RE: RE: Munich on Nov 6th and 7thLootfest
Here you go. Hopefully it comes through. The bold type are Rich's answers.
Tara Minerals holds all the aces
What is the typical way of bringing a project into production? Burn the company’s capital by spending several million dollars for a 43-101 compliant resource estimate, which would mean that the shareholders would be significantly diluted?
Tara Minerals chose a different direction: establishing production based on an understanding of the structure first and build out the resource while producing, using the cash-flow – without diluting the sharebase.
With the help of some outstanding experts and a littlebit of luck, Tara Minerals went from nothing to the status of a producer, with the potential of becoming a real big player.
We spoke with Tara Minerals‘ President Francis Biscan about the company’s exciting properties and what the commencement of production and their Gold discovery could mean for Tara Minerals‘ future
Francis, Tara Minerals has a 100% interest in three zinc/lead/silver mining properties which are all located in the northern part of the La Reforma Mining District of northeastern Sinaloa State, Mexico. What makes this mining district such interesting for Tara Minerals?
First of all, Tara Minerals is a spin-off from Tara Gold Resources. Tara Gold was a company with multiple Gold and Silver projects. Tara Gold was presented with the opportunity to acquire Don Roman, a Lead, Zinc, Silver project, and management decided it would be strategic and beneficial to create a subsidiary (Tara Minerals) to hold and develop these assets.
We thought to accomplish a number of things by doing this including seperating our base metal projects from our gold and silver-projects.
The belief was that a lot of institutions and investors do not like it when a company’s base metals and precious metals projects are mixed in one company.
Such a company is very hard to value and you loose valuations on your gold and peer-ratios.
Additionally, by creating Tara Minerals, we illiminated the need to raise money in Tara Gold to advance the project.
That means that all Tara Gold shareholders can participate through Tara Minerals (Tara Gold owns 80% of the equity of Tara Minerals) without further dilution.
Tara Gold shareholders were primarily responsible for completing the initial 2.5 million dollar financing to advance the project, playing a key role in the success of the project for the benefit of all.
The region is an interesting and exciting area because 15 km to the North-East is the area that the Mexican giant Penoles started its business decades ago.
The project there created their base to become Mexico’s largest mining company. Another large project – the Santo Tomás Copper Project lies only 5 km to the east of our properties.
It is estimated to contain over 7 billion pounds of copper, along with Gold and Silver credits as well.
Geologically, many experts think that our systems might be derived from this big system.
The region has not been worked extensively and has not been explored using modern methods. It is one of the areas where companies are agressively looking to become active.
Tara already produces at its flagship project called Don Roman. Could you please give a short overview over the current production numbers and the resource base? What additional potential does the production facility and the project have?
Right at the moment we are in phase 1 start-up. Including mine development, we have produced 12,000 tons of ore that we now have at the mine-site which includes 8,000 tonnes of production grade ore. The plant is operating at a rate of about 100 tons per day of ore throughput. The goal is to increase production over the coming weeks and months to full capacity which is estimated to be 450 tons per day. Sampling of the initial mined material is supporting our assumptions of an expected combined average grade of 9% Zinc, 3% Lead and 309g Silver per tonne. An assessment of work done to date is indicating costs for mining, mine development, and processing to be estimated at $80 per tonne of production grade ore. Based on this, concentrate revenue per tonne, after operating costs, is estimated at $200 to $250 per tonne based on todays metals prices.
The way we approached this project is a little bit unique. We didn’t raise millions of dollars to go drill this property off. This is a “Manto“ type deposit. Based on the opinion from a number of geologists on what we should expect with this kind of deposit, we determined to sample the mineralized zone on the outer edges of the structure and from within three old mining-portals. That, and some educated assumptions, led to our mining decision. So we didn’t spend millions for drilling, but instead we decided to spend the money for the constrution of the plant and development of a mine. We were reasonably confident (together with our geologists and the non 43-101-compliant engineering firm in Mexico) that we would have some 100,000 tons of ore in the small area explored, with the potential of 3 to 20 million tons.
Initially, we only raised 2.5 million USD and decided to spend that money, along with another 1.2 million, on building a plant and mining, because we determined it would only take 14,000 tons to pay back the whole plant cost at the grades we expected. So we thought: should we spend all that money on drilling and dilute the shareholders OR based on a reasonable degree of confidence, should we build a plant and go directly into production with the strong likelyhood that we could quickly payback the plant and create cash. Then with that cash flow, we could futher define the ore body and give long term visability to the project. The risk, as we understood it, was that we might only find 50,000 tonnes or so, but that was not a real risk for us, because even with just that, we would still end up with a plant, which is fully paid for, and 7 to 10 million dollars of net cash to work with. The interesting thing was that we believed that the tonnage was much bigger than what we needed for the payback of the plant, but while producing the ore we would be, in essense, proving up the orebody and creating drilling locations within the orebody to further define a resource.
The economics of the project are very good. Our operating costs lie at about 80 USD per ton. Right now we get about 3% lead, 9% zinc and 309 grams silver per ton. That means that we have a head grade of about 350 USD per ton, which equates to net operating revenues of about 200 to 280 USD per ton.
We now have the ability to produce 450 tons per day from the mine. In some areas the grades are extremely high. In some areas of the ore body we have grades as high as 30% zinc and in others, 800 grams of silver. The ore body is contained in an uptrust and is about 25 meters thick, dipping at approximately 30 degrees. We sampled the orebody at the outer surface boundries and within the adits and even though the grades had been leached out, on average, we had economic grades.
Many people told us that we must be crazy to build the plant without first establishing a 43-101 resource. But after giving consideration to all available information and what we considered to be qualified opinions, we determined this to be the best risk / reward approach.
At the moment we are in negotiations with a number of concentrate buyers, including Glencore International as end buyers of our concentrate.
Tara Minerals also has the right to earn a 100% interest in Centenario. Please tell me about this concession area.
At Centenario we have a structure which is 7 meters wide with grades of 6 grams Gold and 3% copper with an estimated strike of a few kilometers. Then we have another gold-system that is 2.5 metres wide with grades of 17 grams gold, 350 grams silver and 7% copper, with a potential strike length of a few kilometres. And a third system which includes 67% iron ore, 6 grams gold and 3% copper. When we acquired Centenario we knew that these systems existed, but we have not done any work on these ore bodys, as our focus has been on developing cash flow at Don Roman.
You recently announced the discovery of a gold vein nearby your current Don Roman production facility. What is the current level of knowledge of this discovery? What potential do you expect from this discovery?
The new discovery at San Felipe came out of nowhere. Our geologist sampled a 2 metre wide gold vein and came back with very good gold grades. We went back to this area and channel-sampled it with significant results. We then traced the structure to a point 50 meters above the discovery location and we channel-sampled it there. Then we located it again 125 metres above the discovery location and we channel sampled it at this third location. The average grade of these veins on an approximately 2 meter width was 31 to 41 grams per tonne – with a channel sample! Based on trenching, we now know the vein strikes at least 850 metres length and 400 metres at depth. Outcrops of this vein can be found at least 1.2 kilometres away. The structure is open in both directions and at depth, which means that this might be an extremely large gold vein structure. So when we get the results of the bulk sample and continued sampling, maybe the grade goes down to 20 grams, but maybe it goes up. Even at 20 grams, the structure could be twice as profitable as the lead, zinc, silver ore. Amazingly this new discovery lies only 50 minutes away from our plant, which is actually slightly closer to the plant than the lead-zinc-silver-mine and we can use the same process to recover it. The structure is elavated and therefore access for mine development is ideal. Additionally the structure seams to have a so called „A-form“ which could continue to get wider at depth
How could this discovery change the production process at Don Roman and what could this discovery mean for the future of the company? How important is it?
This new discovery is ready to be mined, the plant lies only a few kilometres away and if the grade holds anywhere near that of the channel samples, we can earn three times as much money as we would from producing lead, zinc and silver. Instead of creating a cash-flow of an estimated three million USD per month, we could make as much as 8 million USD per month. With a higher cash-flow we would have the opportunity to expand the current plant or build a second plant. Everything without diluting our sharebase. Anything above 10 grams of gold would be more profitable than the lead-zinc-silver production. We look forward with excitement to the pending results of our bulk sample and further testing.
Tara Minerals also recently acquired the Picacho Project. What is the potential and status of this project?
The Picacho Project is another huge part of our potential. The Picacho Project has been brought into Adit Resources Corp., a 100% subsiduary of Tara Minerals. About one month ago, we announced Robert Wheatley as President and CEO of Adit Resources. Robert Wheatley spent 28 years with Yamana Gold Inc., which owns two projects adjacent to the Picacho Project. In my opinion there is no person that knows the Picacho Project better than Robert Wheatley. We have raised one million USD and have negotiated to acquire the property for four million shares and an 800,000 USD loan, which we expect to close shortly.
Robert believes that 5 million USD will establish a resource and bring us to a production decision at Picacho. He also believes that the project has the potential for a multi-million ounce gold property. The grades of 10 grams that we got from our first exploration program support these beliefs. We have 8.5 kilometres of known vein structures 3 to 5 metres wide, which could at least go down to 400 metres depth. Robert believes that this is the best unexplored gold property in Mexico that he knows of. The goal is to drill between 500,000 and 1 million ounces and put it into production.
Do you have plans for more acquisitions? Around your current projects or in other parts of the world?
We do review other opportunities when they are presented to us, but we believe that we can work for many years on our current properties with the systems we already know exist, let alone others we may discover, such as San Felipe. So it is more than enough for the moment. We are always looking for further posibilities, but it is not our first priority.
What will be the next important steps for the company?
The next important thing for the company is increasing production at Don Roman and therefore increasing cash-flow. Cash-flow gives us the possibility to explore and increase cash-flow again by expanding our production. The second and extremely exciting thing is the further exploration and development of the new San Felipe gold structure. When the results from the 500 tonne bulk sample we took comes back, we are optimistic that it will show us and investors the tremendous additional potential this Gold discovery will add to the existing foundation we have already set in place. When we get the bulk sample back and it confirms what we have seen to date, we plan to continue to mine that ore and further develope the mine towards increased output. The potential there is better than a million ounces. It is open along strike on both ends and at depth, so it could be a couple of million ounces at very high grade. With an existing plant right on site, it provides us with strong cash-flow within a rising gold market.
Why should potential investors invest in Tara Minerals right now?
What Tara Minerals has accomplished over the last few years has not been realized by the market. Only a few people are really aware of what we have, as the number of shareholders in Tara Minerals is only around a hundred. We have done no promoting of the company, no marketing, because we really desired to produce first. Outside of news releases, we have not created any awareness of what we have and where we are. That coupled with the brand new discovery at San Felipe, which also adds a gold perspective to the company, at high grades, which can immediately be brought into production, creates a very exciting environment for Tara Minerals and its shareholders.
We have a producing plant within a mining-friendly and highly prospective region. All of our projects lie within a one hour drive from our plant. We believe we have made a new gold discovery with very large potential. We do not have to dilute our sharebase. So you have the foundation of cash-flow, the excitement of new discoveries, and increasing cash-flow.
Visit Tara Minerals on Nov. 6. und 7. on the Edelmetallmesse München