IT ALL OF THE WAY TO SURFACE.
AMCâS PRESS RELEASE AT THE TIME CITED THAT THE OTHER 4 âTEST TRUCKLOADSâ FROM THE âTEST PRODUCTIONâ FROM THAT 28-METER SECTION WEIGHED IN AT A TOTAL OF 63.6 TONNES AND THAT THE RESULTS WERE âSIMILARâ. THEN THE âCONE OF SILENCEâ SIGNIFYING THE BEGINNING OF THE MEDINAH LEGAL PHASE CAME DOWN WITH A THUD AND WE NEVER DID GET THOSE RESULTS. A DIFFERENT SOURCE THAN AMC (CHILE EXPLORE REPORT) CITED THAT AMC HAD PRODUCED âABOUT 100 TONNESâ FROM THAT 28-METER STRETCH. THUS THERE IS A DISPARITY OF ABOUT 24 TONNES FROM THE TWO SOURCES BUT THE CER INTERVIEW POST-DATES AMCâS PRESS RELEASE.
TO ME THE USE OF THE WORD âCOMMISSIONâ SUGGESTS THAT ALL OF THE PRE-PRODUCTION RESULTS INVOLVING THE COSTS OF BLASTING, MUCKING, STOCKPILING, SHIPPING, SAMPLING, METALLURGY, RECOVERY RATES, CASH AND NON-CASH COSTS, ETC. CONCLUDED THAT THE ECONOMICS OF THE PROJECT WERE FAVORABLE AND THAT PERMITTING HAS BEEN RECEIVED (OR ANTICIPATED) FROM THE AUTHORITIES TO GO INTO PRODUCTION AT SOME PREDETERMINED LEVEL OF PRODUCTION THAT TYPICALLY SCALES UP WITH TIME.
AS A REMINDER, AMC PROJECTED PRODUCING 25,000 OUNCES OF GOLD IN 2017 BEFORE DELAYS (DUE TO FAULTING) WERE ENCOUNTERED EARLY ON IN THE DRIFTING OF THE LARISSA ADIT. ITâS NOT CLEAR IF THAT PROJECTION IS STILL VALID OR NOT. I DONâT BELIEVE THAT THE GRADES FROM THE HIGHER GRADE 42-METER INTERSECTION WERE IN HAND AT THE TIME OF THIS PROJECTION. AS NOTED, THAT 42-METER INTERSECTION MIGHT NOT EVEN BE FROM THE VEIN/ORE SHOOT THAT CARRIED THE âBONANZAâ GRADES.
THIS INTERVIEW WITH CER HAS OTHER STATEMENTS THAT RELAY THE SUBLIMINAL MESSAGE THAT ALTHOUGH AN EXTREMELY EXPENSIVE FORMAL BANKABLE FEASIBLE STUDY (BFS) OR A PFS (PRELIMINARY FEASIBILITY STUDY) FOR THAT MATTER DID NOT NEED TO BE COMPLETED BY THIS PRIVATE COMPANY, THE ECONOMICS STUDIED TO DATE HAVE RESULTED IN AMC INDIRECTLY STATING THAT âITâS A GOâ AND SOME SERIOUS DEVELOPMENT DOLLARS ARE ABOUT TO BE SPENT.
LATER IN THE INTERVIEW, A COMMENT BY MAURIZIO SUGGESTED THAT THE PLAN TO REHABILITATE THE FORTUNA MINE (THROUGH DEWATERING, MAKING SAFETY MODIFICATIONS, ETC.) HAS ALSO BEEN GIVEN A âGOâ FROM AN ECONOMIC POINT OF VIEW AGAIN PENDING FINAL PERMITTING. THIS EVEN INCLUDED THE BUILDING OF A âPLANTâ NO DOUBT TO CONCENTRATE THE ORE PERHAPS USING CRUSHERS AND GRAVIMETRIC SEPARATION IN ORDER TO PRODUCE A GOLD âCONCENTRATEâ PROVIDING FOR LESS TRANSPORTATION CHARGES PER OUNCE OF GOLD SHIPPED. EVEN A SOMEWHAT INEXPENSIVE GRAVIMETRIC CONCENTRATING SYSTEM CAN VASTLY ENHANCE THE GRADE OF THE CONCENTRATE SHIPPED. THIS IS IMPORTANT BECAUSE TRANSPORTATION IS A MAJOR PORTION OF âALL IN SUSTAINING COSTSâ OR âAISCâ.
RECALL FROM THE STUDY GUIDE THAT THE LOCATION OF THE 400 HECTARE BASELINE ENVIRONMENTAL WORK COMPLETED TO DATE BY IAL AMBIENTAL INERCO OF SANTIAGO SUGGESTED THAT PERHAPS A PLANT OR AT LEAST SOME MINING ACTIVITIES WERE PLANNED SOMEWHERE NEAR THE FORTUNA MINE CLOSE TO WHERE THE NORTH ROAD MEETS THE PLATEAU.
THE ECONOMICS OF THE EPITHERMAL PROJECT MAKING IT DEFINITELY A âGOâ SHOULD NOT BE A SURPRISE ESPECIALLY AFTER THE TRENCHING RESULTS AND THE YET TO BE RELEASED 42 METER INTERSECTION FEATURING GRADES âAPPROXIMATELY TWICE THAT OF THE 28-METER SECTIONâ WHICH WERE THEMSELVES VERY IMPRESSIVE (CER). AN OBSERVATION: THE MARKET ACTUALLY DOWNTICKED WHEN AMC, IN ESSENCE, ANNOUNCED THAT THEY WERE FORTUNATE ENOUGH TO BE ONE OF THOSE 1-IN-1,000 JUNIOR MINERS TO GO INTO PRODUCTION. THE MARKET YAWNED AFTER STATING THE 11.5 GPT GOLD AND 1.6% COPPER GRADES FOUND IN THAT 28 METER STRETCH. THE MARKET YAWNED YET AGAIN WHEN IT WAS STATED THAT THE 42-METER STRETCH WAS ANTICIPATED TO HAVE TWICE THOSE GRADES. MY SENSE IS THAT THERE COULD DEVELOP A SIGNIFICANT âDISCONNECTâ BETWEEN MEDINAHâS AND/OR AMCâS (ONCE PUBLIC) MARKET CAP AND THE VALUE OF THEIR MINERAL ASSETS.
WE KNOW ABOUT THOSE 5,000 METERS OF VEINS FOUND AT SURFACE. WE KNOW ALL ABOUT THE EXTREMELY HIGH GRADES PRODUCED AT THE FORTUNA MINE OVER TIME (60 TO 90 GPT GOLD OVER 7 DIFFERENT LEVELS). WE KNOW THAT THE SURFACE TRENCHING REVEALED 3 GPT GOLD ALL OVER THE PLATEAU AND 7 TO 10 GPT GOLD AS THE PLATEAU TRANSITIONED INTO THE NORTHERN AND SOUTHERN DOWNSLOPES. NOW WE WANT TO GET A FEEL FOR THE GRADES TO EXPECT IN THE LARISSA ADIT AND NEAR THE HISTORICAL âBOILING ZONEâ WHERE HIGHER CONCENTRATION GOLD IS TYPICALLY DEPOSITED IN THESE EPITHERMAL SYSTEMS. WEâRE NOW GETTING THAT INFORMATION VIA THE LARISSA ADIT WORKINGS. THE PRELIMINARY RESULTS FOUND IN THE 28 AND 42-METER INTERSECTIONS IS STARTING TO GIVE US A VERY IMPRESSIVE PICTURE YET ONCE AGAIN THE MARKET YAWNS. SOON WE SHOULD BE ABLE TO GET A FEEL FOR PRODUCTION TONNAGES, AVERAGE GRADES AND CASH FLOW NUMBERS. THE PROFIT AND CASH FLOW NUMBERS SHOULD REMIND OBSERVERS OF THE FAVORABLE (LOW CAPEX) INFRASTRUCTURE AT THE ADL.
KEEP IN MIND THAT THESE VEINS PRESENT IN A âLENTICULARâ FASHION FEATURING DILATED âLENSESâ OF ORE. AT THE INFORMATIONAL MEETING, MAURIZIO LIKENED THE VEIN STRUCTURE ENCOUNTERED IN THE LARISSA ADIT TO A ROSARY WITH BEADS. EACH âBEADâ IS A âLENSâ WHERE THE VEIN STRUCTURE DILATES OUT AFTER PINCHING OFF LIKE A ROSARY CHAIN DOES RELATIVE TO THE BEADS. THE LARISSA ADITâS 28-METER INTERCEPT WAS WITHIN A âBEAD/LENSâ. THE STRUCTURE THEN DISAPPEARED OR PINCHED OFF FOR 4 METERS AND THEN REDILATED OUT INTO A 42-METER INTERCEPT/âLENSâ OF EXTREMELY HIGH GRADE ORE. THIS IS NOT ATYPICAL FOR EPITHERMAL VEINS. THE âLENSESâ SOMETIMES REPRESENT THE INTERSECTION OF TWO FRACTURE LINES OR THE PORTIONS OF A FAULT THAT ARE MORE STEEPLY DIPPING. THE AREAS OF LESS STEEP DIPPING (MORE HORIZONTALLY ORIENTED) BECOME THE PINCHED OFF AREAS.]
âThis is an Auryn Mining project that is comparable to the Andacollo copper mine operated by Teck (TSX: TECK; NYSE: TECK), located in the V Region.â
[TRUST ME YOU DONâT EVEN WANT TO KNOW THE LENGTH OF THE ANALYSIS OF THIS SECOND LINE OF THE ARTICLE]