Junior gold plays – New Orleans Investment Conference

Here we are on the floor of the New Orleans Investment Conference, organized by Brien Lundin of the Gold Newsletter, and taking a closer look at some of the advanced-stage development gold companies.

Today, Trimetals Mining, a TSX-listed gold project developer with assets in Nevada.

More companies to follow.

Trimetals (TSX:TMI)

Market-cap C$19 million

Cash C$8 million

If it works out and grows you could easily argue they’ll be worth quite a bit more than the C$19 million marketcap it has today.

We’ll see.

There’s still loads of risk to consider with Trimetals and its pursuit of a low-cost heap-leach gold project in Utah/Nevada. Keep permitting and resource size in mind.

But then there’s also some factors leaning in its favour.

First it must be said Trimetals, which now focuses on the Gold Springs project in Nevada and Utah, has fairly small gold deposits on its hands.

Some would shrug it off for this.

New Orleans Investment Conference Brent Cook, of Exploration Insights, used to own the stock, but is now wary of the number of ounces in play.

Indeed, resource wise – at least as it stands – you almost certainly won’t see a major shelling out lots of cash for this one at this point. In that vein Cook had played it for greater size than it has shown so far.

But then there’s also no lack of examples of successful miners starting on modest deposits with good low-cost features. These can form the humble beginnings of something bigger.

Trimetals, in its Gold Spring project, which comprises two deposits that straddle the Utah/Nevada border, is worth mulling over in this respect.

To those modest resources.

Trimetals counts:

  • 21.3 million tonnes @ 0.5 g/t gold and 9.8 g/t silver for 339,000 ounces gold and 6.7 million ounces silver in indicated resources.
  • 16.7 million tonnes @ 0.4 g/t gold 9.1 g/t silver for 214,000 ounces gold and 4.9 million ounces silver in inferred resources. (At 0.2 g/t Au cut-off)

At first glance these resources look rather inconsequential. But then not all deposits of 500,000-odd-ounces gold of 0.5 g/t Au are created equal and this one looks to have some strong early-stage chops.

First, it has grown in size over the past few years. Back in 2012, before South American Silver took over High Desert Gold, which then owned the deposit (and later became Trimetals) the deposit ounces stood at a quarter million.

That first gold resource was built around drillholes put into the target back in the 1990s, said Randall Moore, Trimetals’ vice president of exploration, who was manning Trimetals booth early Thursday morning at the New Orleans Investment Conference.

Resources grew consistently from about 200,000 ounces gold equivalent, inferred, in 2012 to 400,000 ounces gold equivalent in 2013 and then to 750,000 ounces gold in 2014.

(This equivalency assumes a very outdated 57:1 gold/silver ratio which is now closer to 70:1.)

Interestingly the resource growth comes from circumscribed areas of the property.

Trimetals has been limited in permitting, until recently, to near-deposit drilling. However its plan of operations for more exploration was recently approved and that opens up a number of other targets to explore – and possibly discover more ounces.

There still looks to be some unfinished business, in other words.

Moore noted that after doing a LIDAR survey, which gives a nice topographic picture of surface features, some old-timer pits (AKA quasi-ancient gold prospecting areas) showed up that Trimetals hadn’t logged before in targets little explored to the south/southwest of its Jumbo and Grey Eagle deposits.

These are the two deposits that make up the core of the project.

Likewise there are existing gold anomalies that Trimetals has yet to drill.

If it finds success in delineating more ounces gold in these targets, you wonder if the junior might get some more recognition.

Now back to the known deposits.

Gold recovery looks good in early stage testing. Trimetals put RC cuttings (think pretty coarse material that doesn’t require extra-expensive grinding) through bottle-roll metallurgical tests and got results between around 80%-90% recovery.

Finer-ground material did between 92% to 98%, Moore said.

The logical next step is to test even coarser material – 3/8-inch grind – to see how recovery does there. If the coarser material shows good recovery it could point to cheap mining costs. Silver pulled a recovery in the 40% to 50% range.

On deposit shape, the geometry doesn’t look all that bad.

New Orleans Investment Conference

It outcrops at surface – silicified ridges that form a small part of the wider system of sheeted veins and breccia – attest to that, and look amenable to a lowish strip with a waste/ore ratio in the 2:1 range. Some of the better grades are near surfaceand that could help Trimetal.

Early stage economics also look strong, though they will need more validation.

The deposits would, in Trimetals management view, support a 9-year mine working at 10,000 tonnes per day in a heap leach operation which would cost $58 million to build. At $1,000/oz gold it spins off a pre-tax net present value of $82 million, and an IRR of 33%, according to a recent preliminary economic assessment.

“It still makes good money,” said Moore, reflecting on project economics at gold prices a fair bit lower than currently.

Now there’s something of an analog that should be considered in this respect.

Midway Gold started mining a similar deposit in Nevada, the Pan project, in September (but not yet at commercial producution.)

This is interesting for two reasons.

First, the grade and size is not that different between the two projects.

Midway counts 48 million tonnes @ 0.56 g/t Au for 864,000 ounces gold in proven and probable reserves (at a much higher confidence than Trimetals inferred/indicated resources) and has also built a mining project around these reserves with a 1.8:1 life of mine strip ratio in a heap leaching scenario with a pricetag of $99 million.

The second parrallel is permitting.

Moore noted that Midway permitted in about 18 months. Pretty fast for the U.S.

Could Trimetals do the same navigating similar Nevada, Utah and federal regulations?

Like Midway, Trimetals may opt to do a full environment impact statement, Moore said. It’s more arduous than an environmental assessment, which requires less detail, but it could afford Trimetals more protection in being less easily challenged.

Do that “so it’s not going to blow up in your face later,” he said.