Part of the Stock Digest group of websites: Visit Tech Stock Digest  

Almaden Minerals (TSX: AMM) CEO Morgan Poliquin Reports Robust PFS with 41% After-Tax IRR at Ixtaca Project

April 4, 2017

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is CEO of Almaden Minerals (TSX: AMM)(NYSE: AAU), Dr. Morgan Poliquin. Morgan, thank you for coming on on such short notice.

Morgan Poliquin: Well, thanks so much for having me on.

Gerardo Del Real: Well, you just released what I believe is a very, very important news release. Let me read the headline. "Almaden Reports 41% After-Tax IRR From Pre-Feasibility Study, Updated Resource and Production Target of 2019 for the Ixtaca Precious Metals Project in Puebla State, Mexico." First off, congratulations. I've followed the discovery for, I want to say, the last seven years now. It's great to see it go from a blind discovery to such a robust pre-feasibility study. Can you share some of the details because it's really, really, really a good looking pre-feasibility study update?

Morgan Poliquin: Well, thank you very much and thank you for following it for so long. Look, I think, the title says it all. 41% After-Tax IRR communicates in numbers that this is a very high return mine plan. We have, in gold terms, about two million ounces that hit the mine plan. We're producing in the order of 150,000 ounces a year for the first nine years with an initial capital of under 120 million, which is pretty much right on what we were guiding with our PEA study a year ago. There has been some minor change since then. But both of those studies, including this one utilize the Rock Creek mill, which allows us with our option to purchase agreement we signed a couple years back, to dramatically reduce the initial capital through utilizing that plant, which was, essentially, a brand new mill that was decommissioned for a $40 million dollar investment.

Combining the nature of the quick payback potential of the geology, the initial pits that we've been able to put into the production schedule, along with the Rock Creek mill, it makes for that quick capacity to payback and the high rate of return that we're seeing. At the same time, producing a very significant number of ounces.

Gerardo Del Real: Absolutely. Just looking over some of the details you mentioned, but the after-tax net present value at 5% is approximately $310 million. The internal rate of return you mentioned is 41%. Just to provide some context there, I believe your current market cap is approximately in the $140 million range Canadian. Is that accurate, Morgan?

Morgan Poliquin: That's accurate. Yeah. Obviously, the $310 million you quoted there is US dollars. Depending on what discount people give NAV calculations, obviously, there's some potential opportunities there to realize value. But we're just delighted to get this out the door and to be able to communicate what we have here. Obviously, a considerable amount of drilling that was new since the PEA went into this pre-feasibility study. I think that's part of the story here too that can't be ignored. Some of the zones that we were drilling off last year, if shareholders or people following the company remember some of the high-grade zones we were announcing new zones, we think there's opportunities to continue to expand those. We'll continue on with that program, but all in all, it's a very nice pit and again, combined with the Rock Creek plant as well as the location. We’re in excellent accessible location that is amenable.

We have a paved road to site when you're 20 kilometers from an industrial park where Kimberly Clark is producing, I think, toilet paper, you're in a pretty good location to cheaply develop a deposit.

Gerardo Del Real: I think that's an important point. When I had the pleasure of visiting the property last year, one of the things that really stuck out was just how engaged the local community was with the company and vice versa. We had several people stop by the Almaden office looking for employment opportunities. How are things in that sense right now, Morgan, because I haven't been there in a bit?

Morgan Poliquin: Yeah. We had a 700 person community meeting. We didn't know it was going to be 700 people but that's the scale of attendance to our community meeting in December of last year just a few months ago. It was overwhelmingly positive from our perspective. The stakeholders and community members are really anxious to see this move forward. I think it's a challenge to understand the exploration process. It's been seven years since the discovery and to get to this stage is arguably, actually, a short time frame because we discovered this with the first hole and so on and so forth. That all being said, I think there are very high expectations and that's for us to manage, which I think we have done effectively. There's permitting and other milestones ahead of us before a mine gets into production. But the point is, we have a very solid community support, which we don't take for granted. I think it's a testament to our local team.

We've been doing many, many tours to operating mines. We believe that transparency should be something that is really the focus of a CSR program and combined with education. That means, visiting, operating mines in the flesh instead of talking about them going and seeing a tailings dam, going and seeing an open pit, rock storage facilities, etc., so that people are fully aware of the proposition. That's what has been our focus. It's a team effort with the community. We're all vested in this project moving forward.

Gerardo Del Real: Absolutely. Almaden and the team there should be commended on the work that's been done. This isn't recent work, by the way, for people that are new to the story. Almaden has been doing this for over seven years, if I'm not mistaken, engaging through education, the local community, and making everybody aware of exactly what the process was like and what the upside and what the potential downside was. Another thing that stands out about the pre-feasibility study is, there's an initial payback of 2.2 years assuming that you never discover another ounce of gold or silver. As we both know, there is a lot of exploration potential on the property and the likelihood of you not discovering another ounce of either gold or silver is nil, basically. Can we talk a bit about the property for, potentially, newer shareholders because this is going to catch a lot of people's attention? How much of the property has not seen exploration done yet, Morgan?

Morgan Poliquin: Well, I think the way to explain it, and thank you for that opportunity, is that in 2010, it was a one hole program to test a theory. That first hole hit, I think, it was 300 meters that averaged about 2 grams. That is a heck of a first start. But very quickly, a-year-and-a-half subsequent to that hole being announced, we were into what was clearly the beginnings of a bad market, which got really, really bad. Our focus, at that point, we were well into a program. That initial hole worked into a bunch of holes that were all hitting and pretty soon, we were into a resource drilling program. That remained our focus. I’m an explorationist as of those who know me will know. It's a challenge for an explorationist to have to be so focused, but we are running a company here for the long haul for shareholders. We felt that the best value was to ensure that we were de-risking the resource that we had. That's the long answer to your question.

We haven't been able to explore the rest of the property. We think we've explored a small portion of the property and there are large alteration zones that remain completely untested that are very similar to the alteration zone that hosts the Ixtaca deposit. We think that there are zones within the pit in this PFS pit land and/or immediately adjacent to it that are open. Some of our holes from last year showed that quite clearly. There's an ongoing program of drilling those zones that are not fully defined that are already known. I think this year, we want to combine that drilling program with call it a blue sky or a wild cat program of looking for brand new zones and there's plenty of scope to do that.

Gerardo Del Real: Excellent. Lastly, the last thing that I'd like to point out is that you're using today's gold and silver prices. A lot of times, we get pre-feasibility studies and they use, let me put it kindly, not conservative numbers when it comes to the price of gold and silver and their inputs. You're using $1250 gold and $18 per ounce silver. That's important because this is truly a polymetallic deposit.

Morgan Poliquin: Yeah, it really is. I mean, we're talking about gold equivalent and silver equivalent but there's only two metals. We have essentially the same recoveries for our main unit, the limestone unit, which is most of the mine plan. They're both coming out into the same product. A lot of deposits can be looked at in a silver equivalent sense, but there's lots of different metals that are contributing to make that silver equivalent. We’re truly a precious metal, we’re a gold and silver deposit. That's fairly unique. But in terms of the pricing, yes, we think that current convention, you have to make sure a lot of resources today at mining companies are stated in 1250 and 18 silver. You have to make sure that you're abiding by that general convention. It just so happens that that's also the spot price, which is why the convention is there. And we also look at in a couple of different scenarios as well, a higher and a lower case.

Interestingly, in our PEA of last year, we looked at what I would call more of an armageddon case down to $1000 gold and $14 silver, I believe, and the deposit still looked pretty good, I believe. It's a very robust deposit. I think, again, combined with the Rock Creek mill, we're able to look at a very high rate of return over a short period of time, we get payback as well.

Gerardo Del Real: Excellent. Well, Morgan, once again, I'd like to congratulate you and the team. It's been a lot of hard work. You've done it the right way every step of the way. I think shareholders are going to be very well rewarded here as a result of this pre-feasibility study.

Morgan Poliquin: Thank you very much and thank you for the opportunity to be on again.

Gerardo Del Real: Any time, Morgan. Thank you, again, for coming on on such short notice.

Morgan Poliquin: Appreciate it. 

View Interview Archive

Subscribe to the RSD email list and get the latest resource stock activity directly to your inbox, for free.

MARKET SUMMARY

INDICES

Name Last Change
DOW 25219.40 0.08%
S&P 500 2732.22 0.04%
NASDAQ 7239.47 0.23%
TSX 15452.64 0.29%
TSX-V 830.17 0.00%

Resource Commodities

Name Last Change
Gold 1347.38 0.01%
Silver 16.69 0.18%
Copper 3.24
Platinum 1007.30 0.25%
Oil 61.68 0.55%
Natural Gas 2.56 0.86%
Uranium 24.25 N/A
Zinc 1.64 0.00%

@RSDigest ON TWITTER

Part of the Stock Digest family of websites
Small Cap Stock Digest