If speed of execution is any barometer of the likelihood of success, the future is bright for Margaux Resources Ltd. (MRL:CA)(MARFF). In a short period, the company has acquired adjacent properties in the southeastern region of British Columbia, Canada, known as the Kootenay Arc Region, and immediately moved forward with exploration and development efforts through sampling and drilling. The diverse portfolio of assets includes past-producing and prospective properties of both base and precious metals. Exploration work has already indicated a large soil anomaly, high-grade gold and room to expand upon known ore bodies.
Recently, Margaux CEO and President Tyler Rice took the time to speak with Equities.com to answer some questions and bring investors current on operations and provide some insight on plans going forward.
EQ: Margaux Resources has amassed a leading position in the Kootenay Arc Region of British Columbia. Can you tell us about this region, your properties and the potential you see in your portfolio?
Rice: The Kootenay Arc is a mineral-rich, past-producing area where a number of mines operated historically, including the lead-zinc Jersey-Emerald Mine, HB, Blue Bell, Mastodon and Reeves MacDonald mines, and a lot of historic gold mining as well. In our Sheep Creek camp area, there were more than 600,000 ounces of historic gold brought out with an average grade of just under one-half an ounce per tonne. So, this is a very mineral-rich area with great infrastructure in a mining friendly jurisdiction. It’s proximate to potential customers, with a gold mill about an hour and a half away from us and a lead-zinc mill and smelter both within half an hour of our location.
Across more than 100 years, the region, more precisely, the Sheep Creek camp, has been the home for dozens of mines and nearly as many owner/operators. Being chopped up like that under different owners creates many challenges. Our strategy was to consolidate the properties in one portfolio, which we’ve successfully done, the first time in over 100 years. That allows us to explore beyond the boundaries of surface claims that were prior restrictions to the multiple different owners where they couldn’t follow a vein past the boundary of their mineral rights. Now that all those mineral rights are consolidated under one banner, we’re able to remove the surface boundary restrictions and apply modern technology to find additional veins and also to look further at depth for extensions on the previously mined veins.
EQ: In August, the company initiated a phase two drill program, which targeted lead-zinc mineralization on the Jackpot property, as well as gold targets at Bayonne and Sheep Creek. How are these and other programs coming along?
Rice: Drilling is completed at the Jackpot property and the Bayonne property, and the rig is currently up at the Sheep Creek location, finalizing the drilling campaign there. We have received results on the Bayonne property, including the first ever at depth below the Bayonne mine, that has confirmed that good gold grades and viable vein widths continue at depth below the historic mine workings, including 15.31 g/t gold over 1.85m from the Bayonne Main vein, 20 metres below the limit of historic mining. In addition, we’ve received results from our first drilling of the Maggie Aikens vein, managing to intercept the vein below the point where our high-grade surface samples were collected earlier this year, and confirmed gold values at depth including 18.2 g/t Au. Results for Jackpot and the remaining three Bayonne holes are just starting to come in and we’ll be looking to announced these in very short order.
EQ: As you touched on, the Sheep Creek camp is home to 26 past-producing gold mines with historic production of more than 600,000 announces of gold at an average grade of 14.7 grams per tonne gold from 34 distinct veins. What is interesting is a very high cut-off grade of 8 grams per tonne gold. How are you positioning yourselves with regards to the cut-off grade and with the new resource estimates?
Rice: as we go through and drill to define the historic resource associated with the Sheep Creek property, we’ll be bringing the estimates in line with current mining production standards and resource requirements. We’ll do our exploration work to define historic resources and potentially identify new veins within the camp, which is outstanding given that there hasn’t been any work done on this property since the 1950s to the extent at which we are conducting work. We are very excited about the opportunity at hand, especially given the historic grades that were mined on this property.
EQ: While there are strong indications of precious metals on your properties, Margaux has a diversified model, including industrial metals like zinc, lead and tungsten. Some of the strategies seem designed for shorter term production, such as assessing the economics of tungsten recovery from tailings of the Jersey-Emerald Mine. This dovetails as a substantial increase in prices for the aforementioned minerals this year that makes it a particularly attractive target. Can you go into detail about the size of the tailings pile at Jersey-Emerald and whether the price action on base metals affects your strategy going forward?
Rice: The tungsten tailings pile provides Margaux Resources a near-term cash flow potential catalyst in the sense that we have seen a 50% spike in the price of tungsten since July. Our environmental partner, The Salmo Watershed Streamkeepers Society, has been working in the area since the 1980s, and specializes in rapid assessment, rapid remediation. They have identified 44 historic tailing ponds within the Kootenay Region from historic mining that occurred, so if we can have a positive proof of concept both environmentally and economically, we’ve nailed it, because there is additional running room within the area for potential further remediation and recycling of other ponds. When the old timers mined, their recovery rates were not what mining recovery rates are right now. We feel that there is still a large potential cash flow opportunity associated with those by virtue of metals left behind, and a great opportunity to reduce the metals from leaching into the environment.
We’re very excited about our partnership that we have entered into with CRONIMET, who are specialists in the recycling and recovery segments of the mining sector. This partnership is more significant than may appear at first blush, as it really validates the tungsten recycling project. I was just out in Pittsburgh two weeks ago and we had a very exciting overview and visualization of what can be recovered through their system, and we’re really looking forward to announcing that. The results would probably be three to four weeks out depending on the lab turnaround.
We have shipped 3,500 kilograms of tungsten tailings to their facility in Pittsburgh, which has just completed running their large-scale recovery process, and we’re looking forward to the assays being returned with a strong indication that we’ll be moving forward into a pilot scale cooperation as early as Spring 2018.
Going forward, we have a 10-year NI 43-101 compliant resource on our tungsten in situ in the Jersey-Emerald. I don’t believe that we get a true value looking beyond 10 years due to discounts that are applied in a cash flow basis analysis. That said, we believe that there is an additional opportunity for expanding the tungsten resource, but we want to focus on the surface tungsten first for obvious reasons concurrent to developing our gold, silver, lead and zinc assets.
EQ: Gold and silver typically get most of the attention, but it seems that there is a lot of value in your tungsten project that’s quite compelling, yet overlooked, as part of understanding the Margaux story. Is that a fair assessment?
Rice: Well, given the high-grade gold produced from our properties historically, it’s understandable why that often gets top billing. But, you’re correct about the tungsten, and it is becoming even more so given that the Chinese control 80% of the world’s supply of tungsten. So, there is a perception from investors around tungsten that it is a difficult commodity to invest in because the Chinese have control of the price. What we have going for us is the diversification in our tungsten portfolio, looking at the tailings aspect, which, from an offering cost perspective, is already on the surface. We have a pretty good handle on what the grade of that material is, which could be a great segue into the in-situ tungsten that we have on our property as well.
Remember that Jersey-Emerald was the second-largest past-producing tungsten mine in North America, and that all the tungsten produced from our property went to supply the strategic reserve of tungsten in the United States during war efforts. Fast forward to today, where tungsten’s importance in industrial applications is as great as ever, and yet currently there is no domestic supply of tungsten in North America. The supply demand balance is certainly going to be of great interest to us, and we hope to be well positioned to take advantage of the situation.
EQ: You certainly have been hitting on all cylinders of exploration development across your portfolio of projects in the Kootenay Arc Region. What is your view on the production timeline and are there any other milestones the investors should watch for as we head down the final stretch of 2017 and into 2018?
Rice: The near-term milestones will definitely be the results associated with our fall drilling campaign at all our properties in addition to the results that would be coming out of the tungsten tailings recycling program. all the announcements to date have been grab samples and chip samples. What we’re really looking forward to is getting the updates on the drill core that has been done, because that is a more valid conclusion of what we’ll be seeing in situ. Chip samples and grab samples are a great surface indication, but the proof is in the pudding at the depth where we did our drill campaign. The first Bayonne results have now been released and results from Jackpot and further Bayonne results will follow imminently. Then those will be followed by Sheep Creek in about a month’s time. We’re very eager to get that news out to provide confirmation to the market of what we’re seeing down the hole.
Then medium term, we’ll be looking at cash flow catalysts from the tailings recycling program that would be run this spring as a pilot scale and then would be dovetailed into a large-scale recovery operation. Beyond that, we look forward to further refining our NI 43-101 supplies resource for lead, zinc and gold across all our properties.
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