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Q&A: Bayhorse Silver Maiden Resource Estimate
September 26, 2018 JayCurrie
Canada gold, junior mining companies
Bayhorse Silver put out its maiden 43-101 compliant resource estimate on September 24, 2018. We had questions and Graeme O?Neill, CEO of Bayhorse (V.BHS) was kind enough to have answers:
Bayhorse reported a 6 million ounce 43-101 compliant inferred Why not measured and indicated?
With respect to the Bayhorse Mine, we built the mine first, based upon the extraordinary amount of solid geological data we obtained, paid for by someone else I might add. Then, using that additional data we developed during building the mine, we established the inferred resource.
Taking an inferred resource to a reserve would cost us an enormous amount of money.
We have built the Bayhorse Silver Mine and developed the resource for just on US$5,000,000. Peanuts compared to many other mines. Not only that, but we have state of the art processing facilities at the mine
We are in the middle of a silver jewellery box, where the previous operators drilled out and defined 26,000 tons of high-grade silver. Based upon our anticipated daily mining rate of 100 ton/day, that is close to one year?s mining available to us at right at our fingertips. The old-timers rarely had more than a year of blocked out ore ready for mining ahead, and during that year of mining, they replenished it so they always had that year of operations ahead of them. So do we need to develop ten years of ore ahead at a huge upfront cost? Or should we keep developing a year of ore ahead of us at a minor cost? We are practical people and we don?t spend money we don?t have to.
I am sure everyone knows about the Pareto Principle. It says that 80% of results come from 20% of effort, or expenditures. It is true for pretty much everything. Typically, a company raises money to explore, finds mineralization, explores some more, drills and drills and drills, and comes up with a resource, which it takes to a measured and indicated reserve and then does a PEA and then a full feasibility study. Then, once financing is secured, after spending a substantial amount more money, and lots more time, they permit and build the mine. Then, a year after they open the mine, they probably start to generate revenue.
We did it backwards. Built the mine, with a brand new 900-foot haulage way, a 100 ton a day, state of the art upgrading facility, and then we established the resource, and are already mining: all for $5 million. It would cost another minimum $5 million to bring the resource to measured and indicated reserve status. We would rather spend that money mining, upgrading, and getting cash flow. There is still a lot of work to do, such as getting ready for winter, but we are well advanced at that, so we have no disruptions during the winter months.
Everyone wants a guarantee. What we guarantee our shareholders and investors is that we are doing what we said we were going to do, and delivering on it. Maybe late, but delivered nonetheless. But proper funding is required to get anything done.
Does Bayhorse have a processor available to ship material to?
We do, and we have indicative proposals to sell any concentrate we make to smelters, with proposed payment at the mine gate when picked up. But we are constantly looking to improve our bottom line. For example, using flotation, typical recovery is 90%, and our testing has shown that we will get the typical flotation recovery. Then the smelter will pay us 90% of the spot price of silver for the concentrate. Deductions after deductions. That reduces the bottom line. In the event we build a Total Metals Recovery processing facility as proposed by Metals US, we will get pure silver, and eliminate sending concentrate to smelters and refiners, and the attendant costs of shipping to the smelter and refinery.
At this point what does Bayhorse have to do to begin mining out its 1000 ton block?
We are right now increasing an existing 30-foot raise installed in1984 into the first mining block, from 7 x 7 dimension to 10 x 10, and timbering it to meet MSHA safety requirements. This raise is in high grade mineralization and into the mining block. We expect this to be completed in the next two weeks. Then we start dropping the mined material down this raise and we will be upgrading it straight away
What are your plans to extend the resource?
Apex Geoscience is drafting up a drilling program so we can bring the conceptual exploration target into a resource category. A number of 200-foot holes from inside the workings extending outside the known mineralized envelope. There is sufficient geological data to believe the zone dips to the south and to depth. The old-timers mined used hand steel, not today?s pneumatic drills, very labour intensive, to open the workings up. They were very experienced and would not have done it if they didn?t believe something was there.
Once you begin mining what is your estimated throughput per day? Can that be increased?
We are set up to do 100 tons/day, 300 days a year. We built the haulage way for a 200/ton a day operation, and our miners are confident we can achieve that throughput. We want to make sure we have consistent throughput though, so we will gradually ramp up to it
You are using a ?Conceptual mining and processing costs were estimated at $US100 per ton of mineralized material? and an ?average grade of 21.65 troy ounces per ton (opt) silver (Ag)?. If I divide 100 by 21.65 I get a cost per ounce of $4.60. Is that roughly correct and what does it say about the profitability of the Bayhorse Mine?
We have a substantial amount of cost data developed during this past year. Mining costs, maintenance costs, upgrading costs, however, it is only after operating for a year that we can say with certainty what the actual costs are. Of course, we have a good handle on the mining costs, that are under $50/ton, but again, taking out large blocks is a little different from driving a haulage way, and we have to support a much larger back.
For reference though, the average all-in sustaining costs (AISC) for primary silver mine is around US$10.25 per ounce. That should be used as a rough rule of thumb until accurate numbers are developed after the first year of operations.
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