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Country Report: Chile

This video was created with the generous support of Far West Mining (TSX: FWM)

Resource Intelligence Country Reports: Chile

The balance between opportunity and risk is the hallmark of a successful investor. In mining, project risk can be increasingly quantifiable to all investors by using our RIQ calculators to determine the value of a project based on their assumptions and discounts.

But what about country and jurisdictional risk? Horror stories abound. Investors naively believe rule of law is universal. It is not. Neither is infrastructure. Nor water. Nor power. Nor workers. Conversely, other investors overestimate risk based on fear of the unknown and miss out on winners. Neither is a winning strategy. Read more

Copper: The Secret of Chile’s Economic Success

Chile averted catastrophe after its record setting earthquake in 2010 because its pro-mining government used mining tax revenues prudently. Resource Investors should keep their eye on companies based in this advanced South American economy.

Dykes Rock!

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Far West Mining’s Rodrigo Ortega defines the mining term “dyke”.

Watch more video glossary terms HERE.

SilverCrest Mines’ Investors Prepare to Celebrate Silver-Gold Production

Junior Miner Steps Toward Mid-Tier Producer Status

Eric Fier (COO, SilverCrest Mines): Here we are back at Santa Elena, if you can remember back in 2008 we stood in the deposit area, which is over my right shoulder here, this is the Santa Elena main zone and the cliff, and at that time we had just completed our pre-feasibility study and we were discussing going into permitting, construction and production. Read more

Avanti Mining, Kitsault Project Animation: From Construction to Reclamation

Avanti Mining Plans 5th Largest Molybdenum Mine

The Kitsault project is located in the Nisga’a traditional lands – the Nass Wildlife Area.

Ideal Infrastructure

This mining project is a proposed redevelopment of an existing abandoned mine, and is located south of Alice Arm, and approximately 200 km by road northwest of Terrace, BC.

The mine site is ideally situated. It is accessible by road from Kitsault and New Aiyansh via the Nisga’a Highway and Forest Service Roads. Read more

Banamichi, Mexico: Rancher Town Hosts SilverCrest Mines Construction Activity

SilverCrest Mines (TSX.V: SVL) is building the Santa Elena Gold and Silver Mine in Banamichi, Sonora. This northern Mexican state is a hub of ranchero activity along with some agriculture. SilverCrest Mines’ new mine will bring tens of millions of dollars of economic activity to the area – and to its investors and shareholders – this winter when the company begins commercial gold and silver production at the mine.

Here’s a snapshot of the town that has played host to this company’s mine development activity.

Avanti Mining on Resource Intelligence TV

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Avanti Mining on Track for Largest Canadian Molybdenum Mine

Kitsault Project will Generate an NPV of $550MM; Company is Completing a Feasibility Study

Resource Intelligence: My next guest is the President and CEO of Avanti Mining, which has one of the most interesting molybdenum plays in North America. Avanti has produced a positive pre-feasibility study on the past producing Kitsault project that outlines a fifteen year mine life in an open-pit-style deposit that could inject hundreds of millions of dollars into the provincial and local coffers. The company is in close consultation with the Nisga’a First Nation band in Kitsault, BC on the development of the mine and the President and CEO of the company is Craig Nelsen and Craig joins us today. Craig thanks a lot for coming in.

Craig Nelsen: Nice to meet you Doug.

RI: Your pre-feasibility study came out in 2009 and it told you a lot. I’ve looked it over. It’s four hundred and ninety plus pages, but one of the things about it that’s interesting is the number of signatures on it. You’ve got Knight Piésold, Wardrop, RDI, SRK and the list goes on. Why do you need so many industry giants involved in a paper like this?

CN: Well Doug, its sort of horses-for-courses in this business. We use the best consultants in their particular area. Knight Piésold is the best at tailings management-facility design, Wardrop is a terrific engineering group for overall project costs. Rescan is a great environmental consultant and we use the people that are best in the field.

RI: Right. So what did the report end up telling you?

CN: That we have one of the top five undeveloped primary moly assets in the world. It’s a unique position for a junior resource company to be in, to have an asset of this quality.

RI: How profitable does the report tell investors this project can be?

CN: Well at the price assumptions we’ve used Doug, this mine on a pre-tax basis has a fifty percent profit margin. After tax, after royalties, after all costs it still has a very enviable thirty percent profit margin.

RI: So what’s the net present value of the Kitsault project?

CN: It has a discounted net cash flow value of $550 million today. On an after tax basis its worth about $1.6 billion. If we have one year that moly returns to the values that it was between 2004 and 2008, which is close to $30 a pound, this project will pay back all its capital costs in less than a year.

RI: So this is really huge project with a 15 year mine life, 40,000 tonnes per day at about 0.1% molybdenum. What percentage is that of the world’s production of molybdenum?

CN: Five percent of the world’s supply. It’s a very attractive project.

RI: Let’s talk a bit about your market valuation. Your pre-feasibility said you’re very close to production–you think you can be in production by 2013. But is the market giving you the value that you think you deserve? If we pull up your stock chart here, you’re trading in the 17 to 20 cents per share range right now. What is it that investors are discounting this for right now–or they just not getting the picture?

CN: Well I think almost every moly stock goes through this evolution in its valuation and the closer and closer you get to feasibility and permitting and financing, the higher and higher your share price is going to be to reflect the valuation of this asset and at this point I’m estimating that we have about a twenty percent valuation of our asset. When the feasibility study is done and financing is placed we should have about a sixty percent valuation. So that means in today’s terms, we could be going to a market cap of something like two hundred and seventy five to three hundred million dollars.

Fortunately we have two other fairly significant prospects on the project, as well. We haven’t gotten them to the point where they have qualified resources yet by Canadian standards, but they do have very significant historical resources.

RI: So looking forward to the time when you may be mining at Kitsault, how many people would the mine employ and how many people could you employ during the construction phase of the project.

CN: Well in the construction phase we’re looking at between two and four hundred jobs, depending on the season and the time of the year. The mine itself calls for 330 fulltime employees for 15 years and if you look at the statistics of spin off jobs or other jobs that are created, by having 330 fulltime mine employees, you could estimate between 5 and 6 other jobs. So we could be looking at between 1,500 and 1,800 hundred other jobs in the Kitsault and Prince Rupert region just to support this mining operation.

RI: You know in some ways the project sort of looks like an inevitability. It will create hundreds of jobs, it will provide very low cost molybdenum, but what I’ve been wanting to ask you is about the management team. How you put together the management team that you have? It’s got some major mining legends on it, for one Pierre Lassonde. So how do you go about gathering a group of people like this.

CN: Well, it’s actually people that I’ve worked with in the past. Pierre Lassonde helped me start Metallica Resources; Bob Cross was an early financer of Metallica when he was with Gordon Capital and people that you know and you’ve worked together with for a while, tend to stay with you. A.J. Ali, I’ve known for a long time. He was the audit committee chair of Metallica and he is really one of better mine financers around. He’s my partner and my CFO. We each own a very large portion of the company. We each own over 10 million shares of stock that we have purchased and we are firmly committed to the success of this company.

RI: History would suggest that bringing giants into production is a very difficult task. What are the issues? Permits and financing primarily, I’d say. So let’s talk about both. How are you dealing with the permitting process?

CN: We’ve just opted into the BC environmental assessment process. We did that for two principal reasons. One is we think it helps us comply with the requirements under the Nisga’a final agreement, the treaty that the Nisga’a have, and it’s a process that they understand. And secondly it has a legislated time-frame and that’s very important for us, to have a very clear time frame. And I think the province of British Columbia has done a fantastic job of sticking to that time frame over the last couple years. They’ve made a very serious commitment to clarity in the permitting process.

RI: That helps. What is the time frame for getting through the environmental assessment?

CN: Well, from the time you submit the application, the environmental assessment application; it’s about a 270 day period. So about 9 months.

RI: Less than a year, that’s not bad.

CN: Yes, and we hope to be able to submit that application at the end of this year.

RI: And what about financing. The capital cost that you’ve looked at in the pre-feasibility study is $641 million. How do you go about getting that?

CN: Well we think about 60 percent of it can be raised in debt and we have WestLB working for us as the principal arrangers. They’re one of the largest European resource banks and they’ve told us if we can find offtake purchasers at a fixed base price, so a floor and a collar for the commodity, for only 40% of our production for the first five years that will guarantee the revenue to pay back that debt. So that’s our target right now: to find steel producers that will purchase 5-year contracts for up to 40% of our production. Now the remaining 60% we sell at market price and it’s in the hands of the shareholders. It doesn’t have to be used for debt service.

RI: Craig, in Avanti’s case you’re going to be working quite closely with the Nisga’a First Nation. How involved are they in the mine development process and also in the sharing of the potential revenue at a mine at Kitsault?

CN: Well, first off we have to comply with the environmental assessment provisions of their treaty. So they’re involved with the BC environment assessment act process. Secondly the government has already indicated a willingness to share revenue with the local communities from the BC mine tax that we will pay. You know, that’s about a third of the tax we pay on this project. Total tax we estimate at being over $800 million.

RI: Craig, can you explain the scope of the Kitsault project for investors?

CN: Well, it really is a very significant asset. As I said, its one of the top five undeveloped primary moly assets in the world right now and in full production it will generate about five percent of the world’s supply of the commodity. It will be the largest molybdenum mine in Canada. It will provide a lot of jobs and salary revenues for local residents. It will pay a huge amount of tax to the provincial and federal governments and a portion of that will come back to the local communities. It’s a very significant asset.

RI: Time frame. What needs to happen between now and 2013 to get to production?

CN: Three things. Complete the feasibility study; based upon that get the mine finance arranged with offtake agreements; and lastly get the environmental permits to start construction.

RI: And certainly when that happens we’re going to see a big change in the share price.

CN: Yes, we believe so.

RI: Craig Nelsen, thanks a lot for coming on the show today. We really do appreciate you coming on and we hope to see you again.

Resource Intelligence is one of the world’s foremost resource investor websites, with revolutionary investor calculators, video, financing information, conference planners, resource estimate updates, news and more. Calculate the per share value of thousands of projects at any metal price. Watch in depth interviews and site videos. Read all the resource news that’s fit to print. Invest better at www.resourceintelligence.net

The Fraser Institute’s Fred McMahon on Resource Intelligence TV

RI: Today we have a smorgasbord of intelligence for you. Joining us on the show is the co-author of the prestigious Fraser Institute’s Survey of Mines. He’s done it for 13 years and he’s joining us here on Skype.  Fred, thanks for joining. What was the genesis of the survey? Read more

Goldsource Mines on Resource Intelligence TV

Goldsource Mines has been on resourceINTELLIGENCE’s radar more or less since that company made its first coal discovery in Eastern Saskatchewan in 2008. News of that discovery sent the company’s share prices soaring to about $20 per share. Of course, over time, calmer heads prevail and the company share prices have been in a holding pattern since, as they drill out coal deposit after coal deposit. So far the company has identified approximately 17 coals deposits on its Border project in a series of interesting sub-basins, and here to tell us more about that is Scott Drever, the company’s president. Read more

SilverCrest Mines: Gold Mining From the Ground Up

Time Lapse Video of SilverCrest Mines’ Santa Elena in Construction

By Doug Hadfield, Resource Intelligence

(Editor’s Note: These videos were created from time-lapse photography. Construction is still in progress. Check back regularly at www.resourceintelligence.net to watch as the videos are completed through July 2010.)

There’s a new gold-silver mine being built in northern Mexico. It’s not often that you have the opportunity to see a mineral resource project literally move to production, but I’ve had a front row seat on the action. Pundits often exclaim that just one in ten thousand exploration projects ever make the journey from exploration to extraction, so I count myself lucky to have been able to watch SilverCrest Mines’ Santa Elena mine in construction daily via video link. Read more

Pediment Gold on Resource Intelligence TV

Pediment Gold Advances 11,000m Drill Program, Begins Pre-Feas studies in Mexico

According to the Fraser Institute, states in Northern Mexico soar past their southern neighbors economically not because of their proximity to the US, but rather because they are more economically free. And for my next guests, Gary Freeman and Mel Herdrick of Pediment Gold, with two projects in Northern Mexico, this is a reality that could net his company’s shareholders some just desserts. Pediment Gold’s two advanced stage gold projects are located in the norther Mexican states of Sonora and Baja California Sur, both with greater than one million ounces inferred or better. Gary Freeman is the company’s President and CEO, and Mel Herdrick is the VP of Exploration. Read more

First Bauxite on Resource Intelligence TV

First Bauxite to Submit FS by April, Acquires Vast Tracts of Bauxite Land

Yannis Tsitos is the President of an intriguing company with a commodity that has compelling price dynamics. The commodity is Bauxite. Refractory Grade Super Calcined Bauxite or RASC. To educate us on the commodity and his project in Guyana, we spoke with First Bauxite’s (TSXV: FBX) President and director Yannis Tsitos. Yannis worked for most of his career—18 years—with BHP Billiton as chief geophysicist for South America and business development manager for their exploration team with a global reach. Read more

Ken Reser on Resource Intelligence TV

Resource Researcher Ken Reser Unearths Manganese

Ken Reser was one of the first to start writing about molybdenum when most investors still had trouble spelling the word, back in 2005. Around that same time, Ken realized the potential of another metal of vital importance to economies around the world that as yet had no significant production in the United States—manganese. Ken Reser has been writing and researching about manganese since 2007 and has concluded that not only is the metal a vital part of infrastructure building in growing economies, but that it should be considered a strategic metal by western governments. Read more

PDAC President Jon Baird on Resource Intelligence TV

President Jon Baird Discusses PDAC2010, Mining Industry

The Prospectors and Developers Association of Canada (PDAC) is more than the world’s most attended mining convention. The PDAC represents the interests of the Canadian mineral exploration and development industry as a whole. The association was established in 1932 in response to a proposed government regulation that threatened the livelihood of Ontario prospectors. Today, 77 years after its founding, the association is a national organization with 6,000 individual members and 950 corporate members. President of the PDAC Jon Baird, joined us in our Vancouver studio. Read more

Catherine Virga on Resource Intelligence TV

Molybdenum Expert Catherine Virga Sees Strength in Supply, Demand Fundamentals

Commodities market research, consulting, asset management, and investment banking are all in high demand. And what all these have in common is that to be successful in each requires a person with a specific skillset. To consult some of the wealthiest people and institutions in the world on commodities and investing requires a profound understanding of economics, politics, world issues and perhaps most importantly, people. Our next guest is an expert in each of these arenas. Catherine Virga is a senior analyst at CPM Group and is involved in client consulting services for major mining companies, a full range of institutional investors, and commodities consuming companies. Read more

Jeffrey Christian on Resource Intelligence TV

Founder of CPM Group sees Strong Precious Metals Prices Beyond 2010

In 2006, Barron’s magazine reviewed Jeffrey Christian’s best selling book Commodities Rising with the quote, “One of the brightest and independent-minded analysts.” Jeffrey founded and is the Managing Director of the CPM Group, which publishes advisories, annuals on gold, silver and precious metals, and which resourceINTELLIGENCE recommends to any serious investor. Jeffrey and the CPM Group are are also advisors to numerous central banks and the metals industry. Read more

Analyst Ray Goldie Makes the Case for Uranium and Resources

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Salman Partners Analyst Puzzled by Decoupling of Copper Prices and Inventories

Our next guest wrote the definitive account of the birth of the Voisey’s Bay mine. A best seller called Inco Comes to Labrador. He was also a part of the team of prospectors that spearheaded exploration for copper and nickel in Labrador in the 1970s. Today, Ray Goldie is a senior analyst and Vice President with Salman Partners and regularly speaks to the investors and the media on subjects ranging from uranium investing to the Goldie Principle.

Read more

Terry Salman of Salman Partners on Resource Intelligence TV

Founder of Salman Partners Sees Positive Outlook for Commodities

Few people know what it takes to run a successful multi-billion dollar investment company. Salman Partners’ founder Terry Salman makes the job seem easy. The mild-mannered Chairman, President and CEO last year steered his company to $7.7 billion in fund-raising activity, mostly for resource explorers and miners. Read more

American Manganese on Resource Intelligence TV

American Manganese Developing a Strategic Product for U.S. Steel Mills

With its recent name change from Roche Deboule Minerals, American Manganese Inc. now clearly states the business in which it expects to truly make its name. Manganese is another one of those metals that most people may have heard about but probably couldn’t distinguish from magnesium, much less care about what it’s used for. Without manganese, however, not much could be built or made in the modern world, and that’s the opportunity which makes American Manganese (AMY) such an interesting investment story. Read more

Midway Gold on Resource Intelligence TV

Midway Gold Tops 4.5MM Oz Gold Under the Investor Radar

Milestones:
2010: Complete a financing
Q2 2010: Midway project drill results
Q3 2010: Spring Valley progress update
Q4 2010: Golden Eagle drill results
2011: Pan scoping study

Our next guest’s company has 4.5 million ounces gold in the measured, indicated and inferred categories, a JV with one of the largest mining companies in the world, and four advanced stage projects in Nevada and Washington. Read more

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