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@tommyMargaux Resources $MRL - TSXV - New CEO.CA sponsor and long position
Thesis: Regional consolidator of Kootenay Arc Assets with Proximal Customers (Kinross Kettle River gold mill in WA, Teck Pend Oreille Mill in WA and smelter in Trail, BC)
The following notes may contain errors and are not intended to be investment or professional advice. Always do your own due diligence and consult a licensed investment advisor prior to making financial decisions, and consult Margaux’s SEDAR profile for important risk disclosures.
~49.243 million shares, 67.697 million fully diluted
~$17.72 mil market cap (at 36 cents)
~$3.5 mil cash (just raised 3.84 mil (30c Units with half warrant at 50c for 2 years)
-4 projects covering spectrum of commodities. Significant land position.
-Massive amount of infrastructure from 1920s-1970s mining, arguably 9 figures worth of roads, underground workings, etc. No abandonment liabilities to Margaux.
-Serious people involved, with hard cash on the line
- CEO Tyler Rice, millennial CPA, CA, MBAcc, raised in Lethbridge, Alberta. Already has two successful exits under his belt in oil and gas and healthcare. Successful young entrepreneur has moved his family to Nelson BC to lead the project efforts. Has invested approx $500k into Margaux, as well as socially invested.
- IAMGold (+800k oz Au producer) $IMG CEO Steve Letwin and family owns approx 30% of Margaux. Mr. Letwin is actively involved as an advisor to the company and is proactive with marketing. Letwin’s brother is Chairman and his brother-in-law is a director. He’s blown away with the infrastructure, access, roads underground, etc.
- Linda Caron, seasoned geologist, recently poached from Kinross, 25 years of experience in the area, including with responsibility to find ore for the Kettle River mill.
1. Flagship Jersey Emerald property:
- 2nd largest historic zinc-lead mine in B.C. + tungsten mine in North America
- 2 separate deposits with 2 separate resources (1 lead zinc, 1 tungsten). Also gold potential.
- Zinc lead resource: 1.9 MT at 4.1% Zn, 1.9MT at 1.96% Pb, Indicated, plus 4.98 Mt at 3.37% Zn, and 4.98MT at 1.95% Pb, Inferred
- Tungsten resource: 3.07 Mt at .34% W, Indicated, and 5.48 Mt at .27% W, Inferred. Big tailings opportunity as well
- Also gold showings (past intercepts of 24.98 g/t Au over 10.20 m at ~115m from surface). Exploring similarities to Buckhorn deposit in WA south of the border.
- Deal terms: $4.01 million cash ($2.92 million left to pay), $2 million work (paid), 1.5% NSR to Apex (buy back half for $500k). $50k monthly payments Apr 1, 17 for 12 months, then $100k per month from April 18, 2018 til X for a total of $2.23 mil
- Teck’s Pend Oreille mine and mill is just south in Washington. Resource beyond 2017 there is not defined.
- Smelter in trail 40km away
- Exploration to upgrade zinc lead resource ongoing. New 43-101 tentatively scheduled for Q3 2017, following Spring drill program (details TBD). Met testing also.
2. Jackpot lead-zinc property:
- Cominco drilled 143 holes and constructed two exploration drifts in the 70s-80s. Teck dropped most BC projects when they acquired Cominco including Jackpot.
- Historic non-NI 43-101 compliant historic resource (company can’t say: 3 Mt @ 5% Pb+Zn) http://margauxresources.com/Portals/0/Documents/170328_PR_Jackpot.pdf?ver=2017-03-27-212637-500
- Deal terms: $340k cash and 500,000 shares plus a 1.5% NSR (can buy back half for $1 mil)
- Daijin had it in 2007 and walked away with several holes unassayed. Logging to determine next steps.
- Access to historic core. Logging and assays planned. Will twin priority holes.
- Exploration including drilling planned this Spring/Summer working towards towards NI 43-101 compliant resource for combined zinc lead resource on Jersey Emerald and Jackpot properties later this year.
3. Sheep Creek gold property
- Historical producer (1899-1950s) 736,000 oz gold plus zinc, lead and silver. Average grade 0.43 oz/t Au (14.72 g/t Au).
- Potentially analogous to Barkerville camp, 55 known veins
- Historic non-NI 43-101 compliant resource: M+I: 122,000 tonnes @ 14.4 g/t Au, Inferred: 172,400 tonnes @ 10.6 g/t Au
- Deal terms: 100% for $500k cash and 1.05 mil shares
- Consolidation of the camp for first time in > 100 years (6 historic mines).
- Late Spring/Summer exploration program planning underway
4. Bayonne gold property
- Past production− 90,000 tons @ 0.47oz/t Au
- Deal terms: 100% for $194k cash and 550k shares
- Finalize Spring/Summer Exploration Programs at Jersey Emerald, Jackpot, Sheep Creek and Bayonne Properties
- Update 43-101 resources for Jersey Emerald and Jackpot later this year (lead, zinc and gold)
- Potentially complete a 43-101 resource on Sheep Creek
- Marketing. MRL has been financed through Letwin family and a few supportive shareholders in Asia. Story is not well known in N.A. That’s changing.
- Baseline environmental. Community consultation.
- PEA and Pre-Feas for lead zinc on the back of updated 43-101 (2018+)
- Could Jersey Emerald zinc, lead be milled at Pend Oreille, to expand their life of mill, delaying abandonment and care and maintenance costs?
- What gold grades would justify shipping gold ore from Sheep Creek and Bayonne to the Kettle River mill?
- Is ore sorting technology from Steinert or Tomra acceptable upgrading technology?
MRL News: http://margauxresources.com/Investors-News
SEDAR (See MD&A for important Risk Disclosures) http://www.sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00030582
Disclosure: Long MRL, and the company is CEO.CA’s newest advertiser, so I am very biased.
Thanks for your thoughts. #index
@teevee@tommy, here are my thoughts on $MRL, a consolidator of Kootenay Arc "assets":
1. when it comes to Pb-Zn (Ag) deposits in the Kootenay Arc, it will take a new, blind discovery to out do what Consolidated Mining and Smelting did starting from the late 1890's through to becoming Cominco. They were very good and thorough. I met one of the last old time prospectors for Cominco back in the '70's. If I recall his name, it was Bruce Mower? A quiet, but very good explorationist who had spent his entire life working for first CM&S and later as they became known, Cominco. They explored for carbonate hosted Pb-Zn (Ag) north, past Revelstoke, and north of Ft. St James all the way up into the Yukon and western NWT. In the "good ol' days", Cominco was a subsidiary of CP, and during the '30's, they kept almost everyone on and working. Nowadays, and for the last 50 years, mining companies hire and fire with commodity price cycles. It is a tough industry.
2. Sheep Creek gold assets? A good and large historic gold producer. I have been underground at Sheep Creek in the 1970's during the last gasp of gold mining. The high grade stopes were characterized by the presence of sphalerite, could run as high as 5 oz/t, and you could smell it when the stop miners hit it with their drill steel, before setting dynamite to blast another round. The mine closed down because they just couldn't find enough stope miners that could jump around on narrow boards high up in stopes with a jackleg drill on their shoulder or under their arm. Those guys were all sinew and muscle, and obviously a great sense of balance. On the south side of Sheep Creek, the stopes stopped at creek level because of pumping problems. Most likely there are some good ore shoots left, but good luck getting a permit to dewater the old workings, or working below creek level given the water problems. They might have better luck at the north end of the camp in the vicinity of the old Reno mine. I don't know if the Brown family is still around in Vancouver, but they used to hold most of the ground and importantly had a lot of old records of mine workings, assays for stopes etc.
I wish MRL the best of luck. It is great hunting ground, and who knows, maybe some fresh ideas, and some money to test them, will result in some new discoveries.
@teevee@tommy, back to $MRL, in a camp like Sheep Creek, in the old workings, if the vein is still strong at the end of the workings, they must forget about drilling and simply extend the drifts and hope to hit another ore shoot. The old timers used to drill for show and drift for dough. What that means is, just drill to identify the vein structure, then cross cut to it, and drift along it until you hit an ore shoot. You can blow your brains out trying to drill off quartz veins to a mineable resource. And when you do hit an ore shoot, you really don't know the real grade until after it has all gone through the mill. Ore shoots might only comprise 10-15% of a vein structure, so drilling for where the ore shoot might be can result in a lot of blank holes that would be discouraging both to $MRL and the markets. Even in larger gold camps and gold systems like say Yellowknife, it is why there was never more than 6 months ore ahead of the stop miners (always drove analysts and bankers crazy because they couldn't understand how you invest in a business that could shut its doors in 6 months). It took continual drift development and assaying to find and prepare new stopes, and at Yellowkife, it worked for over 50 years.
@DanOI know a few things about $mrl. Actually about their mineral exploration projects and mines. I am thinking in writing something on them. Many Albertans tried their luck down in the Kootenays. Used their petro-dollars to try to find ore deposits. I'll tell you what happened in an upcoming article.
@RocketRed$MRL The estimate shows an indicated resource of 5,320,000 tons averaging 1.04% lead and 2.60% zinc and an inferred resource of 16,930,000 tons averaging 1.00% lead and 2.18% zinc using a cut-off grade of 1.5% combined lead-zinc. Within this large low-grade resource there is an indicated resource of 1,900,000 tons averaging 1.96% lead and 4.10% zinc and an inferred resource of 4,980,000 tons averaging 1.95% lead and 3.37% zinc using a cut-off grade of 3.5% combined lead-zinc http://www.sultanminerals.com/i/pdf/ni43-101_jerseyleadzinc.pdf
@tim_oliver$MRL: People -two financial types and a geologist make up the management team, yet they are venturing into a deposit with a production history. They need a metallurgist to evaluate the prior process and an engineer to assess the condition of any remaining facilities. I note it's nepotistic too. In my opinion the management team is weak in the areas needed to develop this kind of property. The team is strong in capital markets. Presumably their geologist is sharp. At least she's experienced. They need engineers. Of course I would say that.
@Wintersleep@teevee I just read your post about MRL and you seem to be very knowledgeable on exploration work, cominco and the Kootenay area. Any thoughts on Kootenay Zink $ZNK ? I know it's a long shot and people have failed before, just wondering if you might have anything to add from your own perspective? Thanks!
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@tim_oliver$MRL - Assets, 1. Jersey Emerald: two deposits, two types minerals. That's not necessarily a blessing. I'd be wary of trying to develop the Tungsten. China seems to have a lock on both supply and demand. I interviewed at Union Carbide's old Tungsten operation near Bishop, CA in 1983. I toured the plant. I don't know what the end product was, but the process was ugly. Apparently there is nothing left at the Jersey Emerald site except a few foundations. Nonetheless, the infrastructure that supported the prior operations ought to still be there. BTW, did you mean to quote the grade as W? Usually it is quoted as WO3. MW of WO3 is 232 and that of W is 184. You can do the math. Here's a good resource on Tungsten: http://www.miningglobal.com/tech/1160/INFOGRAPHIC-What-is-Tungsten-and-Why-is-it-So-Valuable. No comments on Jackpot, Sheep Creek, or Bayonne. That's all drinking and guessing.
@DanO@tim_oliver Haha. Now back to our discusion 1-1.5 yrs ago what was the cost to transport / truck ore to the mill? We discussed another Kootenay wannabe producer back then.
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@tim_oliver@Tommy, $MRL: your notes say the NI 43-101 resource update will come out later this year, but the web site says, right up front where nobody could miss it, an updated resource calculation will be released "subsequent" to the Fall 2016 drilling. Clarification needed. Gives appearance of not taking care of development fundamentals.
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@tim_oliver@Tommy, $MRL: corporate presentation mentions "near term production" more than once. Yet, they don't give even the most general timeline. IMO this is amateurish. Also, the presentation claims "Mill to be commissioned + designed to process zinc-lead, tungsten + gold." Someone should tell them how design usually precedes commissioning. Also, there's a construction stage between design and construction. Recovering all those minerals in a single process might be tough. Did the old timers manage all that in one mill? I could be wrong here. I'm just an armchair metallurgist, but my recollection of the Union Carbide plant is that the unit operations were very different than what we normally see in base or precious metal mineral processing plants.
@DanO@tim_oliver Willa mine/project down in the Kootenay. Back then it was Discovery Venture. Name changed to $mxl. Their plan is to transport the ore to another mill (Max moly mine - closed; an excellent BC examle of a f_up)
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@tim_oliver@Tommy - Is the Pend Oreille mill the one shown in the presentation as being 1.5 hours away in Washington? $MRL
@tim_oliverAh. Thanks @Rice. @Tommy, $MRL, that mill is about 26 miles away. Using $0.25 per tone-mile, the haul would cost about $6.50 per tonne ore. Add another $0.50 per tone at either end for load/unload and you have $7.50 per tonne. AZ Mining just released a PEA with total opex of $48 per tonne. I have no reason to think they are way off. It's an UG Zn operation, so the two are very roughly comparable. Conclusion: the haul cost of $7.50 per tonne is substantial and very well might render the Teck mill option uneconomic. Of course there is a huge offset on capex from not building a mill. But, what is the cost of using Teck's mill? It wouldn't be free. The two locations appear equidistant from Trail. So, concentrate haul costs would be about the same whether from a new mill at Salmo or the Teck mill. Also, if $MRL really expects to process lead, zinc, tungsten and gold, I see a lot of modification required to the Teck mill. So, the Teck mill option isn't without some significant capex. The only way to answer the question is with a trade off study, and that, of course, requires some engineering.
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@tim_oliver@Tommy$MRL - you question about gold grade and shipping doesn't have enough info to make a calculation and I'm not smart enough to hazard a guess.
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@tim_oliver@TOMMy, $MRL - sorting, to me, is one of those things that sounds good, but has too many problems in practice to trust. I'm sure there are examples where it works, but I don't have any knowledge. Hand sorting works for gems, but that's different.
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@RiceEach zone at the Jersey is separate, the Pb/Zn, Au and WO3 and as such would be mined at separate times. My understanding is that the Barkerville mine is applying ore sorting technology to their narrow but high-grade veins with some success. Dense-media-separator comes to mind with respect to upgrading Pb/Zn ore.
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@tommyBig thanks to those of who were able to comment on Margaux Resources $MRL. Not too late if you haven't had a first look already.I'm excited to visit the project(s) next month. Day trip from Van supposedly. Anyone want to come with?
@ocotilloreduxI'll need another day on $mrl. You can guess what I have been doing. wrt to $dbl , if it is any consolation the Kipushi NI 43-101 does not address the H2O issue there although their predecessors found it necessary to install 4,200 m3/h of dewatering capacity. Grouting static water is ten times easier than grouting flowing water since the grout tends to flush out before it is set in flowing situations. There are cheaper quick setting grouts these days though. So if that option is used, grout off around the mining targets first (before any area groundwater table activation to ensure a static environment), put a couple depressurization holes in the middle of the target once done and pump down the water table inside and watch for rebound to see how effective the grouting has been. wrt to dewatering there was a mention in the pdf of 60,000 gpm dewatering rate but I do not know the specifics and how applicable that would be for some of the mining targets.
@ocotilloreduxMy revenue model output for $mrl at the commodity prices chosen. I will give my thoughts on site costs etc. tomorrow. I hope this copy/pastes well!
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Concentrate grades: Zn- 57.6%, Pb 75% from NI 43-101
Concentrate recoveries: Zn- 90%, Pb- 90% from NI 43-101
No gold or silver credits.
Treatment terms: Zn - $US180/tonne conc. , +0.10, -0.03, $US2,000/tonne Zn basis, 85% payable.
Pb- $US200/tonne conc. , +0.04, -0.01, $US2,000/ tonne Pb basis, 95% payable.
Commodity prices: Zn- $US1.50/lb
Exchange rate: 1.33
Mining rate: 700,000 tpa
Mining grade: 4% Zn 2% Pb
Revenue model output:
Zinc revenue/tonne ore mined: $US81.77
Lead revenue/tonne ore mined: $US36.76
Total $US118.03, $C156.97
Zinc revenue $US57.2M
Lead revenue $US25.4M
Total $ US82.6M $C109.0M
Zinc in concentrate: 25,200 T
Lead in concentrate: 12,600 T
Zinc in concentrate: 21,420 T
Lead in concentrate: 11,970 T
Dry concentrate produced:
Zinc concentrate 43,750 T
Lead concentrate 16,800 T
Total 60,350 T (dmt)
Assuming 10% moisture content: 67,000 T (wmt)
Assume concentrator on site and all concentrate is processed at Trail smelter.
Distance to Trail: 55 km
Haulage cost: $C0.20/km t assumes B-trains or road trains.
Haulage cost/t conc.: $C11/wmt
Annual haulage cost: $C737,000
@ocotilloreduxFrom Teck's latest annual report with respect to Pend Oreille located just across the border... "The current mine plan sustains the operation through to early 2018, although there is still significant potential to extend the mine life. We identified high-potential areas in the currently producing East Mine area and initiated a major exploration and drilling program during 2016, which will continue in 2017." Sounds to me like there may be spare mill capacity pending so I assume $mrl is trying to entice Teck to take a look here for shipper feed. If not, they should be. It would only be catching the top of the commodity price cycle. The strategy likely would not work at prices significantly lower than what I used above.
SEDI_botMargaux Resources Ltd. $MRL just filed 2 reports. View full report: SEDI:MRL
@ocotilloreduxPart 2 below. Items for clarification:
Mineral resources. Are these resources in undeveloped areas of the mine or is a significant portion contained in difficult to extract pillars?
Status of mining permits. How quickly could a mine without mill get into production?
The two options appear to be to ship ore to Pend Oreille (PO) or to build a mill on site for ore processing. For the first option, mining would have to fit into Teck’s existing production plans by taking advantage of spare milling capacity. So, considerable delays in obtaining permits, financing etc. could dash this scenario since the remaining PO mine life appears to be less than five years.
Ideally a new ramp would be developed to access the resources such that is was not necessary to rehabilitate the old workings and rely upon access through them (assuming much of these workings are in bad shape after a +45 year closure). Hence ramp length depends on depth to the ore.
The shipper option could be a low capital cost, potentially low operating cost option since the mine would not require a mill, extensive power requirements etc. This option could ideally be in the 1,000 tpd range using Tennessee style room and pillar mining methods. It would be sized to take advantage of spare milling capacity at PO.
Since it is apparent old workings have held up well, a no-backfill mining approach would be taken, like past practice, to mine new areas,
Regulations for shipping ore across the border require clarification but I note that Pretium shipped a 10,000 t bulk sample from Brucejack to the US for processing so approvals cannot be too onerous. The PO mill appears to be only about 45 km away.
The building a mill on site option I think would require at least 2,000 tpd capacity for modest economy of scale purposes. Even so, the ore grade is low (but it is higher than the Tennessee zinc mines) so the operation would likely be a classic swing producer much like PO has been.
Ideally, there should be at least eight years of resources for mining/milling implying an extraction reserve in the order of six million tonnes. Consider two million tonnes to be left behind in pillars supporting the back so ideally eight million tonnes of reserves would support a 2,000 tpd mill for eight years. (Mines with less than eight years of life tend to be overcapitalized and logistically difficult to execute and mines with greater than eight years will not impact project NPV significantly due to the time value of money.) So this means the need to define more resources in my mind for this option.
Mining/Milling Cost Range
Low cost example- Tennessee zinc mines. C$55-60/t ore
Local cost example- Pend Oreille* C$101/t ore
Additional cost example-Hudbay’s Lalor (2015) C$75/t mined + C$24/t milled + $C$6G+A = $C105
*Teck reports $C77M in revenue for PO in 2016 and $C0 gross profit before depreciation . In other words, expenses equaled revenue. 761,000 T of ore was milled (6% Zn, 1.3% Pb) resulting in a cost of C$101/t ore.
The low cost example is likely only possible if all the stars aligned well so I would use the other examples as more reasonable. But it warrants a look if possible.
Going back to my previous revenue model and varying the price of zinc (lead held constant at $US1.10/lb), I get smelter revenue before transport costs of:
$US0.90/lb. $C114/t$US1.00/lb. $C121/t$US1.10/lb. $C128/t$US1.20/lb. $C136/t$US1.30/lb. $C143/t$US1.40/lb. $C150/t$US1.50/lb. $C157/t
If site costs in the $C100/t are a reasonable assumption, zinc prices higher than $US1.50/lb. are likely required to cover initial capital, sustaining capital and other impositions including financing, royalties, concentrate transport, handling, umpire and marketing costs etc. The on site milling option would likely need zinc to be in the $US2.00/lb. range.
So putting together a low operating cost/ low capital cost plan is likely the only means of making the project attractive at first blush. So I would 1) review the location of the resources to see if it is worthwhile putting together a scoping level mine plan, 2) do so if the answer is yes, 3) see if Teck has any interest in toll milling or joint venturing if there are no major impediments to permitting. The deposit is a classic swing producer by all appearances but the NI 43-101 does not provide ample information to determine whether what is left is mineable by low cost methods or not.
@ocotilloreduxWe can't overlook the fact that the mine did produce for a couple decades so it is a matter of the economics coming back in their favor eventually (2019? 2029? 2039?) providing the remaining higher grade resources are not spread out all over the countryside. Have fun walking in those 45 year old openings next week @tommy. It means the ground conditions are superb. Don't look up.
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@tommyThis morning I was reminded about a promise I made here a few weeks back.
So I just sent a $1000 donation to SickKids, Canada’s top children’s hospital and research centre, in the name of the ~ZINC panel, for providing feedback on new CEO.CA sponsor, Margaux Resources $MRL.
I especially want to thank @teevee for the history and @ocotilloredux for the action plan, which you can read in the Margaux channel: $MRL. I will be discussing this feedback with management and incorporating it into an upcoming site visit story and for that, we got more than our money’s worth. Thanks to everyone who participated.
The late Canaccord CEO Paul Reynolds introduced me to SickKids. He was a passionate director. In 2014 Paul agreed to match donations to SickKids by CEO.CA subscribers. He was always looking for win-wins. RIP. http://cdn.ceo.ca/1cev6i9-Sick%20kids.png+#indexhttp://www.sickkids.org/AboutSickKids/index.html
@ocotilloredux@BenjaminCox I am sure you are aware smelters actually recover 95-97% Zn but only pay 85%. The difference is "free metal" for the smelter. Another way they screw the miners over. #zinc~zinc
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@DanO@Tommy I am writing something about $mrl. Almost done. Might post it later today or tomorrow morning if I'd get the rest of the work (that pays bills) done.
@tommy@DanO thanks for taking the time and sharing a bit of backyard history. Good disclosure feedback and I appreciate learning about your potential $MRL concerns. Dont agree with all of the conclusions but have a better feel for risks from reading your comments and enjoyed the writing. Margaux is still figuring out what they have and the best path forward. Significant work programs this Spring and Summer will help. Thanks again