notes from my visit to the Ashdown mineHere is what I posted today at Coach's Corner:
Last week I was able to tour the Ashdown Mine project, operated in a JV with Golden Phoenix (GPXM) and Win-Eldrich (V.WEX) on a 60/40 shared ownership basis. I have been traveling so much lately that I did not get a chance to post my comments on the project for the forum.
The mine sits in the northwestern corner of Nevada, in an area of moderate topography, well served by existing roads. Only the last couple of kilometers is via gravel road.
The mine is a past producing gold project, and it was only developed as a moly deposit as an afterthought, but the moly prices went to hell before the former operator ever managed much production. At current moly prices, the moly ore is far more valuable than the gold ore, but it is likely that additional resources of both metals will be uncovered on the property as further exploration is completed.
As it stands now, Ashdown is the richest moly mine in the world. The best grading resource is concentrated along a vein structure a couple hundred metres along an adit that has been driven into a hill. This high grade zone was opened with a drift to reach the ore, and extensive sampling by the previous operator generated assay values that commonly ranged into the mid-teens percentage of moly. Considering the current price range for moly, about one percent grade works out to a similar rock value as an ounce per ton of gold. I think most people would be very impressed then with a sample between 10-15% moly and the values approaching $8,000 per ton.
The problem at this point is that there is only limited tonnage that has been defined so far at the high grade ranges. However, considering that most moly production that is currently profitable averages well below 0.2% moly, and one should be able to understand that if you have ore more than 50 times the grade of a larger operation, you will still make money even if you are running small tonnages through your mill.
The good news is that the ore is fairly easy to process from a metallurgical point of view. Management expects to gain better than 90% recovery efficiency once the mill is going at capacity in the range of 100 tons per day. With that kind of expectation, Ashdown will still yield more moly production per day from the high grade zone, than a mine running 4000 tpd of lower grade resources. Or to put it even more bluntly, the remnant moly grade in the tailings from the mill will still be much higher grade than the 'ore' at almost every other moly producer.
The mill itself is a modern operation set up about a mile down the road from the mine portal. The equipment is in excellent shape, and the recovery process has built-in feedback loops to ensure that ore can be subjected to optimum treatment and processing to get the most out of every ton. The question will be on how long it takes the management team to get their production up to the design standards of the mill. Since no one alive today has ever run large batches of ore anywhere close to the grades at Ashdown, no one is really sure just how much fine tuning it will take to reach above 90% in recovery efficiency. They are experienced operators and it is a small group to run the mill, so they will probably have a quick learning curve.
In the mine workings, the rock is very difficult to mine, because it can be 'rotten' and heavily fractured which carries with it the danger of collapse. To protect the infrastructure requires heavy blocking and reinforcement with timber beams, and rock bolting to stabilize weaker zones. This is expensive and time consuming.
Rather than work through some of the worst zones, the company has chosen to just go around them, and again that adds to the time and cost of advancing underground development. The original workings around the highest grade zone have caved in, and the current plan is to drive a ramp alongside and below the zone, and then just punch up an access tunnel to begin mining. They are very close to the breakthough into that zone now, and development is proceding at about 10 feet per day.
The entire area of the property is prospective for new discoveries, and several areas of interest for both gold and moly have already been defined. The vein structure they are working could extend to depth for hundreds of meters, and there are reports of historical exploration results indicating further extension lateraly is also possible.
Once the company secures access to begin commercial mining of the high grade zone, about 100 tons per day will be processed. They are working to generate a resource estimate that is compliant within NI43-101 standards, but management believes there is enough ore currently in place to run for several years, and they will use the cash flow from operations to fund additional exploration and development work.
I was able to meet most of the senior management running the project, and am quite comfortable that those in charge are competent, effective, and reliable people with the right mix of working experience. I think these guys have the ability to hold it all together while they work through the challenges of running a mine and keeping rightside-up financially. There are some big risks that go with this project, from the tricky rock structure and the uncertain efficiency level from the recovery plant, but the high potential cash flow that it could generate will also generate impressive upside potential to go with it - a classic high-risk high-reward speculation.
I bought shares of both companies when I got back from my trip, and I have a current bid in the market to add more.
cheers!
mike
Disclosure- GPXM is going to reimburse me for my direct travel costs but I do not receive any form of compensation for my posts and will not been paid by the company to write the article I am working on. I own shares of both companies.
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PS: I just saw that I was filled today for more shares at the close @.355 cents.