Silver Bull CEO Tim Barry Discusses Sierra Mojada PEA

Tim Barry Podcast Silver Bull Resources Zinc Mining Mexico

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Silver Bull Resources (NYSE:SVBL, TSX:SVB) reached an important milestone last week: it released the Preliminary Economic Assessment (PEA) for their 100% owned Sierra Mojada silver-zinc project in Coahuila, Mexico. On Thursday, I discussed the report with Silver Bull CEO Tim Barry. The full audio of our conversation is available above and below; but first, the backstory on Silver Bull.

Restructuring

In 2009, a cash-strapped NYSE listed Metalline Mining held the Sierra Mojada project. Metalline management had lost shareholders’ confidence, so it merged with Vancouver-based Dome Ventures. Brian Edgar, 63, a mining lawyer with close ties to the Lundin Group, was running Dome (Mr. Edgar was Lead Director of Red Back Mining when it sold to Kinross in 2010 for $9 billion). With Tim Barry, 37, exploration geologist, installed as CEO, and Edgar himself as executive chairman, the combined company renamed itself Silver Bull Resources, and partnered with JDS Engineering to re-establish and grow Sierra Mojada’s resource. Along the way, Silver Bull attracted the US’s largest silver miner, Couer d’Alene Mines Corp., as a major shareholder.

Silver Bull’s latest resource statement factors Sierra Mojada’s silver endowment at more than 163.6 million ounces – all in the Indicated category. This is at an average grade of 71.4 grams per tonne, using a 25-gram-per-metric ton cutoff. The silver zone is near-surface and contains some zinc, the statement reported. Directly beneath the silver zone is a large zinc deposit of more than 2.2 billion pounds. Sierra Mojada also contains lead and copper, and it is known as a Carbonate Replacement Deposit (CRD).

PEA

Silver Bull’s PEA will brief investors and potential suitors on the extent of the project’s economics. CEO Tim Barry commented, “The key points of the PEA are an after tax NPV of $463 million. The rate of return is 23.1%, CapEx is $297 million, which includes a 15% contingency, with a 2.9-year payback,” Barry explained on our phone call. “It’s an 18-year mine life, which will produce on average 5.5 million ounces of silver per year, with a very high-quality zinc concentrate of about 55,000 tonnes per year, which equates to about 65 million pounds. Cash costs per ounce, net of byproduct, are approximately $6.58 per ounce of silver produced.”

Silver Bull factored metals prices at $23.50 for silver and $.95 zinc for their PEA, closely following the Energy & Metals Consensus Forecast, but maintaining figures slightly more conservative than consensus.

“The silver price was $24 just two weeks ago,” Barry added. “Sierra Mojada’s not getting built tomorrow, and what we’re trying to do is forecast reasonable metal prices. When this does go into production, we do expect zinc and silver to be higher.”

Silver Bull’s name is a pretty accurate summation of its outlook for silver prices. Still, Mr. Barry painted an especially compelling picture for zinc, noting that several of the industry’s largest zinc mines will reach the end of their lives over the next two years. Smaller, inferior projects are scheduled to replace them. “When you’re losing three of your biggest mines, and there haven’t been any major zinc discoveries in a very long time, it doesn’t bode well for supply.”

“We recognize that people need to see how robust the project is at lower prices, and even at $16 silver, this project still makes money.”

SVB PEA Price Sensitivity

Sensitivity table showing NPV and IRR at different silver prices. (Source: Company PEA News Release)

Our conversation turned to metallurgy. The company says a process called SART (Sulphidation, Acidification, Reduction and Thickening) — commonly used in oxide copper-gold projects — will allow for 75% silver recovery and 40-50% zinc recovery at Sierra Mojada. SART also regenerates 95% of the cyanide used in the metallurgical process, which will save the company considerably during production, as the chemical would otherwise be an ongoing consumable cost. SART is used at Newmont’s Yanacocha mine, Kinross’s Maricunga mine and others, but isn’t well-known to investors. “It’s a good part of my job to get out there and preach the virtues of the SART process,” Barry told me. [For more on SART, listen to the full audio recording.]

“Top Quartile”

Sierra Mojada falls in the top quartile for cash costs per ounce and production volume, according to Barry. “[Silver producers] are going to have to replace [mined] ounces, and that’s where a project like Sierra Mojada has tremendous value — any company wants to buy a big asset and there are not many out there.”

Looking forward, Barry made clear his focus will be divided between permitting, feasibility and getting the story out to investors and potential acquirers. News flow will be focused on key permitting milestones, like their Environmental Impact Assessment ratification, of which Barry says they’re well under way. The company is also working to secure all surface rights to the project, and aims to complete a Pre-Feasibility Study in 2014.

The company has $6.5 million in cash, which, at the current burn rate (~$180,000 per month), will last into 2015. [Ed. note: Silver Bull was recently recognized in an article published by Sprott and others for prudent management of its treasury].

“I’m actually an exploration geologist by training and it’s not lost on me the wider exploration upside of this area. We will have a low-level program, mainly with leather on the ground. … I’d love nothing more than to have a Feasibility on Sierra Mojada under way and reporting the news of that and put a hole into a whole new area that’s never been drilled before. Our Palamos Negros target 9km up-strike from the deposit, and sitting in the same structure, has a lot of potential for the company.”

Silver Bull Resources Inc. (TSX:SVB)
Shares Issued 159,072,657
Last Close 10/07/2013 $0.37
Company Presentation Link

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Pretivm Resources – Bob Quartermain Interview

Upcoming feasibility study and bulk sample test could prove mining legend Bob Quartermain has struck gold again with Pretivm’s Valley of the Kings discovery.

Brucejack, BC, Canada

Behold the Valley of the Kings

Pretivm Resources’ (TSX:PVG) Valley of the Kings discovery on the Brucejack property in Northern B.C. is just about the best Canadian gold project in the hands of a development company right now. It’s got grade, size, low CapEx and ease of permitting all going for it.

The recent sell off in gold and related equities has taken no prisoners — like most other companies in the market, Pretivm shares have fallen over 60% this year. In light of the downturn, we wanted to get a better sense of the project and the opportunity it offers, so we turned to CEO Bob Quartermain for the Pretivm lowdown. We also had the privilege of getting a better sense of the veteran explorer behind the project along the way.

Mr. Quartermain

Pretium’s Quartermain

Born and raised in New Brunswick, Canada, Bob Quartermain developed a passion for the Canadian north as a young man, and has been an exploration geologist focused there ever since. His big break happened in 1980 with the Hemlo gold discovery in Northern Ontario. Quartermain, as project manager, spent three years drilling off the David Bell mine for Teck Resources and contributed to the underground mine plan that would eventually yield one of Canada’s most profitable gold mines.

It was a phone call from the young Quartermain that set off the market frenzy — he and Bruce Durham were the first to recognize the significance of the First Goliath drill core. “You could just see it. It was this moly-rich, sucrosic, beautiful, grayish-blue gold bearing rock. We started opening drill core boxes — and each box contains 15 feet of core — and we ultimately opened up six of them: 90 feet in total, and it was all the same moly-rich rock.”

Watch: The Hemlo Gold Story (CBC)

The young geologist went to the nearest payphone to relay a rough visual assay of 90 feet of 1/4 ounce per tonne gold to his employer Teck. “The person on the other end of the phone didn’t seem so impressed,” Quartermain recalled. But by the time he got back to his hotel room, there were frantic messages for him to call the president of the company.

The market in Vancouver went wild. Soon, penny shares of Hemlo area companies were trading as high as $90. When true assays of the drill core came out to 92 feet of .256 ounces gold, Quartermain’s intuition was validated. From that point on, his company and others trusted him.

After Hemlo in 1985, the humble Maritime geologist took the reins of Silver Standard, another Teck company. By the time Bob retired in 2010, it was a $2 billion silver producer; it had started at just $1.8 million.

“When I came to Vancouver, I didn’t own a suit, I’d never read a balance sheet, never met a lawyer, and I only knew one broker. But they threw me in the fray of running a junior company, and it panned out, because we focused on sound geology.”  With the backing of investors like Rick Rule and Jim Blanchard, the company grew by exploration and acquisition.

Sound geology is what led Quartermain to purchase the Brucejack property from Silver Standard in 2010. He wanted out of retirement and was convinced it was one of the best gold exploration projects in the world.

Brucejack was sold, along with the neighboring Snowfield project (which contains a staggering 34 million ounces of low grade gold — a proxy on a higher gold price) to Pretivm for approximately $450 million in cash and shares. But the focus has always been on locating the potential high grade gold at Brucejack.

In the two and a half years since the sale, Pretivm has defined a spectacular high-grade resource. “In 2009 we had 400,000 ounces of gold and 16 million ounces of silver at Brucejack. The Valley of the Kings area at that time just had a half a dozen drill holes. Between 2010 and 2012, we drilled 174,000 meters and now have over 8.5 million ounces at 16.4 grams per tonne gold open at depth and in all directions.”

Pretium CEO

Quartermain with high grade Valley of the Kings core. Photo: Wayne Leidenfrost

In this day and age, gold projects with the richness and size of Brucejack and the jurisdictional advantage of being in Canada and close to current and former mines like Eskay Creek are rare. Pretivm is in a league of its own among junior companies.

Analysts at BMO seem to agree, commenting that Brucejack is “the right size for the current market environment.” Its underground mine will be finished in 2016; Quartermain says it is projected to cost approximately 600 million dollars and yield over 400,000 ounces of gold per year.

Pretivm clearly beats out the other large-scale gold projects in Canada — almost all of which are low grade, requiring Capex in the multiple billions, which isnt realistic in today’s market environment.

Presently, ten research firms are covering the company with an average target price of greater than $20 per share. Shares in PVG last traded at $6.01.

We contacted economic geologist and editor of Exploration Insights’ Brent Cook to explain this disconnect. Cook told us, “The question everyone has is continuity of the high grade. Bob is addressing that via a bulk sample. The results should answer a lot of people’s questions. I’m actually pretty interested in Brucejack and would love to visit the project this year.”

Results from a 5×5 meter bulk sample from the pay zone at the Valley of the Kings are expected in the second half of 2013. A feasibility study on the economics of Brucejack is also expected early this summer, rounding out the near-term catalysts.

Infrastructure (there is road access), water (they’ll likely generate their own water underground – it’s a wet area), permitting and politics are less of a worry to Quartermain and analysts. Grade continuity is the main focus. If demonstrated, along with expected and positive economics, Brucejack could be one of the few bright spots in the mining industry in 2013.

I asked Quartermain whether his plan was to sell Brucejack or develop it into a mine. He told me his plan is to get the best value possible. “Two years ago, selling the project may have been very likely,” he said. “Right now the major companies are focusing on organic pipelines, and their interest will depend on the bulk sample and feasibility. If they both deliver what we feel they will, the project will be very robust, and we think they’ll be interested.”

The fact that Quartermain built Silver Standard into a profitable precious metals producer makes us confident that if they can’t find a buyer, they can move toward its stated 2016 production commencement timeline on its own.

We chatted for a few more minutes before Bob had to leave Vancouver for Europe, then on to the Middle East to catch up with investors. “It’s important to see the owners of the company, and we like to visit our large investors a few times per year,” he told us.

“There hasn’t been another Hemlo find, and I was fortunate to sit on that discovery. Brucejack may be as significant,” Quartermain said. “I should be so lucky.”

The Prospectors and Developers Association of Canada seem to agree with Quartermain, having awarded Pretivm the 2013 Bill Dennis Award for a prospecting success.

Check out the four-minute video below for a closer look at Brucejack, Pretivm and Quartermain. Also see the company Fact Sheet and Corporate Website for more information.

Disclosure: As of this writing, the author has no position in any of the stocks mentioned in this column. This is subject to change in the future. All information presented is believed to be reliable at the time of publishing. Mr. Quartermain’s comments contain forward looking statements. Please see Pretivm’s Cautionary Statement on page 2 of their corporate presentation. Nothing in this article should be construed as advice or a solicitation to trade any securities.

How To Get Rich By Discovering A Uranium Mine With Your Dad

Father and son Ben and Garrett Ainsworth may have lead Alpha Minerals and JV partner Fission Energy to the radioactive mother lode on a new frontier in the Athabasca Region of Northern Saskatchewan.

Alpha Minerals VP and CEO

Garrett and Ben Ainsworth

Not long ago, Alpha Minerals, formerly ESO Uranium, was a dog of a stock. Trading at just $.02 last October, chances of being able to finance for the Southwest-Athabasca-Region focused uranium explorer looked slim. Backed against a wall, management had no choice but to roll back shares 10:1 and change its name in hopes of triggering a fresh start.

Then something spectacular happened. Just days after the rollback, Alpha announced Discovery Hole 22 hit anomalous radioactivity over 21 meters. Further exploration holes intersected more mineralization. Today, shares in Alpha are trading over $3.80 — providing an almost 20-fold return to investors in under five months. Good dog.

How exactly the discovery happened is one of those crazy stories that’ll take its place in mining legend.

Five years ago, current Alpha Minerals CEO Ben Ainsworth was working as VP of Exploration for Hathor Exploration — the last Athabasca-Basin-focused uranium junior to be taken out by a major. Meanwhile, his son Garrett, then 28, was toiling away for ESO.

Without money for field work, Garrett turned to searching through the Saskatchewan Mineral Assessment Database for potential finds. And in May 2008, when he was leafing through a 1977 CanOxy (now Nexen) report, something jumped off the page. A CanOxy geologist had identified radioactive anomalies near Patterson Lake, but wrote them off as likely caused by “exotic soils in the till.”

It was just a notation, but it was enough for the younger Ainsworth to head to the Southwestern Athabasca Region to stake the claims that would eventually yield a discovery.

At the PDAC conference in Toronto last week, I had the opportunity to have dinner with the elder Ainsworth, Ben, who told me I had to meet his son Garrett to hear how his discovery came to be.

I connected with Garrett in Vancouver this past Monday. He told me the amazing tale behind the find.

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Mining’s Greatest Explorer – Dave Lowell Interview

Odgers Berndtson With special thanks to Odgers Berndston, global leaders in executive search, for supporting this production.

Mining Dave Lowell Arizona

Lowell at his ranch, January 2013 – Photo: Adam Humphreys

Click here to launch the video in Youtube, or scroll to the bottom of this article.

The Atascosa Ranch is walking distance from the US/Mexico border, just outside of Nogales, Arizona. It’s owned by Dave Lowell, an affable 84-year-old man who’s spent the past 75+ years hunting for buried treasure. Today, he’s known as the most successful mining explorationist of the past century, having discovered an unprecedented seventeen ore bodies, including the world’s largest copper mine. Last week, Lowell and his wife, Edith, invited us to Atascosa for lunch. We brought our cameras and sound equipment, and recorded a conversation with one of mining’s greatest outliers of all time.

J. David Lowell was born February 28, 1928, to a modest family, not too far from Atascosa (the ranch belonged to his uncle at the time). Lowell was first exposed to mining at age 7, when his father, a mining engineer, put him to work. When Lowell pursued his college education at Arizona and then Stanford, he concurrently worked at mines and on exploration programs. Not too long after he had completed his degrees, Lowell had become one of the foremost experts on copper deposits.

Lowell is probably best known today for co-authoring the Lowell-Guilbert Model, a guide to large, low-grade porphyry copper deposits published in 1970. Throughout most of his career, Lowell used the model to locate some of the most profitable mineral finds in the history of mining, such as the 1981 discovery of the Escondida deposit in Chile. Containing hundreds of billions of dollars worth of ore, Lowell and his colleagues found it at the cost of a mere $2.5 million.

Escondida Mine, Chile

Escondida at night, the world’s largest copper mine, and a Lowell discovery. Photo: BHP Billiton

Over lunch of elk tacos and Mexican fried beans, Lowell was modest about his success. But he offered a theory as to why major mining companies don’t make discoveries as efficiently as prospectors like Lowell. Major mining companies have a “don’t make mistakes” approach, which “doesn’t fit at all with the profile of the mad scientist who discovers mines,” he said. “When something like one in five hundred good-looking targets will become a mine, a successful explorationist needs permission to be wrong four hundred and ninety-nine times.” Here he paused. “If there’s anything my career says about me, it’s that I’m very good at being wrong.”

Despite being a pro about being wrong, Lowell does admit to limitations. Having “no taste for shareholder relations,” he recalled giving a presentation to investors in 1995 that resulted in the share price of one of his companies falling from $35 to $15 during the time it took him to finish his talk. The shares recovered shortly thereafter.

On the changing impact of technology on mineral exploration over the span of his lifetime, Lowell holds that it’s been “very little.” He believes that “geophysics has been very oversold,” instead favoring “drill holes and geochemistry… The best guide to ore is ore.” Lowell also voiced doubts that technology would be able to revolutionize mineral exploration the way 2D and 3D Seismic has for the oil and gas business, at least in the near future.

The commodities super-cycle is intact, Lowell believes. There’s elasticity in mining companies’ profit margins, he told us, but not in the demand for the underlying commodities they produce. For that reason, large, undeveloped, low grade copper deposits will need to be put into production, sooner than later.

When asked about his favourite jurisdictions for exploration currently, he told us he favors Chile, Peru, New Guinea, Mongolia, Nevada, and some parts of Africa. But he qualified his dispositions by recalling that attractive jurisdictions are constantly changing. “Places like Arizona were very attractive as a place to explore for copper deposits, and now Arizona is about as bad as Venezuela,” he chuckled.

When we moved on to the role luck has played in his career, Lowell avoided answering directly. Instead he responded that “minefinders who make one discovery are much more likely to find another.” His basic philosophy is that of persistence, and it shows — his career is equally productive after retirement age as it was before.

At age eighty-four, Lowell is not slowing down. With financiers Dave De Witt and Marcel De Groot of Pathway Capital (“as efficient, honest and reliable as partners get”), Lowell is developing several projects, including a titanium-iron deposit in Paraguay, which he believes is the largest of its kind in the world. Other active projects are under wraps for now, as to avoid competition. Investors who rode his Arequipa Resources shares from .20 to $30.00 in 1995 will surely be watching Lowell’s upcoming public ventures. An autobiography is also in the works.

It was an honor to spend time with Dave at his ranch, and we’re pleased to share some video, pictures, and sounds of the day. We hope you enjoy the following short film about the greatest outlier and maverick the mining industry has known in recent memory, J. David Lowell.

Odgers Berndtson

With special thanks to Odgers Berndtson, global leaders in executive search, who are working with us to grow their Resources practice. We look forward to introducing them to you over the coming weeks.

 

More: 50 Acre 1: Lowell Profile Backstory (CEO.CA), Lowell Institute For Mineral Resources (University of Arizona), Octogenarian Finds Copper With China As Biggest Customer (Bloomberg), Pathway Capital (Vancouver, Canada)