(Drill rigs turning at Kay Mine Phase 2 Expansion Program (Photo: Business Wire)
An untapped world-class copper-gold-zinc-silver resource lies in the shadow of giants in Arizona, with serious expansion potential.
Arizona Metals Corp. (TSX-V: AMC, OTCQX: AZMCF, Forum) owns 100% of the Kay Mine Property in Yavapai County, which is located on a combination of patented and Bureau of Land Management (BLM) claims totaling 1,330 acres that are not subject to any royalties.
Before listing back in August 2019, the Company spent three years as a private operation traveling across Arizona assessing roughly a hundred different assets, looking for a place where a mine could be permitted and that had at least some historic exploration performed.
In an interview with Stockhouse Editorial, AMC’s Chief Executive Officer and co-founder, Marc Pais explained that the team acquired 100% of two projects that fit this bill, with no future payments or work requirements. These would be the Company’s flagship Kay Mine copper-gold VMS deposit, as well as its Sugarloaf gold-oxide deposit.
A deeper look at the Kay Mine:
The Kay Mine is a volcanogenic massive sulfide (VMS) high-grade deposit that had a historic resource defined in 1982 by
Exxon Minerals (a subsidiary of the oil company of
ExxonMobil (NYSE: XOM)). In the late ‘70s, many oil companies set up mining divisions, and this Exxon property was intended primarily as a tax write-off, given how the price of oil was doing at the time and they could write off these mining expenses without doing much actual mining production. Once the price of oil moved higher by the ’80s, Exxon abandoned this deposit, having never mined it and barely having scratched the surface of the expansion potential.
Situated only an hour north of Phoenix, Arizona Metals is surrounded by mid-tier and major companies with operating copper mines. There are four operating copper smelters within a two-hour drive of the Kay deposit. In the past, material from the Kay deposit was tested at all of those smelters and saw exceptional recoveries of 95% for both copper and gold, but the zinc and silver potential was ignored.
Exxon had spent seven years exploring the property underground through two shafts that went down to 450 meters, along with 6,000 meters of underground sampling and 120 underground drill holes, but very little surface drilling to explore on a large scale. They focused all their attention on a 300-meter zone of strike.
Fast-forward to the present-day and Arizona Metals has just concluded the first phase of its drill program, which set out to begin validating the historic resource estimate* of 5.8Mt at 2.8g/t Au, 2.2% Cu, 3.03% Zn, 55/g/t Ag, and also that the continuity was good.
That first program was a success with 20 holes drilled, 19 of which hit massive sulfides.
To understand the true potential of what can be found under the surface, the Arizona Metals team had to wind the clock back roughly two billion years.
It was here, where the seafloor lay at the time, that an active volcano erupted metals including copper, zinc, gold, and silver. Each funnel of metals made a solid pile as the seafloor moved meter by meter over the next hundred million years.
As the seafloor moved on top of this volcano, it left a number of deposits of metal in its wake. Over the next two billion years, this high-grade mineralization was all squeezed together like an accordion, from a 20-kilometer stretch down to only one or two kilometers across.
(Section view looking northeast. The yellow dotted line marks a potential new zone of Au-rich Zn lenses. See Table 1 for constituent elements and grades of CuEq% and AuEq g/t. “Historic underground assay composites” are underground channel samples at a 4-foot spacing by Exxon Minerals from 1972 to 1979. (Graphic: Business Wire))
Exxon’s explorers had found two of these formations and spent seven years focused on this area, but in applying modern geophysical techniques (including electromagnetic and gravity surveys), the Arizona Metals team has traced the same pattern for twice the distance to the south and north of the Kay deposit and then found more occurrences in the rest of the property. Finding these occurrences is what led the team to believe that this property could boast a resource much bigger than the near six million tonne historic resource estimate that Exxon had determined.
This leads into the Company’s second phase of drilling. In the previous phase, the team drilled through known mineralization to confirm it, but now two drills will dig into 25,000 meters this year, to test new targets and expand the size. In early February 2021,
a second drill rig was brought onto the property, to test new targets defined by a recently completed review of
structural and spectral alteration data, which had improved the understanding of the geological model of the Kay Deposit. The addition of a second drill will allow the team to accelerate testing of targets both on strike and to the west of the Kay Mine.
In
November 2020, Arizona Metals conducted a metallurgical review of the Kay mineralization, which returned good results with robust recoveries of copper, zinc, gold, and silver using conventional off-the-shelf floatation technology.
SRK Consulting, reviewed historical data and recently completed drilling at Kay, and drew a number of comparisons between the Kay Mine and 60 past-producing VMS mines in the region (and elsewhere, including Hudbay’s 777 Mine and Glencore’s Kidd Creek Mine). In assessing the split in resources between gold and copper, with the balance being zinc and silver, SRK anticipates 90% recoveries of copper and zinc, and then 60 to 70% recoveries of gold and silver. This means two separate clean concentrates, a copper concentrate with gold and silver, and a zinc concentrate with gold and silver, both with very low deleterious elements.
Arizona Metals will be sending drill core from the current drill program for batch floatation testing as they are drilling so that by the end of the year they will have a much more detailed metallurgical flowsheet, which could eventually go into a preliminary economic assessment or a feasibility study once the resource is big enough.
(Image via Arizona Metals Corp.)
Acquisition of More Private Land and Water Rights:
Private land is the best land in Arizona for permitting a mining operation. This is because businesses do not have to go through the full federal permitting process if they are on private land. In January 2021, Arizona Metals announced that it is acquiring an additional 107 acres of private land adjacent to the Kay Project, which will increase the total private landholdings to 178 acres. Importantly, the land comes with water rights and 7 operating water wells. The acquisition will leave Arizona Metals with cash of $11M, of which $10 million is budgeted just towards the Kay Mine Phase 2 Expansion drill program currently underway.
The AMC team can test all of its targets at the Kay mine within the next six months with the two drills that are currently operating. If all goes well, CEO Pais said that they would look to adding more drills.
Further metallurgical results are anticipated from the Sugarloaf project and depending on those results, the team is considering conducting a drill program there, as well.
The projects also have serious political backing as well. As soon as Arizona Metals secured ownership of its sites, CEO Pais explained that they invited local politicians so they could get a direct line of sight on what was happening, in case the public came out with any concerns to them, they could assure their constituents that Arizona Metals was out to extract resources safely and sustainably from the area.
Arizona Metals’ chief objective is to de-risk its projects as they work to ultimately get them into production.
The Sugarloaf project:
(Sugarloaf Peak long section displaying historic drill holes and three IP geophysical targets located directly below the historic estimate. (Graphic: Business Wire)).
Located roughly two hours west of Phoenix, is Arizona Metals’ Sugarloaf project, a heap-leach, open-pit target in La Paz County. Though it contains a historic resource estimate* of 100 million tons containing 1.5 million ounces gold at a grade of 0.5 g/t, it is a very different project than the Kay mine.
(Phase 2 drill program and expansion potential. Map via Arizona Metals Corp.)
Sugarloaf has gold oxides, which start right at surface, and grades 0.5 g/t gold down to at least 70 meters deep, which is the limit of the historic resource estimate, but the company believes it goes much deeper, having hit gold down to 400 meters. The question the team wants to answer is how much gold is recoverable (through heap-leaching).
As CEO Pais stated,
“The key things you need to make a deposit like this profitable are low strip ratio and good metallurgy. There are initial indications of a low strip ratio because the deposit starts at surface, it's tabular, and there here is no dip to the mineralization. It is also 300 meters wide at surface. We think there is the potential to define a nice wide pit.”
The 1,700-metre program completed four drill holes in August 2020, where hole 1 returned 137 meters of 0.53g/t Au from surface, including 99 meters of 0.62g/t Au, and 30 meters of 0.90g/t Au. Gold mineralization consists of sheeted veins/veinlets and stockworks of quartz pyrite and argillic hosted rocks. The cores have been sent to Kappes Cassiday for metallurgical testing, including bottle roll and column testing.
Metallurgy is the next step. Metallurgical testing (bottle roll) by
Kinross Gold Corp. (TSX: K) in 2009 and
Agnico Eagle Mines Ltd. (TSX: AEM) in 2013 achieved gold recoveries of up to 73% (in line with heap-leach mines currently in operation).
In a
July 2020 news release announcing the start of drilling the project, CEO Pais noted that while the Company’s primary focus remains on the high-grade Kay Mine VMS project, where they have two drills turning, he also sees significant unrecognized value in the Sugarloaf Project.
If an operation like this has good recoveries and a good strip ratio, the cash cost can be around $900 (USD) to a $1,000 / Oz gold produced. At today’s gold prices around $1,700 / Oz. there is a very high margin on these relatively low-grade deposits.
The Arizona Metals team is out to prove that the Sugarloaf resource is bigger than initially thought, but is determined to first confirm the metallurgy before spending more money on digging any deeper. Metallurgical testing is currently underway. If that confirms what the previous results had indicated, and the leaching is as continuous as believed, then the team can start planning a program to expand and drill.
Leadership team:
(Click to enlarge.)
Investment conclusion:
Arizona Metals has a market capitalization of $133 million with $14 million in cash on hand.
(Image via Arizona Metals Corp.)
With just 77 million basic shares outstanding, there are only about 25 million shares in the public float, and the Company’s share price and volume have seen a steady increase since it began trading on the TSX Venture and
OTC markets.
AMC recently closed an oversubscribed non-brokered private placement offering of 10.5 million common shares of the Company at $0.95 per Common Share, for aggregate gross proceeds of
$10 million. Net proceeds of the Offering will be used to fund the acquisition of 107 acres of private land near the Kay Mine, and for exploration and expansion drilling at the Kay Mine VMS Project in Arizona.
Arizona Metals is now in a very strong financial position. Before this financing, the Company had initiated a fully funded second phase of its exploration program of 11,000 meters at the Kay Mine Property and the additional funds raised in this financing will allow the team to expand the Phase 2 drill program to at least 25,000m during 2021.
For more on this Company, visit
arizonametalscorp.com and https://twitter.com/ArizonaCorp
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.
*The historic estimates at the Sugarloaf Peak Property and Kay Mine were reported by Westworld Resources (1983) and Exxon Minerals (1982), respectively. The historic estimates have not been verified as current mineral resources. None of the key assumptions, parameters, and methods used to prepare the historic estimates were reported, and no resource categories were used. Significant data compilation, re-drilling, and data verification may be required by a Qualified Person before the historic estimates can be verified and upgraded to current mineral resources. A Qualified Person has not done sufficient work to classify them as current mineral resources, and Arizona Metals is not treating the historic estimates as current mineral resources.