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Altaley Mining Sees Major Opportunities in Mexican Market

Ralph Shearing - Altaley Mining


Paloma Duran By Paloma Duran | Journalist and Industry Analyst - Thu, 03/03/2022 - 11:03

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Q: What were the milestones the company achieved in 2021?

A: Our main milestones were the construction at Tahuehueto advancing toward completion and Campo Morado improving production while reducing costs. In addition, we started a successful, extensive metallurgical program, which will take us another two to three months to complete.

Q: How is the company benefiting from the current market environment?

A: There are really two businesses moving in parallel: the public market, where we are trying to promote the company and get our share price up, and the actual mining market, where we are making money by producing metals. The momentum for investment bankers to jump into mining did not really pick up in 2021. The current surge in precious metals may be driving more people to the market but movement remains subdued for the moment. This is a bit unusual, as metals are doing very well: many metal prices are high and some have even hit their highest mark in years. Mining companies are making a lot of money; base metal and gold miners particularly benefit from growing inflation and crises like the Ukraine issue. These changes in the market are forcing us to pay close attention but a new boom has not yet materialized. I expect we are going to get there. I have been in this industry for a long time and have seen a lot of market cycles but this one feels different. We are at the beginning of a major super-cycle for commodities and specialty metals.

Q: Which of your metals do you think will perform best in 2022 and how will you take advantage of the opportunities?

A: Base metals and gold are facing an upward trend. The long-term projections for copper are fantastic because of the global push for decarbonization and the reliance on copper as a key material. Our main commodity at Campo Morado is zinc but we will probably start producing some copper in 2Q22. Zinc has an opportunity, too. There have been many shutdowns and scale-backs for smelters, so prices have gone up. Furthermore, the demand for zinc has increased with the decline of the COVID-19 pandemic, as companies and countries get back to business. We see great opportunities, especially because there are major infrastructure improvement programs planned in developed countries, particularly the US. High demand will keep zinc prices up, especially since it is widely used for galvanization. This trend could yield us another year or two of great zinc prices. Gold prices remain healthy and are sure to perform well under current uncertain political strife being progressed by Russia in the Ukraine.

Q: What factors have allowed Campo Morado to exceed expectations and how will the company ensure that it continues to increase its production?

A: The main factor is that we have a great operations team. We hired Héctor Meléndez as General Manager and he has done a fantastic job. We have been able to reduce costs and the project has recently reached a production of between 2,300 and 2,500t/d, which we had never achieved before.

Furthermore, we have been carrying out some modernizations. We installed a monitoring system in the mill that helps us further advance and better understand our metallurgical processes. We are also reducing our ore grind size. At Campo Morado, the mineralization is very fine-grind.  Many of the metals are locked together, so we must reach an ultrafine grind: our goal is between 10 and 15 microns. Traditional flotation cells are not suitable, especially when the particles are ground so finely that a bit of sludge coats the grains and the reagents are not able attach to the targeted mineral. As a result, we are testing a pneumatic flotation system designed to overcome the problem. These cells operate with higher shear energy, which removes the coating and allows the metals to better bind to reagents. So far, the test has shown promising results. We believe that through the implementation of these cells we will increase our recoveries and concentrate grades. In addition, higher metal prices have helped us tremendously, allowing us to increase our income and build the resources needed to improve the project.

Additionally, we see many exploration opportunities for Campo Morado. We have numerous targets that we will start drilling once we have enough cash flow.

Q: What is the company looking to achieve in the next testing phase at Campo Morado?

A: We have high expectations for this phase, in which Altaley is hoping for a pyrite concentrate. The deposit is 30 to 40 percent iron mostly in pyrite, so a lot of gold and silver is being sent to the tailings facility because we cannot recover it through traditional milling and flotation. By generating pyrite concentrate, we could capture most of the precious metals within the pyrite. This way, we can sell it or put it through forced oxidation and leaching.

Currently, we are reaching a 15 to 20 percent gold recovery and a 30 to 50 silver recovery rate. Both are low, but this could change. In Albion and Leachox first phase testing conducted in 2013 by Campo Morado’s former owner, the Leachox process proved to increase the gold recovery rate to 60 percent. This is a 400 percent increase from our current throughput. Silver recoveries acheived 80 percent, which compared to our figure is 200 percent higher on average. This represents a major opportunity. Additionally, if the pneumatic floatation is successful, we intend to reprocess the existing tailings facility, which contains around 3.2 million tons of tailings. Based on historical daily production reports, we believe there are around 280,000 ounces of gold equivalent (gold & silver only) stored in the historic tailings. In addition, there is zinc, lead and copper, which we also expect to recover.

 Altaley expects its extensive metallurgical testing program to be completed in 2Q22. Then, the company will have a roadmap of what it needs to do to increase recoveries of all metals. How quickly we move with this roadmap will depend on the costs and whether we can finance it with our production or need to raise money. Taking all these factors into account, we believe that we will be able to take advantage of these opportunities in late 2022 or early 2023.

Q: How is the company moving forward to start production of copper concentrates and what impact is this expected to have on the company's revenue?

A: We are moving to an area that is richer in copper, which will make it easier to start copper concentrate production. Once the copper circuit is installed, we will have continuous production. This is a great opportunity because it will give the company another source of income. Also, it will lessen the impact when metal prices start to fall again, as we cannot expect them to be at these high levels forever. However, copper is not our only focus. We believe that Campo Morado may become a silver mine if testing successful give us our pathway forward since silver content is quite high.

Q: How was the company affected by a loss of financing from Accendo Banco and how much did its plans change with the loan from Sail Natural Resources LP?

A: Frankly, it did not impact us a lot because we were able to come up with an alternative. At the beginning, we were taking free cash flow from Campo Morado to help fill the gap that Accendo Banco left. However, we quickly found a solution. We always said we could get Tahuehueto running by late 2021. In mining construction, like any larger construction project, a one or two month delay in anticipated timeline is not uncommon. Nevertheless, finances got tight, and we had some delays as a result of Covid infection among the construction crew, which resulted in minor delays.

Altaley is in a good position because the revenues from Campo Morado and Tahuehueto once production starts in March will ensure we do not need more equity financing. Our company has become self-sufficient and can meet all its debt obligations within three years or sooner, considering prices hold and production increases.

Q: Why is Tahuehueto such an important project in the mining industry and what will be its next steps?

A: Tahueto is a district-scale project that has been around for a long time. However, it is remote and its conflicted ownership in the past hindered its development. But now, going into production is the first step in unlocking its true value. We believe its potential is very similar to its close neighbors: Fresnillo’s La Cienega mine, which produces 3,000t/d, and the prolific San Dimas mining district.

We will start testing the mill soon. In early March 2022 initial production is expected and during Q2 a second ball mill will be brought on line to increase  throughput. Around 2H22, we will ramp up production toward 1,000t/d. Hopefully, we will declare commercial production at Tahuehueto during 3Q22 or 4Q22.

Q: What were some of the ESG actions the company took in 2021?

A: We always help the communities with the funds we have available. We support them with access to water, electricity, infrastructure, rehabilitation of schools and, above all, local employment. At Campo Morado, we carry out training programs to attract locals to the mining industry. We recently brought in a group of six women to be trained as underground drillers.

Regarding the environment, we seek to replace our fossil fuel-fired electricity grid with green energy. The company is studying the best option. Meanwhile, at the remote Tahuehueto project, we are generating our own energy using diesel. The company wants to use natural gas, but it needs permits, which are being prepared to submit to government authorities, to legally vaporize liquefied natural gas to fuel gas fired electrical generators. If approved, we will switch to natural gas to reduce our ecological footprint and electricity cost. In the future, we will look to implement solar energy. In addition, later this year we are intending to prepare an annual ESG report so communities and stakeholders know our ESG efforts and policies.

Q: How are government public initiatives hampering the industry’s development?

A: These initiatives have generated uncertainty in the sector. Investors and companies are wondering whether to invest more or to exit the Mexican mining sector. The government's willingness to nationalize lithium production is a risk because it is a tool that could take assets away from companies, shareholders and individuals. This is not what Mexico needs nor wants and sends entirely the wrong message to foreign investment. Mexicans must decide in the upcoming elections what direction they want the country to take. If the government nationalizes lithium production, will their next goal be gold and base metals. This reform has the effect of scaring mining investment out of Mexico. Changes in policies towards they mining sector is needed; otherwise, the industry’s future foreign investment will certainly diminish.

Altaley Mining Corporation is a Canadian-based mining company with two 100 percent-owned Mexican gold, silver and base metal mining projects: Tahuehueto in Durango and Campo Morado in Guerrero.

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