Abacus Mining and Exploration (TSX-V: AME) President Paul Anderson with an In-Depth Review of Abacus' Three Projects: Ajax, Willow & Jersey Valley
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the President of Abacus Mining and Exploration (TSX-V: AME)(OTC: ABCFF), Mr. Paul Anderson. Paul, it's been a bit. We've talked privately, but it's been a bit since we've had you on. How have you been?
Paul Anderson: I've been just great, Gerardo. We're all hunkered down here with COVID. People working from home. Things up north of the border here are still in pretty good shape. Little flair ups here and there, but we're doing well. It's summer, you can sit outside at least. So things are good.
Gerardo Del Real: It's a great time to have quality exploration and an anchor copper and gold asset. You have a little of each. You have the Ajax Project, which we'll talk about in a bit. Abacus is a minority owner there. You have Willow, which is a property I've been to, I'm excited about. I know there's some copper potential there, but there's also some gold targets that I'm going to ask you about. Then the most recent addition to the portfolio is Jersey Valley, which again is a gold project in Nevada.
I'd like to start with Ajax. Those who are familiar with me know that I'm a long-time supporter of Abacus, participated in several financings, full disclosure, participated in the most recent one, and plan to continue to support the company in large part because of the ownership interest in Ajax. Ajax was permit-challenged, meaning the permit was denied several years ago. It was unexpected the way in which it was denied. I know that now there seems to be a move to, at the very least, re-engage key stakeholders and see if there is a path forward.
Can you describe Abacus' interest in Ajax and just provide a brief overview of the project for those not familiar with it?
Paul Anderson: Certainly, Gerardo. Ajax is arguably our major project. We have a 20% carried interest through to production. We took the project on in about 2002, bought it from Teck Resources, who had a mine on the site previously. The western part of the old Teck property is back into production with New Gold. They call that the New Afton Mine. We have the eastern part, where there is a couple of small open pits that fed the original operation back in the '70s.
Abacus took the property on, bought it from Teck in about 2002, did some work, did some drilling, discovered that there was quite a large resource underneath the old two open pits, that basically joined together and made one large resource.
In 2010, we started talking to KGHM, the big Polish miner, about an interest. We eventually brought them in for 80% of the project. We brought them in so that they would put the mine into production. We're explorationists. We don't really put mines into production. We bring in partners, so we did that in 2010.
We were left with a 20% carried interest. Basically once the mine is back up into production, anything that was spent on our behalf in terms of putting the mine into production gets paid back from proceeds of the mine, the profits that would accrue to us. It's a pretty good position for a small company like ours. The project is large, it has over $1 billion CapEx at the moment.
In terms of the size, I think it's about an 18-year mining life right now, proposed 65,000 tonnes a day. So it's a large, low-grade operation. Right now, in terms of contained metal there's about 2.7 billion pounds of copper, roughly 2.6 million ounces of gold, and 5.3 million ounces of silver. It's a gold-silver-copper project. Depending on the prices of both those metals – of course copper is up in price, gold is up in price, as is silver – it becomes more of a copper mine or more of a gold mine, depending on the prices.
Gerardo Del Real: It's a good problem to have. Right, Paul?
Paul Anderson: It is a good problem to have. We basically handed it over to KGHM in 2010. They completed a feasibility on the study. They took it up through the mine development process here in BC. The first thing you need is something called an environmental assessment permit. We ran into an issue here a couple years ago, where we basically got a no from the Provincial Government in terms of that permit. We really feel that was very politically motivated. There was a new party in power here, supported by the Green Party. They were basically, I think, collectively looking for a fairly large project to say no to. Ours just happened to be in their line of sight.
We didn't have full buy-in from some of the First Nations. We were talking to them. We had agreements with some, some we were working on, and that was used against us in the decision. We really felt it was political. The whole environmental assessment that went through, what came back from that was that you're going to dig a big open pit in the ground. There's going to be some sort of effects on that, but nothing that couldn't be mitigated by what the project proponents had proposed. We were left with a no there a couple years ago, which of course effected our stock price. You remember that, Gerardo.
Gerardo Del Real: I do. I bought in the low teens. I rode it all the way up to over $1.00. Unfortunately for all of us, it was a round trip. As I mentioned, a large part of why I continue to support the company is for two reasons. One, I believe in gold and copper. And two, I still believe that in light of the recent market action with the spot price of copper at $3.00, gold at $1,950 and headed higher likely, I believe that with a market cap of approximately $13, $14 million Canadian, your 20% interest absolutely merits a higher market cap, especially if KGHM is able to go ahead and re-engage stakeholders and provide a path forward.
The way that I understand it, Paul, and correct me if I'm wrong, is if you are able to re-engage key stakeholders, the First Nations groups and the political party that would be involved in reviewing the permit and the application, a lot of the work engineering-wise is already done. So there would be a path to where this could be done in a rather expedited fashion. Is that an accurate way to describe that?
Paul Anderson: Yeah, that's absolutely true. There'd probably be a little reworking of the engineering, but not a whole lot. This was several years worth of work, doing all the baselines studies, the environmental studies, the engineering work, all of that sort of stuff. The bulk of that is done. We really feel that First Nations buy-in is critical on the projects. They certainly have a right to be involved in projects that are in their areas. In terms of getting them re-engaged, I think if some sort of an agreement can be reached with that, that's really a path forward on the project.
It's in a mining area. There's a mine next door. There are big mines in the area. People are used to this sort of activity. If you're looking at 18-year mine life, that's the initial bit. Usually mines get expanded a bit beyond that. These are long-term jobs. They're well-paying jobs. It's all good for the area. We're quite hopeful that it's going to go ahead.
Our partner has begun to quietly re-engage some of the groups. They're working behind the scenes. They don't put out much in the way of press releases, so we don't have a whole lot of newsfow from that, unfortunately. We do see that they're back working at things. Of course the price of copper, gold, and silver certainly doesn't hurt in that respect. We're hopeful that's going to get back on track pretty soon.
Gerardo Del Real: Excellent. Again, just some context here. Market cap of Abacus right now, approximately $12, $13 million Canadian. The after-tax net present value, at 5%, for the Ajax Project is $543 million US. Take 20% of that, and then keep in mind that was using much lower gold, copper, silver prices. Right?
Paul Anderson: Absolutely. I don't remember what the prices they were using, but I think gold was something like probably about $1,100 or something. We're pretty close to double that. Yeah, you're absolutely right. Those numbers are old right now, but it gives you an idea of what the potential is.
Gerardo Del Real: Absolutely. Again, that's the lottery ticket. But let's talk something that you do have a little bit more control of. Let's talk Willow, and then let's get to Jersey Valley.
Willow is a copper, moly, and I think should be also gold project because there are some gold targets there, but let's start with the copper potential. You made a pretty significant discovery I want to say over a year ago. I'm excited to get back in there and put some drill holes there. I'm also excited to do some work on some of the gold targets. Can you provide an overview of Willow?
Paul Anderson: Yeah, absolutely. This is a project we picked up several years ago from Almadex Mining, who you know. We liked the area because Yerington is a camp that has a number of copper deposits. There's four known porphyry deposits. These are large, low-grade deposits. The known resources in the camp are something like 32 billion pounds of copper, so significant metal endowment.
Everybody has always looked in the camp for the fifth porphyry. There's been indications that there's another porphyry. People have looked for it and not found it. Well we think we found it up on the Willow property. We started working on this about three, four years ago, just doing mapping and sampling, that sort of thing, which led to geophysics, which led to drilling.
The drilling was quite significant. We had some real difficulties with the drilling company, where they basically lost half of the holes. We only did three holes. We were just trying to prove a concept. This is our target. This is what we think is down there. Let's drill a couple of holes. What we hit was the host granite.
There's a particular granite that hosts the porphyry deposits in the camp. You can't have a porphyry deposit in the camp without this particular rock type, and we found it on the property. We drilled and in two of the drill holes we hit that particular granite. We got some copper and moly values.
The feeling was, when we looked at the values and the chemistry that came out of the hole, that we were just on the edge of something. We weren't into the guts of the deposit. Our intention was to get back in there and drill maybe another half dozen holes. Of course we hit a point in the last couple years, where the market for copper just dropped. Our share price was down because of the Ajax decision. We just felt it wasn't prudent to try to dilute the company too much in terms of putting out too many shares to raise money. So we haven't done much on it in the last year or so. We're just starting to think about getting back, of course with price of copper being up.
You mentioned gold targets. There are some gold targets in the camp. It tends to be mostly a copper and moly camp. There's a few gold targets. They tend to be in areas that are associated with what we call skarns. These are enriched deposits. They tend to have a whole bunch of stuff. They're sort of a garbage pail of metal. They have copper and moly and precious metals and all sorts of things.
A good example of that is Pumpkin Hollow. Nevada Copper, down to the southeast of us, have just put a mine into production called Pumpkin Hollow. They're sitting with almost 600 million tonnes of 0.4% copper.
Gerardo Del Real: Right.
Paul Anderson: They put a mine into production. It's a little unusual. They have open pit deposits and they have an underground deposit. For whatever reason they decided to put the shaft in to do the underground work a couple years ago, ran into financial problems, sort of got back at it, finished it off. That mine is now back in production underground. It's a bit reverse of what most people do, starting an open pit and then maybe going underground. They're doing it the reverse way, but they've got a significant resource. It's the first new mine in the camp for a while.
Some of the other companies in the area, Hud Bay is right next door to us, with Ann Mason. Ann Mason is sitting there with 1.4 billion tonnes at 0.32% copper. Then there's several other known deposits in the area that have been mined in the past and have potential. It's a pretty interesting area to be in. These are large deposits, a bit like Ajax, large, long life deposits. It's a really nice target.
Like I say, we haven't done much in the last year or so. With the price of copper at a little over $3.00 I see this morning, we're seriously thinking about going back in there pretty soon and doing the drilling we want to do. So that's on the radar screen.
Gerardo Del Real: Well, I can tell you, Paul, as a shareholder I'm seriously pushing for that to happen. I hope that we're able to see some exploration work on Willow. It's an exciting project. You've vetted it. Some of the smartest people in the space have vetted the project. Morgan Poliquin and his team have vetted the project. It's in the right address in Nevada. It's right next to a producing infrastructure, and a camp that, frankly, it's low grade, but it's elephant country, right? All things you like to see in an exploration play.
Paul Anderson: Yeah, absolutely. It's a great property. You drive out of Reno, you've been there, it's about an hour drive out of Reno. You get to Yerington, which is a fairly small town, which has hotels and restaurants and everything you need, and then you drive for about 20 minutes out to the property. There's a road that runs right through it. You could take a car through it. It's really easy access, which is quite nice. It's a bit unusual.
Gerardo Del Real: Great place for a discovery. Let's hope we get to see that.
Let's talk Jersey Valley. I know that this is the most recent addition to the portfolio. It's also the project that I believe is likely to see the drill bit next. Can we talk about Jersey Valley a bit?
Paul Anderson: Yeah, absolutely. We had intended to be a pure cooper play in the last few years. With the price of copper heading down and just drifting and sitting there we thought, "Well maybe we should try to put a gold property into the company." The people involved in the company, Mike McInnis and myself – Mike is our Chair, used to run Riverstone Resources in West Africa. We discovered a deposit, which when we sold the company was about 3.5 million ounces of gold. It's now up to about 5 million ounces, and it's in production with Endeavor Mines in Burkina Faso.
Mike also had Gateway Gold that had properties in Nevada. About 10 years ago, the company got sold to Victoria Gold. One of the properties Mike had in Gateway was called Cove McCoy. Subsequently, it went into production. They produce around 4 million ounces of gold. The other thing in the area was the Phoenix-Fortitude complex. It's produced something in the order of 14 million ounces gold. It has copper production. They've got a mine plan out to, I think it's 2060 or something. It's just a huge deposit.
We're in the Battle Mountain trend, where there's all sorts of activities, all sorts of present and past mining. I went and looked at this last fall, and I liked it for a whole bunch of reasons. The geology of the property is basically an uplifted area of hills with sediments and intrusives and gold values. People have found gold values up in there from previous trenching and drilling. Then there's a flat area, valley covered. It's all gravel. You don't see very much. The only thing you see out there is sinter zone. It's a silica sinter zone, just popping up above the gravels. I describe it a bit like Yellowstone Park, if you go to Old Faithful and you watch the geyser coming up, and you're looking at all those rocks that are all nice and sparkly, that's the same sort of setting.
This is an active hot spring area. In fact, there's a hydrothermal plant on the plains, which produces about 10 megawatts of power a year. It's exploiting one of these hot sources from the hot springs. It was a pretty interesting area. It has all of the right components. The thing that got me interested was out in the flat there, out near the sinter zone, there were a few old drill holes that were done about 15 years ago. There's four diamond drill holes, and they all had some pretty interesting gold values. They all seemed to have better gold values and better geochemical markers toward the end of the hole. It just looked like the holes hadn't been drilled deep enough to really get into something. They were just on the edge of something.
We picked the project up on that basis. We were intending to go out and do a bit more sampling in there, just get some numbers and confirm a few things this spring. We had someone lined up to do that. Of course, COVID came along and everything got nixed. We were sitting there wondering what to do, and realized that we had some old IP geophysics and some MAG, we had images from it, but we didn't have the raw data. That set off a cross-country trek by telephone to look for all the data. I spent almost three months trying to chase this stuff down. It's really miserable to try to do in some places.
The U.S. is one example where there's no large database of data that you can access. Here in BC, you'd go to the BC Geological Survey and stuff would be there and you could get it. I did eventually track it down. Long story short, I did eventually track it down. We got someone to re-work the geophysics. The new person felt that the old geophysics was not properly massaged, I guess. He said that the person who had done it was not very competent, was using old software and that sort of thing.
What came out of that was two really nice looking targets. There was four lines of IP done originally. What we have are two targets that go over all four lines. The first target is roughly 500 meters wide, and it goes over at least 600 meters. The other one is quite a bit narrower.
The larger target looks like it's fairly flat lying. What we see up in the hills, from the old drilling is that there's a series of volcanics and intrusives that are interlayered. Where to get a contact point of either sediment or sediment intrusive, you get some value. That's a point where there's a bit of weakness, fluids move along, and that's where you can look for a gold deposit. I suspect that's what we're looking at in here.
The other target is smaller and it's deeper. It looks like it might be sort of a fault that's a feeder zone to some of these other things. It was really a good starting spot.
The other thing was that I mentioned there were four old drill holes in here. Well, the four old drill holes were pretty interesting because what we realized once we plotted up the new geophysics was that these drill holes had basically just nicked these geophysical anomalies. Because the geophysics that was done before was not very well presented, I guess, the drill holes were not well oriented to hit the mean part of the anomaly. They just grazed the anomaly, but there were some really interesting values in them.
One of the drill holes had about 1 gram of silver over 13 meters. It then had an intercept of about 0.2 gold, a little over 13 meters, right at the end of the hole. That was one of the ones that stopped in mineralization.
Gerardo Del Real: Right.
Paul Anderson: There was another intercept of 0.18 gold, and 3.6 grams per tonne silver over 6 meters, partway through the hole, and then about 1.6 grams gold and 1.6 grams silver over 1.5 meters, again, right at the end of the hole. The third intercept was about 0.2 grams per tonne gold over almost 30 meters. That was, again, towards the end of the hole. So what came out from the re-working of the geophysics was really interesting. All of a sudden these targets looked a lot more interesting to me, as a geologist.
The other thing was that they were open. So they're open. The targets are running northeast to southwest, so they're open to the northeast on our present claims. It was also pretty evident they were running off the claims to the southwest. What we did very quickly was we staked more claims. We picked up another 30 claims, which cover that straight extension down to the west and the southwest. We did that in early July and announced it.
In early July, we had news coming out about the new geophysics, then we had news about the new claims. What we're going to do next, we're going to go in and do some more geophysics, do some more lines extending that survey, so more lines up to the northeast, more lines to the southwest. We've got some pretty nice targets right now.
What I want to see is do those targets extend? Are they going to extend along strike, are there other stuff that we haven't seen before, and what's the best place to put some drilling? The idea is to get in there and do some geophysics, and then try to do some drilling this fall.
Now that said, I'm just talking to geophysical companies right now. Of course, everybody's raising money and everybody's suddenly gotten busy. I'm trying to line up a geophysical crew right now. I had someone in mind, and they're busy. It's going to be like several months. That doesn't work for us. I'm hopeful that we're going to get somebody in there. I'm talking to someone who seems to be available. That will be announced in due course.
Hopefully, all things being equal, we'd like to get in there and do some drilling this fall. That said, COVID does slow us down. I can't travel. I can't go over the border. Normally, I'd be down supervising some of this stuff, or at least looking over someone's shoulder once in a while. I can't do any of that sort of stuff. It does slow us down a little bit. The BLM, who owns the land, the government agency, they're slowing down a little bit in terms of permits and things.
Like I say, we want to do some drilling this fall, but some of that is a little bit out of our hands. That's the plan at the moment. That's about it for Jersey Valley. I quite like the area. I like the fact that there's gold and silver involved. We took it on as an epithermal play, which is typically fairly high-grade gold and silver.
Gerardo Del Real: Correct.
Paul Anderson: We also think there could be some sort of Carlin-type potential there, which are structural traps, large low-grade deposits. The typical stuff that people think about in Nevada. We've got a couple different target types.
I should mention the contact between the uplifted hills to the east and this flat valley to the west, is a fault. There's a range front fault that just drops the valley down from what it was originally. There's a breccia zone in there, which is quite spectacular. It was a focus of most of the previous operator's drilling. I think it still has some potential. I think the size is probably somewhat limited, but it could be wrapped into something else, if we make a real discovery there. That's a secondary target there, where I'm more focused out in the sediments where I can't see anything, of course. I'm using geophysics and geochemistry and all those other things to try to see through the cover. I think that's about it for Jersey Valley, Gerardo.
Gerardo Del Real: Paul, that's a thorough overview of the three projects. There's a lot to like. If there are advancements in any of the three, anytime soon, I expect shares to be much higher. I'm biased, I'm a shareholder as I mentioned from the very get go. I've participated several times in financings, plan on continuing to support the company. Everybody should know I'm biased, but I'm biased for a reason. It's because I think shares are headed higher, and I think we have a heck of a shot at maybe not just one, but several discoveries. Again, we have an anchor asset in Ajax that I believe will be gaining some traction soon, again as well.
Paul, thank you for your time. I took almost a half hour of your time, but I think it's important. I think we finally have a market that's going to reward the work that you and the team did during the bear market, bringing in Jersey Valley, keeping Willow in good standing, and obviously maintaining the dialogue and the relationship with KGHM on Ajax. Anything else to add to that, Paul?
Paul Anderson: No, I think you pretty much covered it, Gerardo. Thanks for your kind words. It's always tough when markets are down, but the thing about down markets is that they lead to up markets. You got to try to position the company that it's going to have some success when things take off. As you know, we finally have a bit of a market.
Our stock price has taken off. It's up quite a bit from what it was. It's basically pretty much doubled in the last couple of months. We've got good metal prices. Hopefully that's going to hang in there for a little while and we can get some work done and make some discoveries.
Gerardo Del Real: I'll say this, the share price has doubled, but it's still, it's nowhere near where it was back in 2016, 2017 when we were anticipating a permit. There's a lot of runway there. You just raised some money. You're cashed up. Let's get the geophysics done and then hopefully we can get a permit and get some drilling taken care of over there at Jersey Valley, and see what happens with Ajax here in the next several months.
Paul Anderson: Absolutely.
Gerardo Del Real: Paul, thank you again. Appreciate it.
Paul Anderson: Thank you, Gerardo.