A quick look at two year charts for spot gold and spot silver show the volatile price swings the metals markets have experienced. They also show something else quite plainly: decisive support levels. For spot gold, support is in the area of $1,200 per ounce. For spot silver, support is evident around $16.00 per ounce. It’s also arguable that both metals found a bottom in late 2015/early 2016, subsequently breaking a multi-year downtrend.
The point is that the metal cycle looks to be turning in the favor of miners after years of sluggishness that forced many small miners to shutter operations.
Late in 2015, when gold was at its lowest price since the fourth quarter of 2010, Inception Mining Inc. (IMII) wasn’t looking to fold, it was looking at the depressed market as an opportunity to grow. It was then that Inception acquired the Clavo Rico project in southern Honduras, a producing project complete with its own heap leach facility and on-site ADR (absorption, desorption and refining) plant.
The acquisition exemplified management’s maxim to run a company that is “Diverse. Agile. Efficient.” in order to flourish in any market condition.
The 200-hectare Clavo Rico concession was mined as early as the 1500s by the Spanish, and more recently through the small, family-run business Compañía Minera Cerros del Sur, S. de R.L., now a wholly-owned subsidiary of Inception Mining. The Clavo Rico property joined the company’s portfolio along with the UP and Burlington gold project east of Salmon, Idaho, a project that Inception acquired in 2013 as gold prices were falling from record highs.
The Gold’s Not Going Anywhere, Don’t Burnout By Rushing Growth
Historic data indicates very high grade gold reserves at the Idaho project. An estimate from 1935 shows 71,179 ounces of gold from only 122,600 tons of ore, equating to 18.14 grams/ton gold. Inception employs a non-traditional business model at UP and Burlington, using contract labor develop the epithermal precious metal deposit and helping the company stay lean.
Like a spigot, Inception can turn development efforts on and off at UP and Burlington based upon corporate resources, which are more heavily directed at their money-maker of Clavo Rico presently.
Inception is expanding operations at Clavo Rico, reinvesting capital from metal sales to fund equipment upgrades and drilling as part of a methodical, steady approach to increase output, efficiency and metal reserves. Recent expansion moves are equating to mining rates rising from about 300 tonnes per day currently to up to 500-700 tonnes per day by year’s end. A new crusher at Clavo Rico has a maximum capacity of 1,500 tonnes per day, positioning Inception to increase throughput in the future at its discretion. Capacity at the heap leach pad is being increased over 50 percent to more than 750,000 tonnes. A core drill program completed last July is being compiled into a maiden NI 43-101 technical report expected July 2017.
Operational improvements under Inception’s guidance have already resulted in recovery rates rising 5 percentage points from January 2014 to December 2016. The new equipment will cost a little more to operate, but increased tonnage, less downtime and higher recovery rates will more than offset that expense.
Inception has craftily aligned for the future through the aggregate of the expansion decisions. In a sense, they have changed the narrative on how to build and operate a small mining company.
Gold Stacked Up
As disclosed in the company’s quarterly reports, for the quarter ended March 31, 2017, IMII generated $979,632 in revenue, which was down $172,400 from the year prior, but Inception had a lot more gold and silver stockpiled. The quarter ended with IMII having approximately $1.53 million in mineralized material on leach pads at Clavo Rico, up 71% from the $891,198 on leach pads at the start of 2017.
Moreover, production rose from 2015 (138,099 grams) to 2016 (170,509 grams) on increased throughput of 211 tonnes per day in 2015, versus 312 tonnes per day last year.
“The year over year increased production is expected to continue as we make ongoing operational improvements, and expand crushing and leaching capability. The goal is to achieve this while maintaining grade,” commented Inception’s CEO, Trent D’Ambrosio in a discussion on progress at Clavo Rico.
D’Ambrosio is proving that navigating market turbulence is a matter of executing on a succinct business model. Sometimes conditions require patience and other times the pace needs to be accelerated to capitalize on the moment. The key to building value is making every move with a purpose while gold and silver prices stabilize and turn. Of course, the most rewarding benefits will come with a new precious metal uptrend. With chess master-like precision, D’Ambrosio and team have made the moves to acquire and develop the Honduras asset towards commercial production, which may fuel additional corporate value and expansion in the future, through additional acquisitions or bolstering exploration in Idaho, or both.
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