Photo: Mr. Ian Graham, CEO and Director of Montan and Mr. Luis Zapata,
Executive Chairman at the Mollehuaca Gold Processing Plant (Toll Mill) Site
1.
Montan Mining Corp. (TSXv: MNY) (FSE: S5GM) is a relatively new company
focused on Peru. Can you please explain to our readers why you chose Peru?
Montan was specifically created to be in Peru because our management
team has a track record of success, experience and roots there. Mr. Michel
Robert, Montan Director and spearhead of our technical efforts was previously
Senior Vice President of Pan American Silver Corp. (TSX: PAA) during the
foundation and growth years of 1995 through 2001 where he was responsible for
the management of operations in Latin America and oversaw the expansion of the
company in Peru, Mexico and Bolivia. Mr. Robert knows how to build and operate
mines and mills in Peru as well as build a mining company from the start. Mr.
Luis Zapata, Montan’s Executive Chairman and Co-Founder is based in Peru and
was formerly Head of Latin America Institutional Equity Sales at Canaccord
Genuity. Mr. Zapata brings domestic financial capacity to the company as well
as government, operational and community contacts.
Photo: Mr. Luis Zapata, Executive Chairman of Montan Mining Corp. at the
Eladium Gold Mine
1.
While the qualifying transaction for Montan was the acquisition of the
Alicia Copper Project the primary focus of the company is the Mollehuaca Plant
in the Peruvian region of Arequipa. Can you please give us some details on that
deal? What exactly did you acquire and what will you have to pay?
Montan recently entered into an agreement to acquire two producing assets:
the Mollehuaca Gold Processing Plant (Toll Mill) and the Eladium Gold Mine, as
well as an exploration property Saulito, all located in the Arequipa region of
southern Peru. The
Mollehuaca Plant was recently expanded and has both a carbon-in-pulp (CIP)
circuit as well as a flotation circuit with a total capacity of approximately
150 TPD. This will make us the second largest currently operating plant in Peru
held by a TSX listed company. The assets are being
acquired from a private company Goldsmith Resources SAC whom had spent more
then US$4 million and four plus years advancing the assets to their current
stage. We will acquire the assets for US$3.3 million staged over 15 months in a
combination of equity and cash. The acquisition of an existing
permitted, operating and producing gold ore processing facility saves Montan significant
capital, time and resources by eliminating the construction and permitting
process which building a new gold processing plant would entail.
2.
So, basically you bought / are buying a plant that you will use for
toll-milling. What is the opportunity here and where will the ore to be
processed come from?
Yes. The plant processes ore from various small-scale formalized gold
mines/miners in the region and throughout Peru as well as from the wholly-owned
Eladium Mine. It is a good margin / margin protected business – buying ore at a
discount to the spot gold price, processing through the plant, and selling the
gold or gold-in-carbon at market. The Peruvian government has been taking steps
to formalize the small-scale mining space in country and mills so there is
increasing need for formalized mills.
In terms of our ore purchasing strategy, Montan
recently announced a key addition to our team: Mr. Jose Luis Garcia as VP
Operations Peru. Mr. Garcia was previously the manager of minerals procurement
for one of the largest Peruvian toll mill operators (annual sales of more than US$150M)
and was key to the growth of that company. Without entering into operational details,
it is fair to say that minerals procurement is the most important aspect of
this business, in comparison with running a plant and its infrastructure which
is basically a straightforward technical issue. The key to success is
developing and maintaining relationships based on trust and respect. Like most
businesses, this is a people business. We are focused on having the right
people. Our mill is in a region of high concentration of gold mining activity
and we are confident in our ability to source ore, as well as in our expanding
team.
Photo: Ball Mill at the Mollehuaca Gold Processing Facility
1.
How are you planning to finance those ore purchases?
Montan is about to finance through an equity
private placement – this will be sufficient for initial ore purchases and the
beginning of ramp up. In the longer term, we are looking to build relationships
with strategic partners that will be able to provide us with low cost credit
for ore purchases. This is ongoing – we have been taking parties to site and
receiving expressions of interest.
Photo: Feed shipment to the Mollehuaca Gold Processing Facility
1.
What are your next steps? Are you planning to expand the mills capacity?
If so, in what time frame and to what capacity?
Our immediate goal is to increase production
from its current 30 tpd to its as built capacity of 150 tpd. As we are doing
that we will begin the process to upgrade our permits to 350 tpd. This will
give us optionality moving forward. Operationally, our initial plan is to
achieve steady throughput of 130 – 150 tpd of 0.8/oz Au material and then we
will make the strategic decision to go to 350 tpd.
Photo: Mollehuaca Gold Processing Plant
1.
What kind of earnings / cashflows does management believe it will be
able to achieve at Mollehuaca?
Cash flow and earnings is highly dependent on throughput (tpd) and feed grade.
Based on steady state 140 tpd processing of 0.8oz Au material and assuming a
$1150 gold price we should be able to deliver on US$7M+ of EBIDTA per year to
begin with.
2.
Assuming all goes as planned and the plant is running at maximum
capacity, generating earnings / free cashflow – what are your plans for Montan
Mining longer term?
Initially we plan to ramp up
to 140 tpd in order to show the market that our team is efficiently running the
business. From there on we can expand the existing plant to 350 tpd. As the
company becomes a significant cash flow generator we will be able to reward our
shareholders through share price appreciation, protection from dilution, potential
dividends or share-buy backs. We will also be able to grow the company further
through M&A in a depressed market environment where additional accretive assets
are cheap.
3.
Why would, in your personal opinion, now be a good time for investors to
have a closer look at Montan? Can you give us some examples for how
toll-milling companies in Peru have been performing recently?
Several reasons: our share structure is one of the best in the space –
with no debt, our management team is experienced, capable, driven and focused –
a mix between experience and young energy, our valuation is compelling versus
peers and we have a clear cash flow focused business plan.
Comparables – TSX Listed Toll Mill Producers in Peru
|
Company
|
Shares
/ FD
|
Price
|
Market
Cap.
|
Debt
(~ $M)
|
Plant
Cost (~ $M)
|
Plant
Capacity (tpd)
|
In
Production
|
|
Dynacor
Gold Mines Inc. (TSX: DNG)
|
36 M / 38 M
|
$2.15
|
$77.9 M
|
-
|
8 / 10
|
300 & 300 (1)
|
Yes
|
|
Inca
One Gold Corp. (TSXv: IO)
|
68 M / 86 M
|
$0.21
|
$14.3 M
|
8
|
5
|
100
|
Yes
|
|
|
|
|
|
|
|
|
|
|
Montan Mining Corp. (TSXv: MNY)
|
19
M / 21 M
|
$0.205
|
$4.0
M
|
nil
|
3.3
|
150
|
Yes
|
As at June 11th 2015
(1) Second plant in construction
As the chart below shows the Peruvian toll
millers have out-performed all other major gold investment asset classes over
the last 12 months – including Gold (Spot), Gold Seniors (HUI) and Gold Juniors
(GDXJ).
More on Montan Mining Corp.
Montan Mining Corp. (TSXv: MNY) (FSE: S5GM) is positioned for growth in
Peru through the acquisition and development of advanced and/or cash flow mining
opportunities. Montan is backed by an experienced and high-energy management
team with diverse technical, market and finance expertise and strengths and is
supported by committed and sophisticated investors focused on building value
for the long term.
For more
information on Montan Mining Corp. please visit their corporate website at http://www.montanmining.ca or
contact Jason Shepherd, Investor Relations at
Ph: 250.212.2122
or TF: 1.866.913.1910 or Email: jshepherd@montanmining.ca
Forward-Looking Statements: Certain statements in this
article are forward-looking statements within the meaning of applicable
securities laws. Such forward-looking statements and information are subject to
risks, uncertainties and other factors which may cause our actual results,
performance or achievements, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statement. Specific risks included that we may not be able
to finance our intended acquisition and we may not obtain regulatory approval.
General risks include the reliance on available data and assumptions and
judgments used in the interpretation of such data, the speculative and
uncertain nature of exploration and development, exploration and development
costs, capital requirements and the ability to obtain financing, volatility of
global and local economic climates, share price volatility, estimate price
volatility, changes in equity markets, increases in costs, exchange rate
fluctuations and other risks involved in the mineral exploration and
development industry. There can be no assurance that a forward-looking
statement or information referenced herein will prove to be accurate, as actual
results and future events could differ materially from those anticipated in
such statements or information. Also, many of the factors are beyond our
control. Accordingly, readers should not place undue reliance on
forward-looking statements or information. We undertake no obligation to
reissue or update any forward-looking statements or information except as
required by law.