Exploration Firm Will Find Right Partner or Go It AloneWed, 10/21/2015 - 08:26
It is no easy feat to obtain the right financing or find the right partner to advance a mining project, especially when the precious metals markets stubbornly refuse to show signs of recovery. According to Deloitte, finding funding is among the top ten challenges for mining companies worldwide. “The dismal shareholder returns of recent years pushed mining companies out of favor among investors,” states a Deloitte mining report. “With internal rates of return no longer sustainable, the industry has recorded a record number of write-offs and impairments. As a result, equity markets have shut off the tap.” Mexus Gold US, an Americanbased exploration company with holdings in Mexico, has encountered this challenge and has been patiently waiting for the right opportunity to come up. This has even seen it reject certain offers of funding. In June 2014, the company turned down a seven-figure offer for the funding of its Santa Elena/Julio project in Sonora. “We feel that the property has a better potential than what was being offered. We are confident that we have more than a million ounces of gold there and the offer simply did not meet our expectations,” shares Paul Thompson, President and Director of Mexus Gold US. The company is now talking to major companies to enter into a joint-venture (JV) agreement, which it is hoping to define by February 2015. As for a potential partner, it is looking for a major company “with the power, credentials, and funds necessary to develop the mine.”
The Santa Elena/Julio property is located 54km northwest of Caborca, Sonora, Mexico and consists of several mining concessions totaling approximately 1,340 hectares. The project currently has a shaft going down 30m where one can see visible traces of gold in the numerous underground quartz veins that traverse the property. Based on surface samples and preliminary drilling on the shear zone, Thompson believes that with additional drilling the company will be able to find more quartz veins with an average of 1.2 g/t of gold. “There is still a lot of risk involved. However. we still do not know what lies below 150m since we have not drilled that deep,” Thompson adds. This means the next step is to start a drilling program to know what it will take to advance the project into production. “This program could result in the creation of one of the biggest mines in Mexico or it could reveal a smaller deposit,” he states. This places Mexus in a dilemma since it still requires a partner to take on a proper drilling program, yet such partners are hard to find given that not enough drilling has been done to entice them. In order not to wait idly by, Mexus has decided to restart its placer operation as a way to generate some extra cash. “We are now rebuilding the equipment for the placer operation in a way that uses a minimal amount of water and reuses water throughout the operation,” explains Thompson. This operation is expected to be underway by mid-February 2015. “Based on what happens during negotiations, we will decide whether to go on with blasting and an underground operation on our own, or carry out the underground and heap leach operations with a partner. We are in the position to take on this project ourselves if it is on a smaller scale,” Thompson clarifies. The operation already has a ball mill and a gravity recovery plant which is capable of processing up to 30 t/d.
One advantage on the company’s side is that it benefits from an excellent relationship with the land owner at its property and recently re-signed the option on the property and the lease for 25 years. While Thompson admits Mexus has been lucky in having dealings with a family that is on board with the company’s plans, he suggests companies should absolutely treat all parties fairly to avoid potentially critical delays. “In the end, all parties need to be satisfied with what they get. When someone gets greedy, everything falls apart. Companies need to keep the greed factor down by keeping everybody informed and maintaining conditions fair and transparent,” he states. So far, Thompson remains confident that Mexus is in the right place. The NASDAQlisted company has been fortunate enough to raise the necessary operational capital within its own ranks so far. Though it still requires considerable investment to advance its Santa Elena/Julio project, Thompson highlights that the company is not willing to take on huge debt. “Our debt is minimal right now and we are going to keep it that way. If we do not strike a JV deal, we will then take on the operation ourselves. The gold in the ground will stay there and it will likely be worth more money in 2016. If gold goes back to more than US$2,000 per ounce, then taking our time will not hurt us,” concludes Thompson