Operator Gains Confidence of Equity MarketsWed, 10/18/2017 - 15:41
Q: How would you assess the prospects for the global mining industry and where does Mexico fit into that?
A: If we look at the production profile of a lot of companies over the next few years, especially given the fact a lot of companies over-leveraged themselves in the past decade, there is a real deficit in terms of production from 2019 and beyond. That is most pronounced in the gold industry. When looking at countries like Mexico that have had recent successes in exploration and in terms of projects that have been discovered from greenfields and brought through to production, it is clear there is a lot of mining entrepreneurship. The country is becoming an interesting place in which to operate and this period marks a turning point in Mexican exploration because it is becoming more innovative and advanced.
Q: What strategies helped to drive the share price up by more than 500 percent in 1H16?
A: Firstly, the company has been evolving constantly since 2012 and before that there was a lot of turnover in management, making it tough for the company to stay well-funded. A new CEO, Brendan Cahill, took over in 2012. Since then, the company has developed a strategy to significantly turn around operations that would see a doubling of production and more than halving of costs in 2H17. We were able to take advantage of improved equity markets and raise US$25 million in a nine-month period, which attracted our largest holder, Eric Sprott, who now owns 19 percent of the company.
More importantly, this capital allowed us to recommence exploration for near-term mineable resources and to follow up on previous discoveries of skarn mineralization on the project. We have already had early success in the program. We are probably about 6,000m through that program and in 4Q16 we announced results in which we intersected significant mineralization. One of those was an underground hole in which we intersected 13m of 1,800g/t silver equivalent. This also brought forward production and gave us an extra 25m of mineralization. The mineralization that we are exploiting on the permit to date is indicative of a larger system that we will continue to explore.
Q: What strategies does Excellon use to raise funds?
A: We see a live interest in the retail silver market and some US ETFs. The silver space is quite small but quite well-monitored and, in terms of being able to raise that capital, we go to investors with detailed plans that show what we can do with the funds. We are at the point where we have raised more capital to see us through the slump. In the context of the Platosa ore body, every 10x10m block of mineralization contains approximately US$1 million worth of metal due to the density and the grade. Therefore, for every drill hole on the project that defines additional mineralization, the return on exploration investment is significant.
Q: How are you planning to double production and halve costs this year?
A: This philosophy is actually quite simple. The biggest constraint on our production historically has been that there is a lot of water in the mine. This does not impede mining but we use a lot more grouting and the process is a lot more manual and time consuming. In 2015, we developed a simple engineering solution to more efficiently dewater the mine and we are in the final stages of implementing this optimization plan. With us being able to more effectively manage this water, we can develop five times faster, we can cut our maintenance costs and become a lot more efficient in terms of electricity use.
We are mining around 150t/d and we think that doubling this to 300t/d is just the first milestone. We think in 2018 there will be more room for optimizing that and at that point the only bottleneck would be our mill, which we can upgrade to a capacity of 500t/d. All the numbers and figures we have used are on the conservative end of the scale. So we believe that a goal of 300t/d is very achievable.