Dave Cochrane, VP and Matt Collins, COO of Sutter Gold Mining at PDAC 2012
In the world of junior resource investing, companies come and go over time. But one company, Sutter Gold Mining (TSX-V: SGM OTCQX:SGMNF), has pushed through the many challenges and is building a mine on a past-producing mine in a challenging mining district.
Recently, we spoke to Matt Collins, COO of Sutter Gold Mining, to learn more about the latest developments at Sutter.
Sutter Gold Mining owns two projects. A Baja California, Mexico property, called the Santa Theresa project, is operated in a Joint Venture with Premier Gold Mines Limited of Ontario, Canada. However, we didn't discuss this project; our conversation centered on the more exciting news that Sutter was delivering – its California-based Lincoln project is moving forward and under construction.
Mr. Collins described the project: "Sutter Gold Mining is the proud owner and operator of the Lincoln Project in Sutter Creek California. We control 3.6 miles of strike length along the 120 mile California motherlode trend. The 3.6 miles that we control have historically produced about a quarter of the total production (or more) of the California motherlode in gold ounces. The total California motherlode vein production historically was about 14 million ounces and our property produced about 3.5 million of those ounces."
After years of no mining operation, interest in the land started to pick up again: "We have been exploring and advancing the project through fits and starts since the early 1980's in different iterations and operators. Sutter Gold Mining was formed in about 2004 to secure the project and be the sole operator of the entire land package. In 2008 we issued an updated 43-101 resource report of about 680,000 ounces of gold. In 2011 we concluded a preliminary economic assessment indicating good returns on 120,000 ounces of those 680,000 ounces. This has been a long-term project – it's taken us nearly 30 years to get the permitting that we have now. We just received the mill building permit on March 1st. We have two additional building permits we expect to receive over the next few months."
That's exciting news, especially coming out of California. Mr. Collins explained: "Things like this don't happen overnight and Sutter has been [working on this] for a quite a long time. The California Environmental Quality Act is burdensome but the nice thing about that is that there's a roadmap in there. You go from A to B to C and check the boxes as you go."
Working to their advantage is the property's location in California. "Amador County, the county we operate in, is a mining-friendly county because they remember their history," said Mr. Collins. "Within Amador County there are ten miles between Plymouth and Jackson of that California motherlode trend, and those ten miles produced half of the gold production from that motherlode. Our property sits in the middle of those ten miles in Amador County. These people are familiar with their history and they understand that's where their roots are. So there is some strong support at the county level but there are many hurdles to overcome – regional water quality issues, air quality issues, endangered species issues, biological and cultural assessments. We will have well over 40 permits by the time we complete the build on this thing. It's been a tough challenge."
As they receive the last of their permits, the company made a non-traditional decision. Most companies at this stage would continue with a prefeasibility and bankable feasibility study. But Sutter's board took a different route. Mr. Collins explained: "We're taking a non-traditional approach in the sense that our board has chosen to advance a project based on a PEA rather than going through a pre-feasibility and bankable feasibility process. Skipping those steps is not a function of over-exuberance but recognizing the difficulty of meeting the 43-101 requirements in the sampling of the resource. Drilling these veins to further upgrade the resource is very difficult and costly."
The deposit is a high grade, narrow vein deposit Mr. Collins said that it's difficult to quantify by 43-101 standards: "Quantifying a resource and then taking that resource into reserves is a challenge from a physical sample density standpoint. It's much more difficult to take a 'nuggety' high-grade narrow vein of indicated and inferred ounces and turn that into a measured resource, and then to take that into reserves."
So, instead of moving forward with feasibility studies, the company is moving forward with building a mine. "Our board has made the decision to begin construction of a mill facility, a tailings facilities, and associated support structure, which are needed to begin producing gold… We brought together a team with quite a bit of expertise and experience and we really stepped up our game in that we plan to produce gold this year. We have already completed contractor selection; we've awarded the contracts. We're in final contract documentation. We've purchased mine and mill equipment. We have taken major steps to open what could be the first new gold mine in the California motherlode in a long, long time," explained Mr. Collins.
Mr. Collins is confident that this is the right move: "There were mines all around us that operated for a long time and produced a lot of gold," he said. "The number of historical mines adjacent to us in the same geologic structures speaks to the continuity of the deposit."
The Company is ready to "build a milling facility, build a tailing facility, do the underground infrastructure, then go mine what we think we can mine," said Mr. Collins. In addition, drilling is underway for an added mine life estimate: "The board has recently approved some exploration on site – we're looking at expanding our Preliminary Economic Assessment projected 5 year mine life. We've already started on that. We've seen what I believe is a positive indication of an expanded mine life," said Mr. Collins. (See March 6, 2012 news release for drilling results detail)
Even though the permitting process has taken many years, Mr. Collins is confident in their ability to move forward, but there is also another advantage for the entire industry: "We're not the only ones in California... I think a lot of people are looking to us to see what we can accomplish. I hope we change a lot of minds and attitudes about doing business in California. It hasn't always been a business-friendly state but the economic times are such that if we bring 100 direct jobs to the community, it will be appreciated, and if we are good stewards of the environment (which we have demonstrated that we can be), that's a very positive thing."
Next, we talked about the leadership team at Sutter Gold. There was a significant leadership change in early November, as James Crombie stepped down as CEO and Dr. Leanne Baker stepped in.
It was an amicable change. The former CEO, James Crombie, who still sits on the board, had other projects that were taking up his time so (under positive circumstances), he stepped down and "he worked with the board to bring in Leanne. She revitalized our focus. We have a strong and dedicated team that was already working on the project and bringing Leanne in brought a wealth of understanding."
In talking about the share price of the company, Mr. Collins joked that every junior resource company claims they are undervalued in the market. Then, on a more serious note, he asserted that Sutter Gold seems to be undervalued based on the value of the resource: "If you look at the average in situ value of a gold resource, it's about $80/ounce; we're undervalued based on the asset value of the gold in the ground." Then he listed off other unquantifiable factors that suggest an even higher value: "All of our major permitting is done; consider all of the design work we've done; consider all of the work we've put into the project. I think you'll see a significant difference in the value of our company as reflected in the share price."
After many years of permitting and compliance and red tape, Sutter Gold Mining seems to be very close to mining gold. While their non-traditional approach might be an unwise decision for other companies, this company is truly building on a demonstrated resource in a proven historical mining district. Mr. Collins said the company is anxious to move forward, finally. He summed up their approach with this: "We're a mining company. It's in our name. We're in development right now but we are miners. We're not bankers and lawyers and wide-eyed prospectors; we're miners."
And this year, if everything goes according to plan, Sutter Gold will start mining their deposit.
Sutter Gold Mining
165 So. Union Blvd., Suite 565