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Almaden Minerals (TSX: AMM) Hits Wide Intercepts of Gold & Silver, Expects Dramatic Cost Savings In Upcoming PFS from Cheap Mill Purchase

February 10, 2017

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is President and CEO of Almaden Minerals (TSX: AMM)(NYSE: AAU), Dr. Morgan Poliquin. Morgan, thank you for joining me once again.

Morgan Poliquin: Oh, well, thank you again for having us on.

Gerardo Del Real: Well it seems like every time I have you on we're talking about more gold and more silver at Ixtaca and this time the headline from yesterday, February 8th, reads, "Almaden Drills Further New High Grade Mineralization Within and Outside Amended PEA Pit, Hits 41.45 Meters of 1.52 Grams Per Tonne Gold, 117.3 Grams Per Tonne Silver Including 4.60 Meters of 6.68 Grams Per Tonne Gold and 565.4 Grams Per Tonne Silver." Morgan, can you share the details of the release? There are pretty good numbers there.

Morgan Poliquin: Yeah, they certainly are. Essentially what we were doing last year with this drill program, and what we'll continue doing this year, furthering our efforts to understand these veins we're hitting, is drilling in a sparsely drilled portion of the known mineralized area. The main Ixtaca zone is what our PEA pits are focused on and what are driving the value in the economic analysis.

However, it was clear to us that there was some additional potential for parallel veins that were, again, poorly understood with the past more sparse drilling. So, we felt the time was nigh to start drilling those areas. We've been putting out these kinds results, here, with the drilling that we conducted, about 20 or so holes, 27 holes, something along those lines here. And they all have gone towards defining what we think are new veins as well as poorly defined veins. The potential here is, I think, very clear from these results, and we'll continue to drill this area and try to further our understanding of these vein zones, and it will go towards the development plans of Ixtaca, we think ultimately.

Gerardo Del Real: Fantastic. Now, I understand that you recently closed a private placement. Can you talk a little bit about that and just what the plans are here moving forward. Obviously we have the feasibility study coming up and I know that's going to be an important catalyst. Or the pre-feasibility study, my apologies. But if you could talk a little bit about the financing and just kind of what motivated that, that would be fantastic.

Morgan Poliquin: Yeah, excellent. Well, we had an opportunity, a party was interested in continuing to support our efforts. It's not a large financing. It's not significantly dilutive, obviously, but it does bolster and strengthen our treasury at a time when we're doing some very significant things, as you mentioned the pre-feasibility study. We have been speaking about Q1 for that and we believe we're on track here, and that's a major milestone.

The next steps are very obvious, it's to initiate the full-scale permitting of the Ixtaca deposit, as well as a feasibility study. Those who have followed the company will know that a major aspect of the company's develop plans is to incorporate the Rock Creek Mill into that. We were able to secure the mill, we think for an excellent price. It's an option to purchase agreement, and there's a $2 million U.S. payment due early in, about the middle of this year, June of 2017. So while we have the treasury to do all the things I outlined, we've all seen that this market has had a tendency to be difficult for a longer period of time than anyone has anticipated. And I think it's prudent when the opportunity arises to ensure that you do bolster your resources. I think we're well-funded now to ensure that we complete all the things we need to do in front of us, which takes the deposit right through to a production decision.

Those are the next steps. They're very clear for us. We're in good shape to do that. The next 18 months are going to be extremely exciting in terms of the deposit's development.

Gerardo Del Real: Excellent. Now you mentioned that payment. The payment is due June of 2017, is that correct?

Morgan Poliquin: 2017 is a $2 million U.S. payment. The final payment is June of 2018.

Gerardo Del Real: Excellent. And for those that are new to the Almaden story, can you provide a bit of context as to how much that mill shaved off the CAPEX and how much you actually paid for it in total cash and stock consideration?

Morgan Poliquin: Yeah, obviously in a milling operation the mill is probably the largest component, typically in terms of the capital required. We had a PEA that started with a 7,000 ton a day mill and ramped up to a larger plant that we had a capital cost of, I believe, $244 million for that. The PEA we produced that incorporated the Rock Creek Mill, which was subsequent to that one, the Rock Creek Mill purchase, was in January of 2016. It was a slightly different mine plan. It didn't involved a ramp up to a larger mine plan because of much lower prices we had at the time. But we were able to show that the deposit was potentially very profitable at those lower prices. But it did incorporate in the Rock Creek Mill, which brought the capital cost down to around $100 million.

The Rock Creek Mill is quite an unusual situation, in that it fits our flow sheet, meaning the minerals and the rock that we have at Ixtaca, while at the same time is the right size, and is operated for about three weeks, the plant. It was built brand new. Well, the entire mine up there was built brand new for, I think, around $250 million. There was about $40 million spent on decommissioning it properly after it only operated for three weeks. It comes with an enormous amount of spares ... spare transmissions for the ball mills, spare ball mill linings. So it's quite an unusual situation. It's pretty much on tide water. And, of course, on Ixtaca, we have a railhead nearby and excellent infrastructure. So, all told, we've done ... Obviously we're working on a pre-feasibility study and finishing that at the moment. We feel very confident that it's a very unusual situation and provides dramatic capital savings, which are what you want in this environment.

So that's essentially part of our ethos. We are focused on reducing dilution, ultimately, by reducing capital, whether it's our strategy of operating our own drills to do the ongoing exploration work or whether it's looking for opportunities in a bad market, like this. So, we feel that the Rock Creek Mill is integral to defining a very unique capital cost structure, along with the infrastructure, which is excellent for the deposit, and we look forward to demonstrating that at the higher level with the pre-feasibility study shortly.

Gerardo Del Real: Excellent. And what was the total cash and stock consideration for the mill there, Morgan?

Morgan Poliquin: Yes, so it was $6 million U.S. It's back-end loaded. We have made $750,000 U.S. in payments already. The $2 million payment is this year, as we mentioned, and the final payment is in 2018 of $3.75 million. There was around 400,000 Almaden shares also that have been delivered to the vendor.

Gerardo Del Real: Excellent. Excellent. So you were able to secure a mint-condition mill with spares for a little less than $8 million in total cash and stock consideration, roughly. That's incredible.

Morgan Poliquin: We think it ... Obviously the mill has to fit the deposit, so there's a lot of stars aligned here. Not all plants are the same. Obviously crushing and grinding, you have to do that for all rock types and the crushing and grinding capacity ... We have softer rock than the Rock Creek Mill contemplated using, so that fits very well. We have a significant gravity recovery of both gold and silver at Ixtaca, and this is predominantly a gravity and a CIL plant, so that's the precise two key components to the Ixtaca flow sheet required. And so, as I say, it presents a really unique opportunity that we were able to take advantage of. In looking for the silver lining to bad markets, you sometimes find these kinds of opportunities.

Gerardo Del Real: Excellent. Excellent. So we can anticipate a Q1, hopefully, for the pre-feasibility study, and then I'm assuming, of course, that we're going to resume drilling here soon?

Morgan Poliquin: That's right. We're focused on engineering aspects of the project, but expect more drilling along the lines of what we've been doing. We just talked about in 2017, we think that we have a tremendous opportunity that's fairly unique, again, to better define veins that actually are within a currently contemplated pit, which is very special. So, we will be continuing to focus on that in close exploration, and at the same time, obviously, there's a strong development and engineering focus what with the feasibility study and permitting as the next steps.

Gerardo Del Real: Fantastic. Well, Morgan, I want to thank you so much for your time. It's an incredible asset down there with, obviously, a ton of blue-sky exploration potential. That's exciting as you unlock that. Thank you for your time, and hopefully we have you back on soon as you resume drilling down there and get an update on the pre-feasibility study that we're anticipating here in the next month or so.

Morgan Poliquin: Excellent. I appreciate that very much. Thank you, Gerardo.

Gerardo Del Real: Thank you, Morgan.

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