The following is a Stockhouse Q&A interview with Jan Alston, President and CEO of CMX Gold & Silver Corp. (CNQ: C.CXC, Stock Forum).
Background
After a highly successful spell in the Canadian energy sector, Jan Alston has turned his attention to mining and the former Clayton silver-lead-zinc mine in central Idaho. Deciding he is much too young to retire, the Calgary-based entrepreneur is working to create value for CMX shareholders using modern exploration and processing technology to get the former Clayton mine back into production. The aim is to run a lean operation and conserve cash while waiting for metal prices to improve.
Why should people be interested in investing in CMX Gold and Silver at this time?
This is a real gem of a property. On an upside risk-reward basis, it is a very good asset. We are not looking at a situation where we have some exploration concepts, or we have some interesting drill intersections and we are trying to follow that up and prove up what could be a mine. This was a mine and it wasn’t mined out. The history and geology of it all point to there being much more there (in terms of metal waiting to be mined) than was ever produced in the past. This is material that can be accessed using modern exploration techniques.
What are the key challenges right now for a company like CMX Gold & Silver?
The main challenge is getting people out there to pay attention and say: Wow, this is a great, ground floor opportunity. With the Clayton Silver mine in Idaho, I know we have a lot of value and the upside is even more compelling. So we have got to get that message out to people.
What attracted you to this particular asset?
The key thing that attracted me to this opportunity was I don’t have to go out and find a mine. It is a property that had been run on a mom and pop basis for many decades and was profitable. It shut down in 1986 not because it was mined out, but just because of the slump in commodity prices.
A historical data review indicates that there is big, big potential underground on the property. We think the potential exists to add a lot of shareholder value by doing the work that is needed to establish that there is a lot more ore still to be mined. Our plan is to get this mine operating again.
How do you plan to generate cash flow from this property in the short term?
The company has been advised that it could generate early cash flow by processing material that remains in waste dumps located at the mine site. This is material that was mined, but never processed because it was not considered to be high grade ore at the time it was mined. We wanted to be sure of what was in this material and we got a pleasant surprise. At today’s higher metal prices and with the use of more efficient processing and recovery techniques, CMX believes that this material has potential value.
Cash flow generated by processing the dump material could be used to fund underground exploration and development at the site, as well as the refurbishment of the mill.
Can you give us a description of the size and scope of the property?
The property covers 276 hectares and consists of 29 patented mining claims, two patented mill sites and six unpatented claims. The former Clayton Mine was developed on eight levels to a depth of 335 metres below surface and is comprised of 6,000 metres of underground development. Two major orebodies were mined, the South Ore Body and the North Orebody.
Back in the early days, the Clayton mine was owned by Ford Motor Co. (NYSE: F, Stock Forum) as a source of lead for batteries.
Do you have any records of how much the former Clayton Mine actually produced?
Historical production records show that the mine produced 7 million ounces of silver, 86.8 million pounds of lead, 28.2 million pounds of zinc, 1.7 million pounds of copper and small amounts of gold.
The underground workings are flooded and inaccessible and, consequently, historical records are the only source of information available.
Diamond drilling will be carried out to identify additional mineralization prior to de-watering the mine to access the underground workings.
What were the company’s key accomplishments in 2014?
An analysis of over 3,000 kg of material taken from 16 locations on the waste dump confirmed the presence of a suite of metals of potential interest, including gold. The waste dump is estimated to contain several hundred thousand tonnes of metal-bearing material that the company believes is readily available for immediate processing.
Can you give us some more specifics on what work you plan to do with the dump material?
We have a program that we want to finance right now. We want to do 75 to 100 more locations using a drill to probe through the dump material to confirm the grades on the sampling that we did last year. Upon completion of a second phase sampling program and conditional on satisfactory results, CMX plans to proceed with a preliminary economic assessment (PEA).
If the PEA is positive, the company hopes to refurbish and modernize the mill as a first phase of reactivating the mine.
How does the dump material fit into your near-term strategy?
We think that as the mining cycle turns up, processing the dump material will be a less costly, less risky option for us as we work on assessing the value of the underground material.
What are the company’s key goals for 2015?
The main thing is to get this follow-up sampling program done, so that we can confirm the grades in that dump material.
We want to do some preliminary high level engineering work on defining the cost of refurbishing the mill. We might take an early look at de-watering the mine workings, potentially in stages, and just dewater enough to look at the shallow opportunities on the South Orebody. Our view is that if the mine dump proves economic it will support refurbishing the mill. All of this, of course is subject to us obtaining funding at reasonable prices.
How are you fixed financially at the moment?
We don’t have a lot of capital. We have to go out there and raise $200,000 to get this summer sampling program done. We are working on this right now. I’m optimistic on that. We have a good story and tremendous upside. We are believers that the commodities cycle will turn upwards and that these kinds of commodities will come back into favour.
Can you describe what remains of the milling facility?
Prior to closing the mine, the operator had expanded the capacity of the mill to around 300 tons per day by adding another ball mill. Our aim would be to take advantage of economies of scale by expanding the existing mill to between 600 to 1,000 tonnes per day. Any decision would be subject to us being able to confirm that there are sufficient resources in the waste dumps to make processing worthwhile.
How much do you think it would cost to refurbish the mill and get it going again?
If I go at it from a conservative basis, it is probably in the order of $3 million to $4 million. That would depend on how much bigger we want to make it. It could be less than that. So we want to raise funds to get a little more precise engineering on that. We have two ball mills that could be refurbished. There is a lot of new technology for gravity separation. A lot of progress in mining technology has been made since the 1970s and 1980s.
Who is overseeing the work in Idaho on the company’s behalf?
We have an excellent consulting geologist, Rick Walker, who has done great work on the Clayton. Walker lives in Cranbrook, B.C. and has worked with other junior companies on all kinds of projects. This project is very much up his alley with gold, silver and lead in the mix. He is quite conservative. But the more work he does on this, the more positive and excited he becomes.
What are the key takeaways for investors?
It isn’t going to cost much for us to complete a lot of value added activity at this project.
We want to get the maximum benefit from the capital that is applied to the project.
When the cycle finally turns and people come back to the sector, CMX will have plenty of good things to get people interested. That should eventually be reflected in the value that investors assign to the company in the marketplace.
FULL DISCLOSURE: CMX Gold & Silver is a client of Stockhouse Publishing.