Maurice Jackson: AbraPlata Resource Corp. (ABRA.TSX.V) is focused on unlocking value in Argentina. Willem, let's discuss the latest press release entitled, "AbraPlata Files Diablillos Silver-Gold Project PEA Report." Let's get into the details of the release. When did AbraPlata officially file its PEA with Sedar, and what can you share with us?
Willem Fuchter: The report is titled, "Technical Report on the Diablillos Project, Salta Province, Argentina," and is dated April 16, 2018. The report proposes an open-pit mining by contractor, using a conventional truck and shovel operation, in two pits—the larger Oculta pit, as well as the much smaller Fantasma open cut. Processing is by a conventional silver plant, comprised of crushing, grinding, agitated back leach and then precipitation of the precious metals by the Merrill-Crowe process.
The project is expected to achieve an undiscounted pretax cash flow of some US$630 million, or an after-tax cash flow of nearly $400 million—$391 million, to be exact. It's also expected to achieve an after-tax NPV (net present value), at a discount rate of $7.5%, of $212 million, and will achieve an after-tax internal rate of return (IRR) of some 30.2%. Payback will be in 3.1 years, and it will have a mining life of eight years after a preproduction period of 18 months. It's expected to produce nearly 10 million ounces of silver equivalent a year, and it'll require initial capital of some $293 million.
Jackson: Willem, how do these numbers relate, using the same discount rate, but using current gold and silver prices?
Fuchter: The economic data were based on using $20 an ounce ($20/oz) for silver, and $1,300 an ounce for gold. At $16/oz silver, the IRR will be 20.3%, and NPV, at a 7.5% discount rate, changes about $25 million for every $1 change in the silver price. For example, at $16/oz, NPV will be $110 million, compared to what we calculated using the $20/oz silver price of $212 million. At $24/oz, the NPV will be close to $300 million.
Jackson: Now that the PEA is complete, what is the timeline for a prefeasibility study?
Fuchter: We hope to complete the prefeasibility study (PFS), by the end of the year, and our overall objective is to deliver a fully permitted, construction-ready project by the end of 2019. In 2019, we will move on from the PFS to do the definitive study.
This will require that we do the following: First of all, we need to do additional engineering work to complete the PFS. We're also continuing with the environmental studies, and starting the permitting applications. Finally, we're going to do further drilling, as we see strong potential to increase resources from the property, and which will need to be considered in the prefeasibility study.
Jackson: Speaking of drilling, let's discuss current activity going on right now. Talk to us about resource expansion at the Oculto deposit, and satellite occurrences. Are the drills turning there right now?
Fuchter: No. We hope to have them as turning ’round about late May early June, and we see three important locations where we can increase the resource. First, within the existing Oculto pit shell, there's a lot of opportunity to increase mineralization—to turn mineralization in the current pit shell into a resource category.
Second, we will continue drilling some of the satellite deposits, like Fantasma, which surround the Oculto Deposit.
Third, there's the deep gold zone, which lies below the pit, which we hope to do some drilling on to show there is considerable potential to increase gold rich resources below the pit.
Jackson: We have focused on the silver and gold at the Diablillos, but AbraPlata has three more projects in its portfolio, some of which host copper and may have a significant influence on the share price in the future. Can you provide us with an update on these projects?
Fuchter: Absolutely. In addition to Diablillos, we've got two other porphyry projects; copper, gold and molybdenum projects. Cerro Amarillo is located in west-central Argentina, in the province of Mendoza, and Samenta lies about 120 kilometers northwest of the Diablillos.
Cerro Amarillo shares a mining camp with the famous Chilean copper deposit called El Teniente. It lies in the same belt of volcanics, and is hosted by intrusives that have the same age as El Teniente. El Teniente is a behemoth porphyry project just across the border in Chile. In terms of current reserves, as well as past production, it hosts at least 170 billion pounds of copper. So it truly is a behemoth.
The Cerro Amarillo project, like El Teniente, is not a single porphyry. Rather, it's a cluster of porphyries, and on our property, we've got at least five porphyry intrusions, four of which have copper mineralization mapped at surface.
All five of them have got good geochem expression, and on two of them, we've been able to do a conventional IP, and the IP has indicated there's chargeable material underlying mapped copper mineralization at surface. This is ready for drilling. However, it lies in on 168-square-kilometer property, and these porphyry projects are large projects.
What we hope to do is get a major mining company interested in coming in to assist in the further development of those large copper, gold, moly porphyry projects.
Jackson: Willem, we've talked about the latent material in the ground. What about the relationship that management and the technical team's expertise have for the task at hand, and their ability to secure permits.
Fuchter: Most of the executive management is resident in Argentina, and that certainly helps with the relationships we have, both with provincial authorities, as well as with federal government officials. But I think what's most important is the fact that our chairman, Hernán Zaballa, is one of the prominent mining lawyers in Argentina. He's been on the boards of such companies as Barrick Gold Corp. (ABX:TSX; ABX:NYSE), Pan-American Silver and Peñoles, from Mexico.
As well, he's done work for most of the junior explorers that have been working in Argentina over the last 20 years. As a mining lawyer, he's obviously well connected with the various authorities in the mining provinces, and Salta is one of those, as well as with the mining authorities in the federal system. That certainly makes it a lot easier as we move forward in further developing the Diablillos project.
Jackson: Willem, what is the next short-term goal for AbraPlata. When should we expect results, and what determines success?
Fuchter: We hope that the drill will be turning in late May or early June, and since some of these targets are high-grade gold targets, I think we can expect to see some pretty exciting results in June or July, of this year. This is a metal summation of gold-rich, at the bottom of a deposit, moving to gold to silver in the bulk of the project and then, silver to gold. Right at the top of the deposit, it seems be silver only.
Most of the targets that we are going to be drilling are some of the deeper gold-rich targets, and I think what you might be seeing is that we might be moving this project from a silver project with a strong PEA, indicating robust economics, to a gold-rich deposit with a silver cap.
So we're really excited with the future possibilities for this project.
Jackson: Willem, if we don't achieve the results we're looking for, what's Plan B?
Fuchter: First of all, I think we can expect the results we're looking for, because there's already one or two drill holes that have intercepted some of these gold-rich zones, and they indicate grades of up to 17 grams per ton gold over 10 meters. I'm not too concerned about not being able to meet expectations.
Nevertheless, the PEA, in its own right, which is based upon the current information, indicates really robust economics, as we've been talking.
Second, we're already talking to some midyear silver producers, to see if they can assist with the construction and operating phases of a project within the next two years.
Jackson: Last question, sir: What did I forget to ask?
Fuchter: Well, our goal is completing the prefeasibility study, and to accomplish that, we're going to need capital. So we have just opened up a private placement financing, and we're offering units, at $0.20, with each unit comprising a share and a full warrant, exercisable at $0.30 cents, for three years.
Jackson: For someone who wants to get more information regarding AbraPlata Resource Corp., please share the contact details.
Fuchter: Please look at our website, which is at www.abraplata.com.
Jackson: Thanks. Please visit our website www.provenandprobable.com, where we interview the most respected names in the natural resource space. You may reach us at [email protected].
Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.
Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.
Disclosure:
1) Willem Fuchter: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: AbraPlata. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: AbraPlata.
2) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: AbraPlata. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: AbraPlata is a sponsor of Proven and Probable. Proven and Probable disclosures are listed below.
3) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
4) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
5) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this interview, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of AbraPlata, a company mentioned in this article.
Proven and Probable LLC receives financial compensation from its sponsors. The compensation is used is to fund both sponsor-specific activities and general report activities, website, and general and administrative costs. Sponsor-specific activities may include aggregating content and publishing that content on the Proven and Probable website, creating and maintaining company landing pages, interviewing key management, posting a banner/billboard, and/or issuing press releases. The fees also cover the costs for Proven and Probable to publish sector-specific information on our site, and also to create content by interviewing experts in the sector. Monthly sponsorship fees range from $1,000 to $4,000 per month. Proven and Probable LLC does accept stock for payment of sponsorship fees. Sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.
The Information presented in Proven and Probable is provided for educational and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. The Information contained in or provided from or through this forum is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information on this forum and provided from or through this forum is general in nature and is not specific to you the User or anyone else. YOU SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED ON THIS FORUM WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A PROFESSIONAL BROKER OR COMPETENT FINANCIAL ADVISOR. You understand that you are using any and all Information available on or through this forum AT YOUR OWN RISK.
