Fishing for Opportunities in SinaloaWed, 10/21/2015 - 08:22
Q: How has Marlin Gold benefited from the creation of its own royalty company?
JB: For many years, there were few royalty companies on the market but the number expanded during the mining boom. The idea of royalty companies is to operate as mining companies but without the same risks being involved. In order to generate revenue, royalty companies provide capital to mining companies in exchange for production based payments. These payments are typically life-of-mine and based on a predetermined price for the metal being produced by the mine. Such companies inject money into mining projects at a very early stage and eventually obtain dividends once the projects are successfully advanced to production. Naturally, royalty companies look for the best mining projects to get best returns on investment possible. They look for assets with an important exploration upside, low operating costs, and great management teams. Sailfish Royalty is our wholly-owned subsidiary that provides Marlin’s shareholders with exposure to a hybrid business model. Marlin is now able to unlock shareholder value by capturing the valuation difference between royalty companies on the one side and operating companies on the other. It is our intent to spin out Sailfish Royalty to our shareholders once the proper scale is achieved.
Q: What are the main challenges Marlin Gold has encountered during the development of its projects in Sinaloa and how has it overcome them?
MG: One of the main challenges was to build the mine on schedule without exceeding our US$30 million capital costs. In 2014, we encountered intense rainfall that hindered the development of the projects. It is neither easy nor safe to develop a mine under such meteorological conditions. Since the beginning, one of our main areas of focus was the equipment we needed to purchase for the processing facilities since much of the machinery comes from abroad. Some of the technologies required for the crushing of minerals can take up to six months to be delivered.
Once we were done conducting processing trials, we immediately purchased the equipment so that we could receive it with enough time to install it and start operations. We also had to rethink our agreements with contractors since they represent most of the expenses. We had to enter flat rates agreements with our contractors so that we could get a fixed budget for their services.
Q: How will you make sure to reach the targeted production rates at La Trinidad Gold?
MG: The first thing we need to do is prepare ourselves for the next rainy season. The bad weather we encountered in the past really delayed our operations so we now have to make sure everything is set up and ready to operate ahead of time. Another important priority is to redesign the infrastructure of the mine so that we can operate it in the best way possible. The mine’s previous owner left behind infrastructure that was too antiquated for us to use and did not match our mining methods. We had to change almost everything in the mine. We are now planning to process an approximate of 1.4 million t/m at La Trinidad.
Q: Which strategies will Marlin Gold employ to move the El Compas project to the advanced exploration stage?
MG: SEMARNAT just accepted our environmental impact assessment to carry out our exploration works, but we need to provide them with some additional information. In terms of permits, everything is advancing as expected and Marlin Gold will soon be able to embark on an aggressive exploration campaign. Right now, our focus is on turning La Trinidad into a fully operational mine.
Q: What is the company’s action plan to provide returns to the community and shareholders in a socially and environmentally responsible manner?
MG: We are now working closely with PROFEPA and SEMARNAT so that we can attain the Clean Industry certification. This certificate will really helps to appease the environmental concerns of the local Maloya community. In addition, we are currently in the process of obtaining our Socially Responsible Company certificate. Something that also awes us is that despite the fact that Sinaloa is not a mining friendly state, especially when compared to Sonora, we have not encountered any major problem with community members. The community surrounding La Trinidad has always looked at Marlin’s operating team favorably due to our history of operation at Capital Gold.