Tell me about Andover Mining?
Andover Mining (TSX: V.AOX, Stock Forum) is a company that is focused on advanced-stage, district-wide projects in very safe political jurisdictions, where we are looking for high-grade deposits while neither being reliant on either base or precious metals. That being said, our projects are in Alaska and Utah, both very safe geopolitical jurisdictions and very mining friendly states.
In the State of Alaska, we have a VMS (volcanogenic massive sulfide) deposit, silver, lead, zinc, copper and gold. It’s very copper rich in terms of equivalency, about 6% copper equivalent, with lots of size and scope. We have about 50,000 acres of land tenure so it’s a very large land position.
In the State of Utah, the land package has been held since the 1870’s by the same company in the historic Tintic Mining District and has been extremely prolific. The district has produced 270 million oz of silver and billions of pounds of lead, zinc and copper and about 2.7 million oz of gold. We hold about 18,500 acres of land in aggregate where the centre part of the ground is joint ventured with Rio Tinto via Kennecott Exploration. They are exploring for a massive copper porphyry system and have a chance to earn 55% of the project by carrying us to a bankable feasibility study. They’ve spent just under $6 million since late 2010 and they continue to work on the property.
Tell me about the projects
Our Big Hill project in Utah is at the exploration stage and all work is being carried out by Rio Tinto. This is highly unusual because typically, the bigger companies don’t do the exploration work on a junior’s ground; they buy the junior if they make a major discovery. So this is highly unusual, which we believe gives an indication of just what they think of the project.
The Burgin Deposit, located on our land in the State of Utah, has three previous feasibility studies. Historically, Kennecott mined the Burgin Deposit in the 1960’s and 1970’s and produced about two million tonnes. The last Feasibility study was done in 2001 on only a part of the deposit, known as the Burgin Extension Deposit. This study showed 19.1 oz silver and 30% combined lead & zinc, extremely high grade however, because it is historic, it’s not NI 43-101 compliant. In 2011, we completed an updated and compliant NI 43-101 resource calculation and PEA for the Burgin Deposit, which can be found on our corporate website.
Looking ahead, our proposed Earn-in and Joint Venture partner, Enirgi Group Corporation, will be the second joint venture on our Utah asset. When finalized, the time frame will likely involve a year to do a prefeasibility study and then another year for a full feasibility study. We currently have an 800tpd mill on the property, which is permitted and bonded but it was converted and set-up for a small gold mine, the Trixie, which is located on the property. Enirgi may just process gold and silver through the old mill and process the silver, lead, zinc deposits through a newly constructed mill.
Our project in Alaska is part of a very rich mineral belt with very big players known as the Ambler Mineral Belt. NovaCopper is our adjacent neighbor and they have the largest of the known VMS deposits, about 28 million tonnes. Our other neighbor is Teck, and they have a smaller deposit at about seven million tonnes.
We are currently in the process of compiling our data, historic and current drill results, and putting that into a resource calculation. We expect receipt of this by the end of the year and following this, a PEA in Q1 2013. It appears that a portion of the historic Teck drill holes on both the north and the south end of their “Smucker” deposit are located on Andover ground so we’ve got lots of strike length and opportunity to develop.
What’s unique about these projects?
For both projects, the safe jurisdictions in which we work and operate is of major benefit along with the high grades that we have seen on both projects. We also have an amazing team of people who can drive our projects forward in both Alaska and Utah; in addition we have a clever strategic private equity investor, The Sentient Group. Sentient, is a large private equity firm that is well known to the institutional followers. They own a 17.8% stake in Andover Mining.
In addition, our project in Utah has significant water assets associated with the project. There is a massive lack of water now within the State of Utah, which presents a real need and opportunity for water. As we move forward, unlocking the water’s potential economic value will be something we will try to exploit.
In Alaska, the State has initiated a program called Roads to Resources where the State will, at their expense, build infrastructure and roads to accommodate mining projects. This represents a significant savings in capital expenditure for us. In return, companies pay for the roads over the life of the mine, thus it becomes an operating cost. For our project, this would represent about a 200 mile road build, where the State and their affiliates would oversee permitting, bonding, funding and construction. We are in the process of negotiating this involvement together with NovaCopper as any road built, would benefit both companies.
Which do you consider to be your flagship property and why?
We look to Alaska as our flagship property since it is so massive, in terms of both physical size and contained metals. Using current commodity prices it contains estimates in excess of $6 billion of metals, this being said, both of our districts that are in Utah and as referenced here, Alaska and the Ambler Mineral Belt, with their contained deposits are much bigger than what 90% of juniors ever have.
What’s been keeping the company busy this past quarter?
We have been negotiating a new earn-in and joint venture and that frame work is now in place with Enirgi Group Corporation. They will develop, permit and mine the Burgin Mine Complex in Utah. Under the terms of the agreement, Enirgi will develop the project through prefeasibility and feasibility and arrange project financing, which would enable them to earn a 51% interest.
What are your plans moving forward with the remainder of 2012 and into 2013?
In Utah, our plans are to work closely with our JV partner(s) and make sure that they get all the support they can from us on these projects and we will focus on the water and power potential.
In Alaska, we are going to focus our work programs based on the results we get from our PEA and resource calculation. This year we had two new discoveries that are 8.5 km’s away from our known deposit (SUN), called the Stu and the SAL. We will focus on developing these and then we are really looking at the west end of the district, Smucker area, because we know we have some nice drill holes on our property there.
We will continue to work with the Department of Transportation and Public Facilities and the Alaska Industrial Development and Export Authority (ADEA) of the State of Alaska on development for transportation and power access for the Ambler mineral belt.
The focus for me is to also try to get in front of some major banks and get our banking relationships in place and to get research coverage out on the company. We are going from an exploration company to a development company and then move towards being a production company. These efforts should enhance shareholder value dramatically.
From a project perspective we intend to get a PEA out on the Alaska project in Q1 and resource calculation out before the end of the year.
What are the key challenges for Andover?
A challenge from a market perspective is the frustration of the stock markets. It’s a matter of unlocking the value of the company, getting the JV agreements in place.
Why should our audience be interested in Andover Mining?
I think the real interest from an investor stand point is first, the quality of our assets with identified mineral resources located in both Alaska and Utah. Secondly, the jurisdictions where we operate. You don’t have to worry about governments coming in and taking projects away, such as what we’ve seen in other parts of the world.
Alaska and Utah are both politically stable and mining friendly. You can see how proactive Alaska is and their initiative to help mining companies especially with the development of the road.
As the resource calculation and PEA are in place for the SUN, Alaska, analysts will then be able to put a value on these phenomenal assets. We are working to build a billion dollar company. We think the stock will move significantly once these milestones are in place. A lot of that will be driven by the investment industry coming out and saying positive things about us. When that gets done it starts to unlock the doors to lots of institutions and creating significant shareholder value.
Disclosure: Andover Mining is a Stockhouse client.