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Posts tagged ‘HudBay Minerals Inc (HBM)’

Can streaming agreements save some good junior miners?

November 12th, 2013

by Ana Komnenic | November 12, 2013 | Reprinted by permission of

Financing has been tough for juniors lately: Cash generated from financing activities in Canada fell 34% this year compared with last year, according to a recent report by PricewaterhouseCoopers.

Can streaming agreements save some good junior miners?

Randy Smallwood,
CEO Silver Wheaton.

Randy Smallwood, CEO of Silver Wheaton TSX:SLW—the world’s largest precious metals streaming company—says that in his 30 years in the mining industry, he’s “never seen it this bad.”

But a stream financing model for juniors may be the silver lining during these cash-strapped times.

Silver Wheaton just signed its first early deposit gold stream agreement with exploration company Sandspring Resources TSXV:SSP.

Under the $148-million deal, Sandspring will get $13.5 million up front to complete feasibility work, after which Silver Wheaton will have the right to buy 10% of the life-of-mine gold production from the Toroparu project in Guyana. If Silver Wheaton elects not to proceed with the gold stream, Sandspring will return all but $2 million of the advanced funds.

This model allows Silver Wheaton to take advantage of high-quality, earlier-stage projects. Meanwhile, Sandspring gets access to critical funds without diluting shareholder value.

According to Smallwood, early deposit gold stream agreements are the “most attractive forms of financing for juniors.”

“Previously, prior to the feasibility study, the only source of capital has been the public markets,” Smallwood told

But Silver Wheaton is picky, and Smallwood is not looking to strike a deal with just any company.

“There’s a lot of projects out there that shouldn’t be financed,” the CEO said. His team spent a lot of time picking the right one—putting a lot of emphasis on the firm’s management team.

“We wouldn’t be there if we weren’t very confident,” he said.

Silver Wheaton plans on executing more of these deals but the CEO wouldn’t say with which companies.

“There is an option, just make sure your project is as good as you say.”

As for business as usual, Silver Wheaton’s primary focus remains regular precious metal stream agreements. The company recently struck a $135-million deal with Hudbay Minerals TSX:HBM to acquire 50% of its gold production from the Constancia project. Silver Wheaton already has an arrangement for 100% of the life-of-mine silver production.

Ultimately Smallwood sees more value in silver for two reasons. For one, the uses of silver are much broader: Half of its consumption is attributed to industrial applications including high-efficiency electronics and antibacterial products. Silver’s market position is also more volatile than gold—which can be both a blessing and a curse.

Reprinted by permission of

Athabasca Basin and beyond

August 31st, 2013

Uranium news from Saskatchewan and elsewhere for August 24 to 30, 2013

by Greg Klein

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Fission proposes Alpha takeover for sole control of Patterson Lake South

Fission Uranium threatened to go hostile when Alpha Minerals <br />asked for more time to consider its proposal Patterson Lake South” width=”400″ height=”300″ />
<p class=Fission Uranium threatened to go hostile when Alpha Minerals
asked for more time to consider its proposal.

This week’s Patterson Lake South news came not from the field or an assay lab but from the boardrooms. Separate August 26 news releases from 50/50 joint venture partners Fission Uranium TSXV:FCU and Alpha Minerals TSXV:AMW revealed that talks had been underway about the former taking over the latter.

It transpired that after the market closed on Friday, August 23, Fission gave Alpha until the following Sunday afternoon to respond to Fission’s all-share offer, then valued at $7.26 per Alpha share or about $170.44 million. When Alpha asked for more time to consider, Fission went public, saying it “will consider making a formal offer directly to Alpha’s shareholders.”

By press time August 31, neither company had made further announcements on the subject.

Read more about Fission’s proposal and Alpha’s response.

Read commentator Tommy Humphreys’ suggestions for a combined Fission/Alpha team.

Update: On September 3 both companies announced a letter of intent for Fission to acquire Alpha. Read more.

Ashburton finds radioactive boulders at Sienna West, reports historic data

Ashburton Ventures TSXV:ABR has wrapped up Phase I exploration at its 1,090-hectare Sienna West property about 40 kilometres southwest of the PLS discovery, the company announced on August 28. “Numerous” radioactive boulders showed gamma ray readings above 200 counts per second, with some measuring 1,500 to 1,800 cps. About 20 boulders will be assayed, the company stated. In addition 40 radon detector cups were placed, to be retrieved for analysis after 30 days.

Ashburton also cited historic, non-43-101 Geological Survey of Canada sediment samples from two lakes on the property that showed results in the 98th percentile of 909 samples from roughly 16,000 square kilometres of northwestern Saskatchewan. The lakes are two kilometres apart, suggesting the results “are not an isolated occurrence,” the company added.

The Sienna project includes the 147-hectare Sienna North property contiguous with PLS’s northern boundary. Two weeks earlier Ashburton reported a crew found radioactive boulders there, which were sent for assays, and placed radon cups. The company plans to identify drill targets for Sienna’s next phase.

Enexco/Denison drill Bachman Lake

Drilling has begun at Bachman Lake, an 11,419-hectare property about four kilometres west of Cameco Corp’s TSX:CCO proposed Millennium mine in the southeastern Athabasca Basin. The three-hole, 1,900-metre program will cost JV partners Denison Mines TSX:DML and International Enexco TSXV:IEC $570,000, the latter announced on August 26. The helicopter-supported campaign will test three conductors that lie 2.5 to five kilometres apart.

Enexco may earn a 20% interest by funding $500,000 by year-end. Denison, which holds a 7.4% interest in Enexco, acts as project operator. Enexco also holds a 30% interest in the 3,407-hectare Mann Lake JV 20 kilometres northeast, along with Cameco (52.5%) and AREVA Resources Canada (17.5%). In Nevada, Enexco’s 100% Contact copper project now undergoes pre-feasibility.

Fission finds “significant and strongly radioactive” anomalies on North Shore

On the northwestern Basin, airborne geophysics found two “significant and strongly radioactive” anomalies on Fission’s North Shore property, the company reported August 29. “The northern anomalous region occurs within a 1.5-kilometre by 0.5-kilometre area and contains several parallel trends up to 300 metres,” the company stated. Another anomaly about seven kilometres southwest ranges between one to 10 kilometres wide and up to three kilometres long. The company added that radiometrics suggest some of the larger anomalies “are likely to be part of the outcrop/sub-crop, as opposed to boulders.”

Fission credited the find to its patent-pending System and Method for Aerial Surveying or Mapping of Radioactive Deposits, which the company says is the same technology that found the PLS boulder field. In August Fission’s collaborator on the system, Special Projects Inc, flew a 12,257-line-kilometre magnetic and radiometric survey at 50-metre line-spacing over the entire property. The system can distinguish between radioactivity released by uranium, thorium or potassium, as well as determine the relative concentration of each element, Fission stated.

Along with further data analysis, the company plans to follow up with mapping and prospecting. The property underwent a seven-hole, 1,260-metre drill program in 2007 and 2008. Fission has interests in seven Basin uranium projects and one in Peru.

U3O8 negotiating JV with Argentinian state-owned company

U3O8 Corp TSX:UWE announced August 27 that advanced discussions are underway with the state-owned mining company of Chubut province, Argentina, to form a JV. The proposal would combine U3O8’s Laguna Salada uranium-vanadium project with adjoining concessions held by Petrominera Chubut SE, onto which U3O8 believes its deposit extends. The company said the deal would also “establish a framework for potential development of the Laguna Salada deposit in compliance with the stringent requirements of the current provincial mining law.” The project has a preliminary economic assessment scheduled later this year.

Having acquired Calypso Uranium last May, U3O8 holds Argentina’s two largest uranium deposits. The country plans to bring a third reactor online this year, boosting its proportion of nuclear energy to 9%, while a fourth reactor is out for tender and a fifth is being planned, U3O8 stated. Argentina currently imports all of its nuclear fuel.

In Colombia, U3O8’s Berlin project has a December PEA for a potential uranium mine with phosphate, vanadium, nickel and rare earths credits. The company also has a uranium project in Guyana.

Boss Power/Morning Star dispute stalls $30-million settlement

A $30-million settlement dating to October 2011 is being held up by a dispute between its beneficiaries. After the British Columbia government suddenly banned uranium and thorium exploration in 2009, the province eventually settled Boss Power’s TSXV:BPU lawsuit out of court. But a condition required the company to surrender its exploration properties, the Blizzard properties and the peripheral B claims. According to an August 19 news release from Morning Star Resources, the settlement hasn’t closed because Boss included those claims in the settlement “without the knowledge and consent of the B claims owner,” Anthony Beruschi.

An August 27 Boss news release acknowledged Beruschi, “sole director and president of Morning Star” and a former Boss director, as “beneficial owner of the B claims.”

Boss’ news release claimed Beruschi “appears determined to extract more than his fair share of the settlement proceeds” and “now appears to be leveraging media and threats of a board replacement to obtain payment for his B claims.”

Morning Star’s August 19 statement said Beruschi “has privately presented several fair offers to Boss’ management and the board to enable Boss to deliver the B claims under the settlement” and accused Boss of “a refusal to negotiate in good faith.”

Morning Star said it will present its own slate of nominees for election to Boss’ board at a meeting Morning Star expects to be held by mid-November “so that it can promptly close the $30-million settlement.” Morning Star stated that it and its affiliates hold about 33% of Boss’ shares.

Boss countered it will “continue its efforts to reach an agreement with Mr. Beruschi while at the same time pursuing court proceedings to allow the settlement proceeds to be paid into court and the settlement to complete.”

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A perspective on Peru

May 23rd, 2013

Panoro’s Luquman Shaheen talks about social concerns, political policies and copper

by Greg Klein

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Even before the conference with President Ollanta Humala, Canadian Prime Minister Stephen Harper’s Peruvian visit included a May 22 meeting with mining executives in Lima. Among them was Glenn Nolan, president of the Prospectors and Developers Association of Canada, who urged the PM to press Humala to unlock some $4 billion of unspent royalties earmarked for regional spending. Nolan, who’s also Noront Resources’ TSXV:NOT VP of aboriginal affairs and a former chief of Ontario’s Missanabie Cree First Nation, told Canadian Press, “We want to see good laws and transparency so that our (royalties) go back into the community.” At least by implication, he drew attention to powerful community concerns that have sometimes resulted in deadly clashes. Speaking to ResourceClips, Panoro Minerals TSXV:PML president/CEO Luquman Shaheen discussed Peruvian social issues and public policy, as well as his company’s Cotabambas and Antilla copper projects.

According to Reuters, anti-mining protests caused about 200 deaths during the term of former president Alan Garcia and at least another 24 since Humala gained office in 2011. Shaheen emphasizes, however, that “social issues differ not just by region but from valley to valley, from community to community. Throughout Peru the social issues are very local issues related to employment, land use, water use, etc.”

Panoro’s Luquman Shaheen talks about social concerns, political policies and copper projects

Barely visible near the centre of the photo,
blue tarp marks a Cotabambas drill site.

Cotabambas and Antilla, about 100 kilometres apart in southern Peru, each face different local concerns. But, Shaheen says, “the issues at both our projects are very progressive, very manageable. We have agreements signed with all the communities at both our projects—socio-economic, development agreements where we commit to employment, investment into education, health care, agricultural projects. Although there’s been news about social issues at some projects in Peru, there’s dozens, if not hundreds of others where the issues are very well managed.”

He adds, “As for the political issues, if you look into the details, I think you would be hard-pressed to find a national political environment that is more pro-mining, more pro-development or more pro-private investment.”

The country’s pinning part of its economic strategy on a plan to double copper output by 2016, making Peru once again the world’s second-largest producer. To do so, the government’s actively encouraging the industry in three key areas, he says.

Soon after taking power, Humala replaced Peru’s royalty regimen with one based on operating margins. “It’s a very progressive decision in which governments and companies share the risk of potential decline in margins, as commodity prices soften or as costs increase,” Shaheen explains.

A second development suggests some progress on the issue PDAC discussed with Harper. “The central government collects revenues from the mining sector and is obliged by statute to re-invest those revenues in the regions that produced the mining revenue,” says Shaheen. “The regional governments have lacked the infrastructure and the institutional strength to invest that money into projects. The national government has taken on a number of projects to assist the re-investment of those revenues into road projects, railway projects, other community infrastructure development. It takes time, but you see from the national government a very pro-active approach to the inequality of the regions.”

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From Flin Flon to Timmins

April 29th, 2013

Great Northern and Temex report gold news from Manitoba and Ontario

by Greg Klein

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Great Northern Gold Exploration’s TSXV:GGE Wekusko property hasn’t always delivered the grade. But four holes reported April 29 have ended a 2,133-metre Phase I program on a high-grade note, extending the McCafferty zone at depth and offering encouragement to the project in northern Manitoba’s Flin Flon greenstone belt. The results show:

  • 14.6 grams per tonne gold over 1.5 metres, starting at 49 metres in vertical depth
  • 1.52 g/t over 1.25 metres, starting at 92 metres
  • 9.19 g/t over 1.15 metres, starting at 56 metres
  • 5.98 g/t over 1.2 metres, starting at 90.5 metres.

True widths were estimated around 80%. The company labelled the second result a poor sample recovery due to broken and ground-up core.

Another five exploration holes, however, failed to find expansion potential. Of 11 previous holes reported March 13 from the same one-kilometre by three-kilometre grid, 10 didn’t show significant gold but one hole produced intervals of:

Great Northern and Temex report gold news from Manitoba and Ontario

Great Northern Gold’s winter drill campaign extended
its McCafferty zone at depth with high-grade assays.

  • 131.1 g/t gold over 0.3 metres, starting at 85.5 metres
  • 3.73 g/t over 0.5 metres, starting at 85 metres.

True widths weren’t available.

A non-43-101 in-house estimate by a previous operator suggested McCafferty holds 16,761 tonnes averaging 13.89 g/t for 7,483 gold ounces. An historic, non-43-101 estimate for Wekusko’s Gold Dust zone suggested 58,356 tonnes averaging 14.06 g/t for 26,361 gold ounces. Another non-43-101 estimate for the project’s past-producing Ferro mine suggested 73,760 tonnes averaging 15.31 g/t for 36,111 gold ounces.

While the estimate “is modest in size,” concedes Great Northern’s May 2012 technical report, “the grade is relatively high and, in aggregate, the tonnage and contained ounces exceed [what] was mined successfully from the adjacent Rex-Laguna past-producer. It should also be noted that the erratic distribution of gold in these zones as indicated in drill intercepts makes ore resource estimation difficult.”

Summer exploration will venture beyond the McCafferty grid to include soil sampling, mapping and prospecting on other parts of the property.

The company holds an option to earn 100% of the 8,880-hectare Wekusko as well as a separate 100% option on the nearby 60-hectare Ferro mine. The package lies 23 kilometres southeast of Snow Lake, home to HudBay Minerals’ TSX:HBM Lalor mine and QMX Gold’s TSX:QMX Snow Lake mine, a past-producer that QMX plans to re-open.

Great Northern opened April 29 at $0.06, half a cent over its previous close, then ended the day at $0.065. The stock’s 52-week high and low were $0.18 and $0.05. With 20.22 million shares outstanding, the company’s market cap came to $1.31 million.

In other April 29 gold news, an option adjacent to its 100%-held Juby property allowed Temex Resources TSXV:TME to substantially increase its resource estimate.

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In times like these

April 23rd, 2013

QMX Gold searches for Snow Lake financing, watches Lac Herbin output

by Greg Klein

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Maybe as much as anyone, QMX Gold TSX:QMX president/CEO Francois Perron knows the challenges of the industry today. His company’s Lac Herbin gold mine in Val-d’Or has yet to meet expectations. A “broken market” has stalled plans to re-open the Snow Lake past-producer in Manitoba. The yellow metal’s sudden price plunge has only added anguish to angst. Still he soldiers on, with a confidence born of long-term perspective.

“People are freaked out by short-term factors,” he insists. “I think the longer term is amazingly bullish for gold. I’m still in the gold business and I’m glad to be there.”

QMX Gold searches for Snow Lake financing, watches Lac Herbin output

After a disappointing 2011, QMX Gold’s Lac Herbin
operation reached its 2012 production target.

He bases much of his optimism on Snow Lake, a northern Manitoba operation that gave up 1.44 million gold ounces up to 2005. With surface infrastructure including a mill, the mine still has gold to offer, according to 2010 figures that show a proven reserve of 900 gold ounces and a probable reserve of 451,000 ounces.

Those reserves are included in the measured and indicated categories of a resource estimate that shows 1,000 ounces measured, 727,000 ounces indicated and 336,700 ounces inferred. Snow Lake exploration continued throughout 2011, totalling over 42,000 metres of drilling.

A 2010 feasibility study used a 7% discount rate to project a pre-tax net present value of $100.8 million and an impressive 80% internal rate of return. Initial capital costs came to $39.7 million for a reactivated underground mine that would produce 415,600 gold ounces over a five-year lifespan. Payback was set at 1.7 years.

Now, nearly three years later, QMX estimates the initial capex closer to $45 million. “Some of the numbers have moved around but some of that is pure inflation,” says Perron. “We have been optimizing the feasibility study. The initial study had cash costs of $640 an ounce. With a larger camp and a different format for financing equipment, we expect $825 an ounce.”

Snow Lake remains on care and maintenance, with a closure plan in place and dormant but renewable permits. It could be pouring gold in 12 to 14 months and ramp up to commercial production within 21 months. All that’s holding it up is a currently very elusive commodity—money.

“The initial approach was to finance through the public markets,” explains Perron. “By now we all agree that the public markets are broken. We have the advantage of having a project that’s been through the bankable feasibility process. On that basis I’m looking at private equity partners or some kind of strategic alternative like that.”

In May 2012 Credit Suisse agreed to lend the company, then known as Alexis Minerals, $45 million over 4.5 years for Snow Lake development. Contingent on the loan is a requirement that the company raise additional equity. The actual figure, says Perron, “depends on the amount of hedging that we put into it. I’d say they’re probably looking for $10 million to $15 million to backstop the project.”

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Fortnight in review

March 28th, 2013

A mining and exploration retrospect for March 16 to 28, 2013

by Greg Klein

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Qualified person de-qualified

A geologist who faked assays and wrote false news releases has been slammed by the Ontario Securities Commission. On March 28 the OSC announced sanctions against Bernard Boily, a one-time VP of exploration for Bear Lake Gold TSXV:BLG who worked on the company’s Larder Lake gold project in the Cadillac Break of northeastern Ontario.

Some examples of his fanciful figures follow, with real results in brackets:

  • 8.5 grams per tonne gold over 1.2 metres true width (2.6 g/t over 1.2 metres)
  • 10.6 g/t over 6.5 metres (3.6 g/t over 6.5 metres)
  • 9.9 g/t over 6.5 metres (1.3 g/t over 2.1 metres)
  • 23.4 g/t over 0.6 metres (3.1 g/t over 0.6 metres)
  • 10.5 g/t over 2.1 metres (1.7 g/t over 2.1 metres).
A mining and exploration retrospect

His scam came to light in July 2009 after Bear Lake hired an independent firm, InnovExplo Inc, to compile a resource estimate. Bear Lake then hired other independents to investigate. Investors, meanwhile, launched a class action suit. That was settled in April 2010 under confidential terms.

The OSC banned Boily from trading securities for 15 years, fined him $750,000 with $50,000 costs, and barred him from QP-ing for life.

In a statement announcing the penalties, OSC director of enforcement Tom Atkinson said Boily’s behaviour ran “contrary to the important gatekeeper role played by qualified persons in the securities disclosure regime.”

But Larder Lake’s not barren. Drilling continues by Bear Lake’s JV partner Gold Fields Abitibi Exploration, a subsidiary of the multi-billion-market-cap Gold Fields Ltd.

In January a Vancouver ex-QP, John Gregory Paterson, got a six-year prison term for faking assays while CEO of Southwestern Resources.

Speaking of fraud

Bre-X, the outrage that brought about QPs and NI 43-101 in the first place, is coming to an anti-climactic end. That’s according to an Ontario judge quoted in the March 21 Globe and Mail as he granted a bankruptcy trustee’s request to drop its legal action against Bre-X, its former officers and other companies involved. The G&M stated that an Alberta court is likely to approve a similar request and an Ontario class action suit will likely be dropped.

But some people made money and it wasn’t just company insiders. Clint Docken, the lawyer representing the Alberta class action suit, told the paper that trustees Deloitte & Touche got $3.9 million in fees and paid its lawyers $8 million, leaving $79,000 in Bre-X coffers. “A lawyer representing the trustee was not available for comment,” the G&M stated.

No charges were ever laid and “little also came of a move by the trustee to freeze the assets of [John] Felderhof, his ex-wife Ingrid and former Bre-X chief executive officer David Walsh, who died in 1998.” Nor is there any trace of the $75 million the Felderhofs got by selling Bre-X shares, the story added.

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Under the rainbows

February 5th, 2013

Columbus, Aquila/Hudbay and Evolving find gold in French Guiana, Michigan and Nevada

by Greg Klein

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To put some perspective on its Paul Isnard property in French Guiana, Columbus Gold TSXV:CGT likes to go back in time—roughly 225 million years. That’s before tectonic forces tore apart the planet’s one and only continent. The present-day Caribbean coast of South America was then joined to present-day northwestern Africa. Consequently there’s continuity, the company contends, between South America’s Guiana Shield and the Birimian Shield of gold-rich countries like Guinea, the Ivory Coast, Burkina Faso and Ghana. Thanks to that geology, Columbus has boosted its inferred resource by 184% to 5.37 million gold ounces.

As announced on February 5, the project’s Montagne d’Or resource update uses a low cutoff of 0.3 grams per tonne for a deposit starting at surface and reaching an average vertical depth of 247 metres. The company provided additional numbers for higher cutoff grades:

  • with a 0.3 g/t cutoff, 117.1 million tonnes averaging 1.43 g/t for 5.37 million ounces
  • with a 0.4 g/t cutoff, 111.2 million tonnes averaging 1.48 g/t for 5.3 million ounces
  • with a 0.5 g/t cutoff, 101.9 million tonnes averaging 1.58 g/t for 5.17 million ounces
  • with a 0.7 g/t cutoff, 81.7 million tonnes averaging 1.82 g/t for 4.78 million ounces
  • with a 1 g/t cutoff, 58.1 million tonnes averaging 2.22 g/t for 4.15 million ounces.
A rainbow seen from Evolving Gold’s Carlin project adds a storybook touch to geological exploration

A rainbow seen from Evolving Gold’s Carlin project
adds a storybook touch to mineral exploration.

The update uses a 16 g/t topcut as compared to the previous 1.89-million-ounce resource, which used a 30 g/t topcut and 0.4 g/t cutoff.

In a statement accompanying the announcement, Columbus chairman/CEO Robert Giustra said modelling “has also identified gaps within the deposit envelope where additional drilling has the potential to add ounces and where tighter drilling may upgrade some or all of the inferred resources to the indicated category. Additional expansion potential is also suggested by untested geochemical anomalies extending more than three kilometres along strike, by incompletely tested parallel zones of gold mineralization, and at depth.”

The 149-square-kilometre Paul Isnard project includes a 65-person camp with airstrip on a forest road connecting to a highway 115 kilometres from the port of St. Laurent.

Columbus shares opened February 5 at $0.355, seven cents above the previous close, and hit $0.425 before settling on a $0.365 close.

Another resource update, announced February 4, comes from Michigan’s Back Forty project, a 49/51 joint venture of Aquila Resources TSX:AQA and Hudbay Minerals TSX:HBM. The global resource shows:

  • measured and indicated resources of 987,236 gold ounces, 11.91 million silver ounces, 110.43 million copper pounds, 74.3 million lead pounds and 1.02 billion zinc pounds
  • an inferred resource of 155,885 gold ounces, 1.99 million silver ounces, 18.65 million copper pounds, 17.21 million lead pounds and 113.33 million zinc pounds.

The estimate provides separate numbers for open pit and underground resources. The open pit estimate shows:

  • measured and indicated resources of 640,663 gold ounces, 6.96 million silver ounces, 72.27 million copper pounds, 36.22 million lead pounds and 525.54 million zinc pounds.

The underground estimate shows:

  • measured and indicated resources of 346,572 gold ounces, 4.95 million silver ounces, 38.16 million copper pounds, 38.07 million lead pounds and 496.13 million zinc pounds

  • an inferred resource of 142,351 gold ounces, 1.82 million silver ounces, 18.02 million copper pounds, 15.9 million lead pounds and 103.7 million zinc pounds.

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Week in review

February 2nd, 2013

A mining and exploration retrospect for January 26 to February 1, 2013

by Greg Klein

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Search for quarry workers postponed, victims believed dead

Efforts to find two workers missing in a gravel quarry accident at L’Epiphanie, Quebec were postponed on Thursday. The truck drivers, employed by Maskimo Construction, were buried by a landslide two days earlier. High winds and unstable ground made it unsafe to operate the helicopter and heavy equipment involved in the mission. Searchers hope to resume their efforts on Saturday but “police have acknowledged they don’t expect to find survivors,” the CBC reported.

One co-worker described the landslide in a Canadian Press story reprinted in Wednesday’s Montreal Gazette.

Colombia exploration workers remain in captivity

A mining and exploration retrospect

Five people kidnapped from Braeval Mining’s TSX:BVL Snow Mine project in Colombia remain missing. The Monday edition of Colombia Reports stated the military, which arrested four more suspects on Sunday, claimed it was making progress. But, the journal added, the National Liberation Army (ELN) kidnappers warned that any rescue attempt would endanger the hostages.

Among the ELN’s demands are stricter regulation and heavier taxation of the mining industry, legalization of small-scale mining and a national debate on mining policy, Colombia Reports stated.

The victims—a Canadian, two Peruvians and two Colombians—were abducted on January 18 in northern Colombia’s Bolivar department.

On Thursday the country’s biggest rebel army, the Revolutionary Armed Forces of Colombia (FARC), released three Gran Tierra Energy TSX:GTE contractors after one day in captivity. But, Reuters stated, the guerrillas killed four soldiers in southwestern Colombia’s Narino department on Wednesday.

More mid- and large-cap companies selling royalties

The streaming business has grown tremendously, both from the amount of money available and the size of companies seeking it. As Bloomberg reported on Thursday, “the biggest miners have joined the queue of capital-hungry companies requesting funding.”

Silver Wheaton TSX:SLW CEO Randy Smallwood told the news agency that his company has seen increased interest from miners with market caps “up into the tens and hundreds of billions.… Doors that we’ve been knocking on for a long time, they are all of a sudden knocking on our door.”

If an operator goes down from say a one-gram cutoff to a 0.5-gram cutoff, the operator may not make any money but the royalty-holder makes money…. It’s one of the best business models that I have ever seen.—Franco-Nevada chairman Pierre Lassonde in an interview with BNN

Although Silver Wheaton completed only one transaction last year, it was a $750-million deal with HudBay Minerals TSX:HBM, which has a press-time market cap of $2 billion. Such deals obviously benefit Silver Wheaton, which has been outperforming both silver prices and metal producers, Bloomberg stated.

Not surprisingly, success brings competition. But the founder of the first royalty company, Franco-Nevada TSX:FNV chairman Pierre Lassonde, considers most of the newcomers to be small fish. In an BNN interview posted Thursday, he said, “Every week we must have two, three, four, five companies coming and approaching us, but they’re of a size that there’s only two or three royalty companies that look at them.” Over the last six months his company has been working on three “really large deals” of half a million to a billion-plus, he said.

With each transaction Franco-Nevada gets a free perpetual option on any further discoveries on the same property. “It is this optionality that has given us the kind of rate of return that we give the shareholders,” he explained.

Lassonde attributed “de-ratings in the gold stocks” to smaller, lower-grade deposits than those found in the 1980s and ’90s. “At Franco, as far as we’re concerned, if an operator goes down from say a one-gram cutoff to a 0.5-gram cutoff, the operator may not make any money but the royalty-holder makes money…. It’s one of the best business models that I have ever seen.”

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Growth Without Risk

August 17th, 2012

Silver Wheaton Strikes Big in Peru and Manitoba with its HudBay Deal

By Kevin Michael Grace

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See here for a Resource Clips feature on Peru and mining.

For investors in gold and silver bullion, ETFs (paper bullion) and mining companies all have their risks and rewards. Randy Smallwood, President/CEO of Silver Wheaton TSX:SLW, argues that his company supplies the rewards without the risks. “I think,” he declares, “we provide the best—and I’m not just going to say silver—I think we provide the best option for exposure to precious metals.”

He explains, “We provide growth and dividends, and we provide leverage. The key is growth. Currently about 20% of the reserves that we have on our books right now have come from organic growth within the company. When you invest in bullion or ETFs it doesn’t grow—an ounce stays an ounce stays an ounce. We also provide protection on the costs. Our costs are fixed by contract; our capital costs are fixed; and our production costs are fixed.”

Silver Wheaton Strikes Big in Peru and Manitoba with its HudBay Deal

Constancia: A big vote of confidence in Peru.

Silver Wheaton is not a mining company; it is a streaming company, the largest of its kind. It signs deals with miners which sell future production of silver and gold to SLW. For years, it paid $3.90 per silver ounce. Its $750-million deal with HudBay Minerals TSX:HBM bumps that up to $5.90 per ounce.

“This is the first acquisition we’ve done in over three years, and there is no doubt costs are higher,” Smallwood says. “Analysts looking at this from an undiscounted basis estimate we’ve paid somewhere between $15 and $16 per ounce. I think it will be better than that, mainly because the exploration success isn’t being factored in; they’re just looking at current reserves. For instance, when [HudBay's] 777 [Manitoba mine] started production in 2004, it had 14 years of reserves. [In 2012,] it’s still got 14 years of reserves. That’s pretty typical of the VMS deposits.”

Under the terms of the deal with HudBay announced August 8, SWL acquires 100% of the life-of-mine silver production from 777 and 100% of the life-of-mine silver production from HudBay’s Constancia Copper-Molybdenum-Silver Project in south Peru. SLW has also acquired 100% of gold production (at $400 per ounce) from the 777 Mine until Constancia satisfies a completion test, or the end of 2016, whichever is later. SLW‘s share of gold production from 777 will then be reduced to 50%. SLW will not share in any ongoing capital or exploration expenditures at the mines.

I think we provide the best option for exposure to precious metals —Randy Smallwood

Smallwood reports that the HudBay deal is “the largest we’ve ever done in terms of total dollar value. It’s the third largest in terms of metal production behind the Pascua-Lama and Peñasquito transactions, which were nine and seven million ounces silver equivalent a year, respectively. [The HudBay deal] will produce five million ounces a year for us. What’s intriguing on this one is it has a bit more gold than we’ve traditionally had. It still keeps us dominantly silver-focused, but I’m happy to have a bit of gold in the mix.”

Silver Wheaton had $1.1 billion cash in hand as of June 30. “We can easily afford a billion-dollar deal now,” Smallwood says. On August 9, SLW reported 2Q net earnings of $141.4 million, $0.40 per share, on revenues of $201.4 million. (Figures for 2Q 2011 were $148.1 million, $0.42 per share, $194.8 million.) Production was 6.5 million ounces silver and 3,200 ounces gold or 6.7 million silver-equivalent ounces, up 10% from a year earlier. Sales were 6.9 million silver-equivalent ounces. Proven and probable silver reserves were 798 million ounces. Smallwood says that the HudBay deal will result in a 10.7% increase in proven and probable silver reserves.

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Silver Wheaton CEO Randy Smallwood on HudBay Gold-Silver Production Deal

August 9th, 2012

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