One of the perversities of the junior mining disclosure rules is that a company can’t talk about things it has not publically disclosed. The trouble with that general rule is that a company needs to provide guidance to the market as to its plans and it needs to be able to talk about those plans with potential investors. Eloro (ELO.T) published a release today which is a master class in useful disclosure.
The trick is to read between the lines and put information which is intentionally a bit vague into the broader context of the releases to date about the company’s Iska Iska deposit in Bolivia.
What we knew before today’s release was that Iska Iska was very large. It has several “domains”. In one of those domains, Eloro has identified and drilled a high grade silver deposit starting at surface. Eloro has been working towards defining a “starter” pit in this domain. As well, Eloro has identified an area of significant tin/silver mineralization. Eloro filed an initial 43-101 compliant inferred Mineral Resource Estimate on the two domains in October 2023.
With those facts in mind, some take aways from today’s release.
“I am excited to report that a ramping development phase is planned within the Santa Barbara potential starter pit area once initial infill drilling has confirmed the ramp location from the independent engineering study” CEO Tom Larsen is quoted as saying in the press release. This is new and potentially very significant.
One of the criticisms of Iska Iska is that it is actually too big to be brought online for less than, what? A billion dollars? With a ten to fifteen year lead time. (In fact, think under 500 million and three years. Bolivia is not Ontario.) The “starter pit” concept deflected some of that criticism but it was still a long way in the future and hundreds of millions in CAPEX. But a “ramp”? Put a ramp in the right place, namely where there is near surface high grade, add a crusher and an ore sorter and you could be in production in a few months producing high grade concentrate.
What do you do with this concentrate? Again, the press release provides a huge hint:
“Potentially leading to a small pre-concentration plant to generate additional metallurgical data on this important stage in the process and permit pre-concentrated “ore” that could be treated at Empresa Minera Villegas SRL’s lead-zinc-silver differential flotation plant located 15 km from Iska Iska for the production of silver-rich lead and zinc concentrates.”
No need to build an expensive, on site, mill. Concentrate could be trucked to the Empresa plant. 15 km is a trivial distance especially if the concentrate is very high grade. We’ll hear about the CAPEX of a ramp/concentrate operation in the forthcoming PEA, but low millions would be my guess. With a lead time of, perhaps, two years after the definition drilling has been done.
A ramp would be, essentially, a bulk sample in force. Eloro reminds us of the significantly higher silver grades obtained in larger boreholes:
“bulk metallurgical tests returned substantially higher grades than the original twinned diamond drill holes – 91 g Ag/t in the bulk sample versus 31 g Ag/t in the original holes that were twinned, suggesting that grades, especially for silver, may be underestimated, in some cases significantly. These results highlight the need for further bulk sampling to better confirm overall grade in the deposit.”
If ELO manages a head grade over 50 gpt silver on a bulk mining basis and if the ore sorter can manage to reject 80% of the material, the remaining material would grade 250 gpt or a just a little under 9 ounces per ton. Assume $25/ounce and you are shipping $225 a ton rock. (And, yes, those really are “back of the envelope” numbers.) Lower-end sorters can sort between 40 and 100 tons per hour, call it 60. Ten-hour days would produce 600 tons per day for a gross value of $135,000 per day. And that is just the silver. And just one sorter.
Having revenue early would put Eloro miles ahead of the competition and underpin the financing required to build out the starter pit to its “preliminary optimized production rate of 35,000 tonnes per day”. Critically, the ramp is entirely separate from the starter pit PEA.
The second big hint in the release is this:
“A silver rich bi-product is envisaged from processing the tin-silver domain that would be commercialized separately.” (italic mine)
The Iska Iska tin endowment has barely been drilled. The IP suggests it is huge but it is also geologically and economically complicated. Grades are, at the moment, guesswork and the metallurgy for a great deal of the deposit speculative. The fact that Eloro is stating that the tin silver domain would be commercialized separately suggests that the company has come to terms with that reality.
Developing a property the size of Iska Iska is a daunting project. Taking it in first a nibble and then expanding bite-sized chunks makes a lot of sense. Larsen and his team have been very careful issuing shares. While they will certainly have to raise some money in the next while, the possibilities opened by a bulk sample/mine by ramp may avoid having to issue more shares than they are comfortable with.
ELO is trading around $0.90 for a market cap of 71 million dollars. I have said it was on sale before and it went lower. But this is one of those rare junior resource stocks which has a world class resource, two really if you think of the tin separately. Well worth a look.
[Disclaimer: This is not investment advice. I am not an investment professional. I am down about 30% at the moment. I will write about companies that I hold. I will disclose any holdings. Do your own due diligence. Do it hard. Call the CEO.
I currently hold shares in ELO.T and while I have no plans to sell anytime soon, I reserve the right to take profits as they arise.]