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- Prime mining is experiencing the best of both worlds with gold prices far in excess of processing costs and potential for substantially larger deposits than previously anticipated in the Los Reyes project in Mexico.
- All-in sustaining likely to be $900-$1000 per oz, or lower.
- After the global reset, we may see a greater focus on renewables and if that’s the case, the future for lithium is fantastic.
- Gold and lithium are two good trades but as seen in the 2015 gold market, the rise from the bottom (lithium) is hard to time.
Andrew Bowering, CEO and Director of Prime Mining Corp, joined Lara Smith, Founder of Core Consultants to discuss their Los Reyes gold project in Mexico. Andrew brings 30-years experience as owner operator of drilling companies and leadership in worldwide mineral exploration and development. He shared his excitement about their volume of deposits, his views on their share price and other observations about his sector. The following is a transcript of the video:
Lara Smith: I’m Lara Smith. I’m here on my sofa in Tel Aviv under lockdown. I’m here with Andy Bowering from Prime Mining. Andy. Hello.
Andrew Bowering: Good day. How are you?
Lara Smith: I’m all right, thanks. Where are you?
Andrew Bowering: I’m in Burnaby, British Columbia in my home office and casual.
Lara Smith: Also under lockdown?
Andrew Bowering: That’s it!
Lara Smith: That’s pretty much the whole world right now.
Andrew Bowering: Yeah.
Lara Smith: But not under lockdown because Mexico is doing pretty well from, from a Covid19 perspective. You’ve got the Los Reyes project in Mexico, which is a gold and silver project, and you’ve just put out a resource statement. Can you tell us about that?
Andrew Bowering: Yeah, our crews are continuing to work down there. They’re in the field working today, they’re taking samples and they’re getting shipped off to the lab. But for the last several months, we were working on updating a new resource for Los Reyes. We knew it was bigger than advertised, and last week we delivered our first updated resource on the project. It’s the first update that’s come in, I guess it’s seven years on the project. And we announced, I’ll call it an in-pit resource of close to 1.1 million ounces, gold and silver Au equivalent. There was 830,000 ounces measured and indicated at 1.3 grams, all oxide, all in-pit, calculated at a very conservative number.
And what I mean by that is that our calculations were done, or Stantec’s were done at 1320 gold, $16 silver, based on gold recoveries of only 72% and based on silver recoveries of only 25%.
Lara Smith: And actually just to tell everybody, firstly gold is over 1600 bucks right now. So that really is conservative.
Andrew Bowering: It really is. You know the global on this is 1.7 million ounces, gold, silver equivalent, 1.7 million. Now, you know, we’re required by 43-101 to constrain it to sort of what’s economically feasible. And so our top mining engineers, our management will tell you that there’s a million ounces recoverable there now, and that’s a big deal.
It’s all oxide. It sits at surface, it’s open pittable, it’s heap leachable, and no ifs ands or buts, it’s going to be a successful mine. Now the real question is how big can it get? And so, you know, one of the last times we talked, our plan was to fast track this to production. We knew there was 500 something thousand ounces there and that was a global, not an in-pit, but we knew there’s about 500,000 ounces there and we were going to try and fast track it to production in a couple of years as a open pit heap leach.
Lara Smith: And you’re not going to do heap leach because it’s just too big now. Right?
Andrew Bowering: It’s too big. Here’s the thing, if we kept with that same plan, we would leave 250,000 ounces of gold on, sorry, 200,000 ounces of gold and 16 million ounces of silver on a leach pad that likely would never get recovered. And think about the economic value of that. So as a result, it’s going to have to be a combination of heap leach and, CIL or some process like that. And if you’re going to engineer it out for a million ounces, you might as well see how big it is. Only 40% of the structures have been identified. The only reason the pits stop at 200 meters is that’s as deep as the drilling has gone. It’s open and…
Lara Smith: And Prime is actually primed perfectly right now just because where the gold price is sitting. I was speaking to Jim Rogers yesterday. He’s a buyer of silver at this level, he’s a buyer of gold, silver’s cheaper than gold right now, but I asked him and he said it can breach that 1900 mark. Gold has been ceiling priced at 1900, it was there in 2011, he thinks it’s going to hit that and beyond. What do you think about gold?
Andrew Bowering: Interestingly enough, I was watching Pierre Lassonde’s interview with Kitco last night, and he talks about some crazy numbers for gold and, I remember, I mean, I’ve been in the space for 30 years, I remember in 2011 when it hit 1940, and it certainly looks like it’s heading through there, and the world’s a really different place right now. Who knows where gold can go? But, we can make a lot of money at $1,200 gold on this project, but…
Lara Smith: How much do you need to start making money? What gold price do you actually need?
Andrew Bowering: We don’t know yet until we really do a full feasibility study, but based on all the early projections our estimated all-in sustaining costs are going to be somewhere in that 900 to a thousand dollars mark, is what I would guess, and since it’s probably twice the average grade of an open pit heap leach mine in North America, we think it’s at the lower end of the cost curve, so it could, it could hug $900 all-in sustaining costs and maybe a little cheaper. It’s going to be one of the cheaper ones.
Lara Smith: Yeah, certainly believe that gold’s going to be over 1000 bucks, you’re very much in the money, you’re doing well.
Andrew Bowering: 100%. And then if it’s a $2,000 it’s crazy to think about.
Lara Smith: It’s even better.
Then you’re really getting in at the bottom.
Andrew Bowering: Well, that’s right. Well, you know, we bought it when gold was 1260 and gold had been bouncing along that 1260 mark for several years and the industry, it endured a lot of pain.
You know, when I think about the guys that had it, that we bought it from, they tried to roll everything up into Minera Alamos in 2015 and that was probably the very bottom of the market, but it’s stayed at the bottom of the market for four more years, right? Or five more years now.
Yeah, yeah. The time’s, right. Timing’s everything in these things you know? My last company, you know, we started at a 3 million market cap. We financed it at 15 cents. The street got lots of stock and it traded as high as a 450 million market cap went to 480 and that was a lithium trade.
Lara Smith: You’ve had so many successful companies. Are you talking about Millennium Lithium now?
Andrew Bowering: Yeah. Yeah, and the only reason I brought it up was timing. It’s timing. If you, like a friend of mine did his PhD in lithium chemistry and went for five years he said, don’t bother, don’t bother, don’t bother. And then in 2015 he said, now’s a good time to get into the lithium trade. And he was spot on and…
Lara Smith: Should we be in lithium now?
Andrew Bowering: Now’s the time to get back into the trade. I mean, the world economies are going to go through a bit of a crunch here for a while. But once we get through this, economies will start to pick up again. And the world is definitely heading towards electrification far more than ever before. And maybe this may be after this global reset you’re going to see a greater focus on renewables and if that’s the case, the future for lithium is fantastic.
And most of the lithium stocks are near the bottom. So yeah, I think it’d be a good time for them, but you just don’t know. You could be in 2015, like the gold trade, you know you’re at the bottom, but you just don’t know when it’s going to come out of it. That’s all.
Lara Smith: Right. But you’d be buying into lithium at this point? You’d be buying gold, even with gold high? You’d be continuing to buy gold, you’d be continuing to go into lithium.
Andrew Bowering: Sure, I think those are two good trades. Yeah.
Yeah. I don’t know. I don’t like the copper trade, just don’t. Yeah, I know that everybody wants to talk about, there’s a lot of copper out there and there’s some big mines that can get turned on in a heartbeat and, and likely will, and when we come out of this, I don’t know, the covid coma that we’re all gonna be in for the next six months, when we come out of that people are going to be looking for revenues wherever they can get them, and so mines are going to crank it up. And like Pierre said last night, he said, mills are going to work overtime to catch up. Gold’s the place to be.
Lara Smith: We’ve already seen some of that in China, where China’s turned back on, but their raw material supplier, which is outside of China, is not so, so you’ve got this luring deficit. It’s coming; they’re running down inventories. So definitely the tide could turn very quickly as it does for mining. Mining’s a lead factor when you come out of recession. It’s one of those those industries that just turn quickly.
Andrew Bowering: Quickly for sure.
Lara Smith: Any final words on Prime? What’s next in store? And then we can leave it there.
Andrew Bowering: Well, we’re going to start a $6 million exploration program. That’s $5 million worth of drilling and some surface work and half a million dollar met program that will run over the rest of this year. As I said, only 40% of the structures have been drilled. Every deposit that’s in that 1.1 million ounces is open along strike and open in depth. And…
Lara Smith: It’s already exceeded your expectations on your resource statement. Do you think it’s going to go even further? It’s a huge deposit.
Andrew Bowering: We’re going to find out, we’re going to spend about $5 million, and that’s going to tell us, tell everybody whether it’s a 2 million to 3 million ounce deposit, or collect series of deposits or whether it’s bigger than that, that’s what it’ll tell you, and then it will tell you whether you need to go spend another 25 million in infill drilling to show that it’s several million ounces or it’s time to do a feasibility study and put it into production. We’re kind of in a best of both worlds situation right now with this asset.
Lara Smith: And we will pretty much know that answer by the end of the year?
Andrew Bowering: Yeah. And the one thing I’ll say the company’s got a market cap of 27, 28 million Canadian dollars. And, I don’t know, a million ounces of oxide North of a gram, 1.3 grams, open pittable, heap leachable, no environmental nasties, has to be worth somewhere between $50 an ounce and $75 US an ounce and you know, that puts this company really should be trading in a 80 cents to a dollar 25 range, somewhere in a pre covid world. That’s probably where it would be trading. And that doesn’t just come from me, that comes from some pretty smart people. So I think we’re undervalued. I think that we get a bit of discount right now because we only have a million in the bank and people wonder where the money’s coming from, but, there’s a few of us that are deep into the company and we’ll put some more money up and we’re working with a couple strategic investors to talk about the right deal for funding it. We’re just very careful about dilution.
Lara Smith: Yeah, that’s very important that you’ve got management who are personally invested in this and are actually willing to continue to be invested just to see the project through and that’s really something where you’re very much aligned, well I feel that you’re aligned with your shareholders who do buy that share; you’re in with them.
Andy, thank you so much for your insights. Good luck with your project.
Andrew Bowering: Thank you, Lara, take care.
