Tocvan closed Friday at $0.52 on 62,700 shares, just over 300,000 shares for the entire week. Overall, I thought the trading this week was very positive with the price firming over $0.50.
The price of gold continues to consolidate in this price range with gold futures making a strong upward move on Friday surging $35 to close at $2,674.
For those that haven't seen the interview this week with Brodie Sutherland by Atrium Research, here is the link to their website and youtube video.
This interview is a great overview of Tocvan's progress at Gran Pilar in Sonora Mexico. I think the most important takeaway is that Claudia Sheinbaum is no longer proposing an open pit mining ban. As I have said previously, it now appears that any reference to open-pit mining has been totally eliminated and basically replaced with softer language requiring better environmental and socio-economic controls during the approval of mining concessions and licences.
The overall message from Claudia is a movement to responsible mining while increasing economic activity. The good part is that this will allow mining companies to proceed without concern of being shut down by the Mexican Government.
I believe we are already starting to see a positive impact with the price of Tocvan firming over $0.50, as well as the price of other companies located in Mexico surging in the last two weeks. For Tocvan, the removal of this policy essentially eliminates the risk of receiving permits and obtaining approvals for the 50,000 ton pilot plant and full production facility. I don't think anyone will argue that a ban on open pit mining has been a concern for shareholders, and likely one of the main reasons the price of Tocvan has been depressed.
In a nutshell, Tocvan has already conducted much of the underlying work required to bring Pilar to near-term production. There is far too much to discuss here, but rather I would like to say I am very pleased with how Brodie discussed the path leading to production in this interview. I strongly encourage listening to this interview as Tocvan moves closer to drilling and advancing the near-term pilot mine.
Brodie also stresses there is access to a quality workforce and contractors to do everything in a cost effective manner, clearly less expensive than mining operations located in the US for example.
From a previous press release, "The company has been working toward a long-term arrangement with a new Sonora-based drill company, Canmex Exploraciones Servicios (CANMEX). The newly formed CANMEX is made up of management and operators with extensive experience in Sonora including several successful drill campaigns across the company's Pilar and Picacho projects. Owned and operated by longtime Tocvan supporters Leo Wurtz and Gerardo Martinez, CANMEX has at its disposal three RC rigs, five diamond core rigs and two truck-mounted water well rigs. All of this equipment can be utilized by the company during the next phases of exploration and development. The arrangement allows for cost-effective drilling to continue across both projects with a trusted local operator known for drilling excellence and environmental stewardship."
Several large mining companies also operate in the Sonora area, for example, Alamos Gold, Agnico Eagle, Fresnillo, Silvercrest, and First Majestic. The reason I am mentioning these companies is simple, they will eventually be looking for additional resources to mine. Therefore, the goal of Tocvan is two-fold,
1) develop near-term production to provide a working proof of concept, establish cash flow, and control share structure, and
2) build a larger resource through drilling and consolidation of the surrounding property to develop a significant asset that is very attractive to a buyout.
A recent buyout example was Coeur Mining acquiring Silvercrest for $1.7 B all stock deal at a premium of 22%. I am sure other deals will evolve as investment will be attracted to Mexico now that the open pit mining issue has been resolved. As I have said before, this puts Tocvan in a "Sweet Spot".
What I find very compelling, in addition to the availability of quality manpower and less expensive physical resources, is the all-in sustaining costs are estimated at a little over $1,000 per oz. It is pretty easy to see that with gold at $2,600 per oz, and potentially going higher, the profits are staggering. You can see why Brodie is moving as quickly as possible to a pilot production mine that has the capabilities for expansion and generating near-term cash flow. These facilities can also be used to generate revenue through contracts from smaller miners in the area looking to crush and process ore.
Make no doubt about it, simply reaching production in early 2025 will be a game changer for Tocvan and shareholders.
I also find it interesting that Brodie has gone to the expense of collecting over 700 samples from the surrounding area, mainly to the east of the initial discovery. His description of this area is very compelling, especially the discussion around surface continuity. My guess is that this area must be visually very special for a geologist to discover and explore. The Main area of Pilar was drilled back in the 1990's when gold was only $300 per oz., thus gold exploration then was not as compelling as it is today. It is this larger area that holds the "Blue Sky" potential to dramatically increase the resource at Pilar, Brodie estimates this could be easily 5X the resource.
Putting this in perspective, Tocvan could easily build a multi-million oz discovery.
But it gets better, Brodie talks about an area 5 km to the north of Main Pilar which is a huge alteration zone and visually large area of volcanic rocks where the first sample ever collected returned 5 grams of gold and 100 grams of silver. This is a large 3 km long area with extensive artisanal workings that have returned very high silver values, as high as 1,000 g/t Ag. It is this area that has apparently caught the attention of a "Major" producer in the area who spent over 6 weeks exploring and collecting samples. Brodie mentioned they will be meeting with this group at an upcoming conference in November to explore plans moving forward.
There are a number of catalysts going forward such as drilling, resource definition, and near-term pilot mine production. What I like is there are still only about 51 M trading shares and plenty of room to raise capital at these prices without dramatically impacting the share structure. It has taken a lot of discipline for Brodie to keep the share structure low while advancing the project since 2020, this will tell you where his mind set is at.
After listening to this interview, it seems that drilling will resume at any time. In a previous shorter interview Brodie mentioned that shareholders will be updated soon about new developments in the works. Now that the rainy season is largely behind us, I suspect the months going forward are going to be extremely busy.