The Making of Mexico’s Next Diversified Midtier Metals Producer
STORY INLINE POST
What is it about a project that would make an exploration geologist give up fieldwork to sit in a boardroom as a CEO of a producing mine?
I am an exploration geologist by trade. Nothing made me happier than collecting and interpreting geological data from exploration programs. Diamond drilling, field mapping, surface sampling, the logging and processing of core — that was the dream. When it was done, I would happily travel the world to start all over again on another exploration program. I enjoyed it so much that I eventually started two companies: an exploration services company and a diamond drilling company.
In 1987, after spending a few years working as an exploration services contractor, I decided to form a junior mining company with my business partner, Paul Chung. As is the nature of the junior space, with only 1 in every 10,000 exploration projects becoming a mine, we explored several projects that did not pan out, but then came Mexico.
I was introduced to Tahuehueto, Altaley’s flagship property, in 1997. I spent a couple of days on the property recognizing the strength of mineralization and the ultimate size potential of this large district-scale project. You could say that in those two days, I fell in love with the project and immediately negotiated the acquisition of the company that owned it. We completed $350,000 of work on Tahuehueto immediately after acquiring it; however, the markets soon turned, gold went to $240 an ounce, and the project was, out of necessity, put on ice for lack of available funding.
2004 saw a resurgence in the industry, leading to a boom from 2004 to 2009, with a significant amount of exploration drilling and surface work conducted on Tahuehueto. We raised a lot of money and developed our reserves and resources during those boom years. Then came The Great Recession.
Desperate Times
In 2013, the mining industry was in a perilous state. A combination of low metal prices, a lack of investor interest in mining in general, and the inability of the junior mining sector to access capital left our company in a desperate situation for several years. By 2015, Tahuehueto had stalled, there was no money for exploration, and we were doing everything possible to keep the office doors open.
Leaving no stone unturned and working all connections, I was eventually introduced to a Mexican mining group that believed metal prices would soon recover to drive a resurgence in the junior exploration and mining sectors. This group purchased a majority ownership in the company and provided an initial US$3.5 million of equity financing plus an approximately CAD$10 million debt facility to advance Tahuehueto toward a production decision.
Mexican ownership and an experienced Mexican management team helped us grow Tahuehueto from advanced exploration into development and initial production.
With a renewed focus and funding support from our major shareholder, we began to explore growth opportunities and opted to expand through the acquisition of a second Mexican project. In 2017, the company purchased and quickly took possession of the Campo Morado Mine in Guerrero state.
The property changed hands a few times before we acquired it. Farallon Resources, a Hunter Dickinson company, acquired Campo Morado in the early 1990s, completed most of the exploration on the project to prove up the ore bodies, and funded the construction of the initial mine.
In 2010, Nyrstar purchased Campo Morado from Farallon (HDI) for the equivalent of CAD$420 million and further invested CAD$100 million in upgrades and royalty repurchase. Unfortunately, the zinc market crashed, and Campo Morado was put on care and maintenance in 2015.
For a mere US$20 million, we acquired Campo Morado, a mine with fully fitted-out infrastructure that included installations, processing plant, underground development, and mobile mining equipment capable of producing up to 2,500tpd and boasting a substantial drilled out mineral deposit of 14.7 million tons of measured and indicated resources containing gold, silver and base metal hosted within concessions covering 12,045ha.
Currently, Campo Morado is processing more than 2,100tpd and is now the sixth-largest zinc concentrate producer in Mexico. The mine brings in consistent cash flow and provides the company with exposure to the base metal markets, also producing a significant amount of silver annually.
We are increasing production in the short term with a low-cost mill expansion. Anticipated metallurgical recovery improvements also put the project on a pathway to significantly increase production of both base metals and precious metals. Soon, we hope to initiate exploration drilling, working toward significantly increasing our resources and justifying an expansion of the mine, hopefully toward a 5,000 ton per day operation.
Purchasing Campo Morado propelled the company from a tiny junior explorer/developer into an immediate junior producer.
A Diversified Midtier Metals Producer
Our Mexican journey has not been easy. Through trials and tribulations and many stops and starts, Altaley is on the cusp of becoming a diversified midtier metals producer and I am so proud of what our team has accomplished.
2021 was a record-breaking year of rapid growth and excellent profitability at Campo Morado. Gross revenues increased 121 percent to US$98.4 million with a clear pathway to restart exploration drilling once adequate working capital is available, hopefully, to double resources and expand our operation.
Tahuehueto, our flagship project (the one that anchored me to mining in Mexico), initiated pre-production and mine commissioning in May of this year, with full commercial production expected in 2023. In 2022, an updated prefeasibility study returned a post-tax NPV (Net Present Value) of US$161.3 million.
Tahuehueto, at its initial 1,000 ton per day rated capacity, is expected to produce over 45,000 ounces of gold equivalent resources, 65 percent of that true gold ounces and 35 percent from byproduct silver, lead, zinc, and copper.
Cash flow from our two operating mines will solidify Altaley as a midtier producer and allow for the organic growth of both projects with exploration and mine expansions. The Campo Morado and Tahuehueto properties offer excellent exploration potential and an easy way to increase reserves and resources. Additional growth for the company is anticipated by seeking merger and acquisition opportunities within Mexico and potentially in other stable jurisdictions in North America and abroad.
There are exciting times ahead for Altaley in Mexico.
https://www.altaleymining.com/media/ceo-interview-with-canadian-kyle
https://www.bnnbloomberg.ca/rise-of-the-phoenix-1.896515
https://www.youtube.com/watch?v=-WOX_x45zuE
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