Abacus Mining (TSX-V: AME) CEO Michael McInnis Provides Update on Permitting Process at Ajax Copper-Gold Project and Plans for Drilling Program at Willow Copper-Gold Project
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is Chairman, President, and CEO of Abacus Mining (TSX-V: AME)(OTC: ABCFF), Mr. Michael McInnis. Abacus is a mineral exploration and mine development company with a 20 percent interest in the feasibility stage Ajax Copper-Gold Project located at the historic Ajax-Afton Site, southwest of Kamloops, BC. And it also has an option to acquire up to a 75 percent interest in the Willow Copper-Gold Property in Douglas County, Nevada, a region which is known for past copper-gold production.
Now, Mr. McInnis is a professional mining engineer with over 35 years of experience in mineral exploration, in both North America and abroad with a demonstrated track record in acquiring and developing high quality mineral projects. He has an extensive experience managing junior mining companies, most recently at True Gold Mining until its acquisition by Endeavor Mining in 2016. He's also been a director of several junior mining companies and has served as a director of Abacus since July of 2002 and as its Chairman, President, and CEO since February of 2014. Michael, thank you so much for joining me today.
Michael McInnis: My pleasure, Gerardo.
Gerardo Del Real: Well, I provided a brief introduction, but I'd love for you to share with us a bit about your background and how you got involved with Abacus Mining.
Michael McInnis: Sure, I've been in the business here for, as you say, about 40 years so, a long and good time. I started in BC and branched out to the U.S. and abroad. I've had a number of involvements with junior companies. I started my career with about 15 years with the big companies and then moved into junior mining for the last 25. I've had a fairly broad experience both locally and abroad and I got involved in Abacus mainly because of my background in porphyry coppers. They had recently acquired the Teck holdings up in the Ajax area and they asked me if I would join the board in '02 which, I thought I would like to do. It's an area that I was fairly familiar with so, I joined the board in '02 and stayed with them obviously until the present.
Gerardo Del Real: Excellent. Now I mentioned in the introduction that Abacus has a 20 percent interest in the Ajax Copper-Gold Project and partner KGHM is largely funding that project. Now the project is proposed copper-gold open pit mine which, is currently undergoing a provincial and federal environmental assessment. It's going through the process and there's been some very important developments recently that I'd like to go over in a just a sec. In addition to that, Abacus recently signed an option to acquire up to a 75 percent interest in the very prospective Willow Copper-Gold Property in Douglas County, Nevada which, I had mentioned earlier is a region that's known for its past copper-gold production.
I'd like to talk about both, Michael, but let's start with the flagship which, of course, is Ajax. The Ajax project has total, proven and probable mineral reserves of 2.7 billion pounds of copper, 2.6 million ounces of gold and 5.3 million ounces of silver at 0.29 percent copper, 0.19 grams per tonne gold, and 0.39 per tonne silver. And there's been rumored proximal ore bodies that could significantly add to the economics there. Now can you provide us with a bit of background of the project and the potential that may still exist exploration wise?
Michael McInnis: Sure, no problem. I might want to just rewind a bit back to give you a very quick review of the history. The rush, if you will, started in probably the early 70's when Chester Millar discovered the Afton ore body through drilling. He was subsequently bought out by Teck, who not only took over his company and drilled off Afton, they created quite a large land base in and around the Afton ore body. They put the Afton into production in sort of around the mid 70's and in the interim they were looking around the property, discovered Ajax, did some drilling and in 1989 through about '91, they did some mining at Ajax itself. Low copper caused him to drop tools there for a few years. They went back at it in '94 to I think '97, but again, the copper market took a tumble and they stopped the mining of Ajax.
We, being Abacus, acquired all of the Teck holdings in 2002 and subsequently some other value assets in '04 and we went about raising money, did a lot of drilling on a number of areas within the Teck holdings. Ajax, but also including one called Rainbow and one called DM-Audra, and these are bona fide deposits of copper and gold and they certainly form the future, if you will, after the Ajax mining is potentially being minable there. There are a number of other, sort of, showings, but they're not nearly as far along as the Rainbow and DM-Audra.
The Ajax, in our view, responded quite nicely to the exploration and we concentrated our work on Ajax and in '09 we produced a PEA which was positive. Meantime, we were deciding whether to go forward on the prefeasibility and we were approached by KGHM. Now, KGHM is one of the largest copper producers as well as silver in the world. They're headquartered in Poland. Historically, they've never done any work outside of Poland, but their board had decided they wanted to branch out a bit and they were looking within the Americas, let's call it, for a good copper project that they could go to work on.
So they looked at Ajax and said, we like it. We signed a deal with them May the 10th. The deal in summary, Gerardo, was that they would put $37 million dollars in to earn a 51 percent and that money would be dedicated primarily to go to the bankable feasibility study which they did. When they finished that and again, a positive, they had an option to earn an additional 29 percent in the project by providing to Abacus around $30 million U.S. They obviously did that as well and that money was earmarked in an escrow account to go towards Abacus' 20 percent interest in the property. And the deal, in essence, was when that $30 million dollars in the escrow was exhausted then we could request KGHM to fund in its entirety all of Abacus' financial commitments right up to production.
So, the $30 million was exhausted, I think, last year and we have since requested KGHM to fund our portion, in other words the 20 percent. We can do that right up to production, if we choose not to either raise the money or put it up through other means, right up to production. So, right now the property is held 80 percent by KGHM and 20 percent by Abacus. The feasibility that they did was again, funded fully by them. They have updated the feasibility and just kind of walking through it a little bit you mentioned the resources already. We're going to be mining there at about 65,000 tonnes a day. That produces roughly 58,000 tonnes of copper and 125,0000 ounces of gold per annum and our mine life right now is in the order of 18 years, but as you know, most of these mines find enough to continue on after that.
Gerardo Del Real: Correct.
Michael McInnis: So, we have a $1.3 billion CAPEX. Our OPEX is in the order of $11 dollars a tonne and that gives some fairly nice financial metrics. On a pretax basis our NPV at 8 percent is U.S. $429 million and at an after tax at 8 percent, it’s U.S. $216 million. So, we have a very attractive and robust project and we're looking forward to moving this down the road.
Gerardo Del Real: Absolutely. Now, Michael, KGHM obviously believes in the project. I mean, they're funding you all the way up until production and you seem to be at an inflection point with the recent developments at Ajax. There's been some important developments that I'd love to go over. The most recent, was a decision that the provincial and federal government have decided to align the review efforts. Can you share with us why that's such an important and positive development and just what that means as far as the timeline for a final decision on whether the project will be permitted.
Michael McInnis: Sure. In broad overview, the first applications you put in for permitting are for your environmental permits and that goes to both your provincial governments and the federal governments. And we produced a very large document of about 18,000 pages last year that was submitted for review by the governments and we since that time have answered I think it's upwards of five thousand questions, queries, clarifications. So, it's been ...
Gerardo Del Real: Five thousand?
Michael McInnis: Yes, over five thousand. A lot of work, but we have answered them all satisfactory. The EAO, the Environmental Assessment Office of BC is happy. So, what has happened here is normally that goes through the provincial one and then through the feds somewhat in tandem, but not necessarily. At the federal level there's always a possibility that major projects like this would get submitted to the federal review panel for the federal review. And this is a fairly time consuming procedure. It could take as much as two years.
So, we were obviously concerned that we might get into that federal review panel and really slow the project down in terms of its permitting process. The governments announced here recently, recently being about a week ago, that they would be working very closely together and in tandem so as not to keep duplicating the efforts of both governments. So, we were very happy with that. We're pleased that they're taking that approach. It's going to add a bit of time to the provincial process, but at the same time, it'll also have sort of spill over repercussions on the federal side and then we can get the federal permit shortly after the decision by the provincial government.
The time table on that, Gerardo, is right now having the provincial decision September of this year and having the federal decision shortly after. By that, I mean, perhaps, two to three months after the provincial. So, we have a definite time table now for getting that and we're excited about moving that forward.
Gerardo Del Real: Well, that's exciting. So, in 2017 we'll know that hopefully you got the green light and that the project will be moving forward.
Michael McInnis: That's correct.
Gerardo Del Real: Wonderful, wonderful. Well, in the meantime, as I mentioned earlier, you recently optioned the Willow Copper-Gold Property in Nevada which is prospective for a big copper porphyry. Now the property has seen some significant work in the past by one of the best in the business, Almadex Minerals CEO Morgan Poliquin, who's juggling multiple discoveries himself which is a part of the reason why the property became available. I believe your relationship with Mr. Dwayne Poliquin, Morgan's father, also played into that. You cut your teeth with porphyries, Micheal. Can you provide some background on your experience with these types of targets and just why you're so excited about Willow which is going to provide a lot of news flow in meantime.
Michael McInnis: Yeah, sure can. As a young Geo my first job was with Cominco who is now part of the Teck organization and at that time they were heavily into porphyry copper exploration specifically the Valley Copper ore body which had just been discovered and I was assigned as a young Geo to go work on Valley Copper. So that was a pretty exciting time for a young guy to just come out and get into an ore body that was about to be moved onto production.
So, that was my first education and exposure to what porphyry coppers look like and all the manifestations of them. Subsequent to the delineation of Valley Copper, they put me on the porphyry copper team and we spent a number of years looking at various porphyry copper projects throughout BC with Cominco. When I moved onto another company, they had a group of porphyry copper prospects up in the Stikine Arch of Northern British Columbia and I was put onto that project as the district Geo in charge of those projects. And one of the first projects I actually drilled up there was the Red Chris and, as you know, it's now an ore body with Imperial Metals, but that's a long time ago.
Gerardo Del Real: Right.
Michael McInnis: When I first got into junior mining, we also did porphyry copper exploration, some of which was back in the Stikine. And we drilled off the GJ which, I believe one of Ron Netaleski's companies is exploring. We had it and I think it was like 120 million tonnes of porphyry copper grade. So, not quite there in tonnes, but still potential so good luck with Ron on that one.
So, that's kind of a capsule of my involvement in porphyry coppers. I like them a lot. They're obviously long life mines and if you find one it really is a company changer. When I became president of Abacus, the board head said, look, we have the Ajax and that's going to have a life of its own moving through the permitting process, but what we need right now, Mike, is another copper project so why don't you go find one. I looked at, quite literally, almost a hundred different projects over a period of time there. And one of the things that sort of stuck in my memory bank was in a former company, we had an option on the Caballo Blanco from Almadex, which also included the porphyry copper prospects to the south of Caballo. We never did much there, but always liked the look of them and so I thought I wonder what they're doing with that.
So I called Dwayne, who I've known for many, many years and said, Dwayne, what are you doing with your copper porphyries? I'm interested in optioning them. And he said, unfortunately Mike, they're unavailable. We're drilling them right now and we like what we see.
Gerardo Del Real: Right.
Michael McInnis: So I said, awe too bad. And he said, but if you like that, you're going to like Willow. It's a property we have in Nevada. We like it a lot. We think it looks like El Cobre, but we have our hands full right now with what we're doing so take a look. So we did, looked at all the data and met with Morgan, who I have a really high regard for in terms of his knowledge of porphyry coppers around the world and liked the data so we looked on the property. And I said, okay, I like this. Let's see if we can make a deal, which we did. So, that's how we got there. We liked the looks of it. We think it has all the earmarks of a high level porphyry reserve system and we're going to go to work on it here.
Gerardo Del Real: Excellent. Now, just to provide some background for those that aren't familiar with the two projects you mentioned, the Caballo Blanco and the El Cobre Project, they're literally right next to each other and Caballo Blanco is currently undergoing a permitting review and that looks like it's very prospective and the people developing it seem to have the right political capital to actually put that into production here. And El Cobre is being drilled by Morgan right now, as you know, and it looks like there's definitely a discovery there. We'll know a lot more here in the coming months, but just to your point as to how prospective Willow could be. Both of those, the El Cobre Project and the Caballo Blanco, both of those projects seem to be moving forward in a very positive way.
So, we expect a decision in the fall for Abacus. That's obviously a very important upcoming catalyst for the company. What's the plan at Willow? Do you plan to see drilling this year? Is there going to be any mapping that you need to do? I know that Morgan and the team did some work on it in the past, quite significant work, but I know there's some work that still needs to be done there. Do you have a plan for that, Mike?
Michael McInnis: We sure do. They started the work, the work is first rate as you might imagine. Step one, we're going to put on a very experienced porphyry copper mapping geologist who is going to pitch up there probably in the next couple weeks to start some mapping. Essentially looking to map not only the lithologies, but look at the alterations, structure, etc. We will then coordinate that with a completion of the Geochem survey that Morgan started as well as the completion of the IP that they also started. We'll also be doing a fair amount of spectral work in terms of looking at specific rock samples that are collected doing the Geochem to see if we can develop a pattern on the alteration. Alteration type, alteration morphology, that sort of thing.
So, we'll be doing that. We have a Mag survey planned. All of these, of course, Gerardo, are directed at establishing specific drill targets and we do have a drilling program plan for this year and budgeted for this year. We are planning try to get that underway mid-summer and, of course, that's contingent on getting the prior work done and getting the data in which sometimes is not in your total control. But that's the plan right now. Yes, we'll be drilling mid-summer on the targets that pop loose.
Gerardo Del Real: Excellent. Fantastic. Well, I'm excited about visiting the property later this month. I hope we're able to make that work and you own 20 percent of a project with an NPV at 8 percent of U.S. $429 million. Obviously, I mention how exciting the Willow target is, the Willow Property is, and that will be drilled hopefully in the summertime. Can you provide people that aren't familiar with the Abacus story the current market cap for Abacus and just to provide some context here.
Michael McInnis: Yeah, our current market cap is Canadian about $19 million and U.S. about $14 million.
Gerardo Del Real: And again, to remind everybody, you own 20 percent of a project with an NPV at 8 percent of U.S. $429 million. So, I hope that provides a little bit of context. That's the opportunity there. I think Willow's going to become an important part of this story here this summer and I'm excited again to get down there later this month. Michael, I want to thank you so much for your time today. Is there anything that you'd like to add?
Michael McInnis: No, I think you've touched on everything, but maybe just to do a synopsis. I really think there are opportunities here. We've set Abacus up as a copper vehicle so if investors like what they see on the horizon for the copper market, you should take a look. I think there's an opportunity for re-rating as those permits are received for the Ajax. I think there's a potential for a re-rating obviously if we make a discovery in Nevada. We have a pretty low market evaluation and we like the looks ourselves of the copper market. We think we're just entering into a multi-bull market. So, take a look. Get in touch with me if you ever have any questions.
Gerardo Del Real: Fantastic, and we'll make sure to put a link to the Abacus website here with the interview. I want to thank you again, Mike, for your time and hopefully we're chatting soon to talk a bit more about Willow and please, please keep us up to date with everything going on at the Ajax.
Michael McInnis: Will do and look forward to seeing you towards the end of the month on the property.
Gerardo Del Real: Appreciate it. Michael McInnis with Abacus Mining.