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Posts tagged ‘Alexis Minerals Corporation (AMC)’

Turnaround Time

January 24th, 2012

Alexis Hopes Manitoba Gold Will Fund Abitibi Expansion

By Greg Klein

(Update: On July 5, 2012, Alexis Minerals Corp began trading as QMX Gold Corp TSX:QMX.)

At first glance, a company that loses money on an Abitibi gold mine might not seem the ideal spot for a CEO’s career move. But when François Perron joined Alexis Minerals TSX:AMC a year ago, he had his eyes on the main prize—the company’s Snow Lake Gold Project in Manitoba. That, he maintains, is the key to reviving the Lac Herbin Mine and finding others in Quebec’s Cadillac Break’s largest land holding.

“Snow Lake is the jewel, and that’s why I joined Alexis,” Perron says. “There’s this huge opportunity to unlock a lot of value with that project.” In operation from 1995 to 2005, it comes with a mill and other surface infrastructure intact. Below the surface lie proven and probable reserves averaging 4.04 grams per tonne for 451,900 gold ounces, which are included in measured and indicated resources of 728,000 gold ounces averaging 4.14 g/t. The inferred resource estimate is 336,700 gold ounces grading 4.43 g/t. The estimates date to December 2010.

Alexis Hopes Manitoba Gold Will Fund Abitibi Expansion

An October 2010 feasibility study for Snow Lake’s Main Mine and #3 zones projected a pre-production capex of $39.7 million with a sustaining capital cost of $35.2 million. The two zones would produce an average 83,000 ounces a year at a cash cost of $640 an ounce for a mine life of five years. The payback period was estimated at 1.7 years.

More recent studies project Snow Lake’s capex to be closer to $47 million. “That’s still very, very low because I have a mill that was working in 2005,” he emphasizes. “The mine is there; the shaft is already there; it’s a pretty dry mine. So we’re in a very good position. Most of the capital goes to developing new areas which we’ve identified.”

Exploration results from Snow Lake’s Dick Zone released January 12 include:

  • 14.04 g/t gold over 4.6 metres
  • 6.74 g/t over 5 metres
  • 5.19 g/t over 4.2 metres
  • 4.01 g/t over 4.1 metres
  • 3.77 g/t over 3.3 metres

January 12 exploration results for the Ruttan Zone include:

  • 6.17 g/t over 4 metres
  • 3.74 g/t over 7.6 metres
  • 2.79 g/t over 2.1 metres

January 12 exploration results for the Bounter Zone include:

  • 3.55 g/t over 1.5 metres
  • 4.6 g/t over 0.5 metres
  • 1.59 g/t over 1.3 metres

“The old mine was run on a very, very small footprint,” Perron emphasizes. “The camp that we’ve consolidated now is more than 90 square kilometres. There’s a large part of the belt that’s never been explored, very easily truckable to the existing mill. I have a five-year mine life from the old feasibility study. I’ve done another $8 million worth of drilling this year to add to it, and we’re just getting started. The key objective is, let’s get that mine into production. If I have that producing cash flow, I can start to fund some serious exploration and continue to add some serious value.”

With 1,000 square kilometres, we are the largest landholders on the Cadillac Break. That’s not moose pasture. There are more than 20 producing mines there —François Perron

In search of that cash flow, Perron focuses on financing. Alexis announced January 5 bridge financing of $10 million to fund working capital and repay a $2.1-million convertible debenture. “Debt financings take a bit longer than I would like,” Perron says. “But the bridge financing will give me the extra couple of months needed to do the other one properly. There could have been faster ways to fund, but I’m trying to make sure I get a good deal for the company.”

Perron estimates that once financing has been secured, Snow Lake will take 12 to 18 months to achieve commercial production. “Safe to say we’ll be exiting 2013 in production,” he declares.

As for Lac Herbin, Perron says, “The bleeding has stopped.” An anomaly of the sort not normally found in Abitibi, the mine managed to lose money. It opened in December 2008 after a feasibility study projected 80,000 gold ounces a year. The mine met production goals in 2009, but its 2010 output dropped to 24,900 ounces. By 4Q 2010, Lac Herbin’s cash cost came to $2,020 an ounce, helping explain the company’s 2010 net loss of $48.5 million.

“Historically, in the Val-d’Or district, mineralization behaved in a certain way. But we didn’t get the behaviour that exists elsewhere in the camp. We had one very wide structure called the S3 Zone, which we thought was going to carry further down. Now what’s left in the reserve are much narrower veins where the old approach of mining didn’t work. When you have a very unpredictable deposit, it doesn’t mean it’s not there. It means you have to adapt to it.”

Lac Herbin’s turnaround plan is three-fold. More stopes will be added, allowing miners greater flexibility “to adapt to an always-changing deposit,” Perron says. A mill upgrade will try to increase recovery from the former level of 89.3%, although he concedes the goal of 92% has proved elusive. Ongoing drilling aims to further explore and define the mineralization, with an updated resource estimate scheduled for release in the coming months.

On January 20, Alexis announced 2012 production guidance of 18,500 ounces to 20,500 ounces—modest, but a substantial increase over last year’s 9,000. The company also announced that 4Q production was 3,726 ounces, for a 2011 total of 10,197 ounces.

Looking ahead to a future when Lac Herbin has redeemed itself and Snow Lake is producing serious cash flow is what really inspires Perron. “With 1,000 square kilometres, we are the largest landholders on the Cadillac Break. That’s not moose pasture. There are more than 20 producing mines there. Over time, with effort, our objective will be to unearth other big mines. If you look at the Abitibi mines that have opened up in recent years, they have been below 200 metres. But 80% of the database that we have of the old Noranda stuff doesn’t drill further down than 200 metres.”

At press time Alexis had 593.6 million shares outstanding at $0.045 a share for a market cap of $26.7 million.