Discussion of Unconventional Financing for Exploration ProjectsThu, 10/17/2019 - 13:23
Q: What is Sonoro Metals’ view of financing for exploration and what financing tools is it looking at for its projects?
KM: The junior mining sector has only marginally improved in terms of financing, even with gold’s recent gains. Companies mainly look to the Toronto and Vancouver stock markets to raise capital but it remains very hard to raise money for exploration or developing smaller gold operations.
Our strategy for unconventional finance really started when John Darch joined as Chairman in 2018. He has an extensive history developing major projects in Thailand, Africa and the Philippines. He brought in Neil Maedel as our Director of Finance, who lives in Asia, so it was a logical step to look at the Asian markets as a way to raise money. We started in Singapore through a small outfit named Inproved and they were really helpful and led us to a pretty established company in China called New Tigers Consulting.
New Tigers is run by a former China State Council official named Dr. Wei Qian and they have been around for decades. Qian introduced Sonoro to some very large Chinese EPC companies that are really experienced in developing low grade oxide gold deposits and are quite interested in what we are doing. The idea is to get EPC business while they also provide mine finance and get a stake in Sonoro. This means they can get started doing business in a new territory and grow from there. It really seems like a little project for them initially, but by getting started with our pilot operation they can see it leading to a much larger operation, followed by much bigger new projects and more business.
Cerro Caliche’s operation alone could grow from a pilot operation of around 3,500t/d to fully built out at a potential 60,000t/d. We internally estimate we already have 500,000 oz in a mineable state at or near the surface at Cerro Caliche, so we could put 100,000 oz under another subsidiary and finance it. Like a gold bond, the project debt would be supported by the 100,000 oz from this particular part of the property where the pilot operation would operate. As the EPC company, they really can get comfortable with what we are doing and de-risk the project. Its success becomes as much up to them as it is up to us, so we are all in the same boat. We would then build a pilot plant that we expect could enter production by late 2020 and we already have the people in the company with the experience to do this.
Q: Which projects does the company want to position by the end of 2019?
MH: We are working to advance the Cerro Caliche concessions. The key question is how to develop this resource and grow it over time. The company has set 1 million oz of gold as a target. I think there is a good chance we can get 2 million oz because we already are well-established toward achieving our initial target in the overall gold content and we have only explored about 30 percent of the concession. We are really getting great results for the money we have spent.
The objective is a heap leach open pit in the 60,000t/d range, which offers the lowest-possible mining costs. So far, the mineralization we have found is very shallow, within the top 70m of the surface. It also has the consistency over broad areas that could be open pit mined, both within the area we will be working in and outside our property boundaries. We will probably be looking into acquiring several other areas adjacent to that concession, so the potential mineable resource just keeps growing.
Q: How would you assess the development of the local workforce within the company’s operations?
MH: In Sonora and Chihuahua, we work with high-quality geological and technical professionals. There are really exceptional technical and nontechnical people, consultants and contractors in Mexico. Some are already consulting for companies like Agnico Eagle, Argonaut Gold and other Canadian companies, so their capabilities are quite recognized.