Anaconda – Trending Towards a Longer Gold Mine-Life
Anaconda Mining Inc. (TSX: ANX) is in a model from days gone by that might very well be the model for much of the mining industry going forward. Gargantuanism has only resulted in unbuildable budgets, unfinanceable mines and, when they wrong, insurmountable problems. Flying in the mining machine back 100 years ago, the model was much closer to that being pursued by Anaconda. The only really big gold mines in the world were those in South Africa. Most others made a living, and a good living by being highly efficient and intensively working their deposit. The other key was not overbuilding the processing facilities which resulted in less to amortise.
Anaconda has pursued a stealth strategy of accumulating properties and has ended up owning a goodly chunk of Newfoundland with one mine in operation and should, if things go to plan, end up with a whole string of satellite mines feeding the same central plant.
The Mining Operation
The mine at Pine Cove dates back to 2007 when Anaconda commissioned the Pine Cove open pit mine. At the time the deposit had an indicated resource of 2.63 million tonnes grading 2.93 g/t gold and an inferred resource of 254,150 tonnes grading 2.11 g/t gold.
The Pine Cove Mine is an open pit, truck, and shovel operation with eight haul trucks and two excavators. It is contract mined but the mine has in-house supervision and management, with single shifts of 10 hours. On average, 9,000 tonnes per day are extracted from the mine. The pit is currently at 40 metres below starting elevation.
The baseload production at the mill is approximately 15,000 ounces per year.
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The curiously named Stog’er Tight deposit was discovered by Noranda in 1988. This gold deposit is located three kms east of the Pine Cove mill near Baie Verte. The deposit outcrops at surface along its entire current strike length of approximately 400 metres and to a depth ranging between 15 and 115 metres.
There have been two attempts to mine the Stog’er Tight deposit. Exploration work in 2014 included the drilling of sixteen infill holes, with the best of them returned 10.52 g/t Au over 3.5 metres, 8.13 g/t over 4.0 metres, and 7.2 g/t over 4.0 metres. Several historical holes had returned high grades, including 4.23 g/t over 7.9 metres, 10.10 g/t over 2.5 metres, and 5.2 g/t over 3.7 metres.
The last resource estimate, dating from 2010, included 65,200 tonnes of reserves at 4.96 g/t Au, 95,000 indicated tonnes at 7.04 g/t, and 53,000 inferred tonnes at 5.75 g/t.
In recent weeks the company has announced a new resource estimate that it feels gives it at least a ten year Life of Mine from what it calls its Point Rousse complex.
As can be noted this is a substantial expansion from the numbers for Stog’er Tight from the 2010 resource.
The company’s goal is to develop a gold mine at Stog’er Tight that has a minimum of five years of life, producing approximately 15,000 ounces annually, to continue the baseload production at the Point Rousse Project. The Company believes there is significant potential for further resource expansion east, west and southwest of the current Stog’er Tight deposit to meet this goal (Exhibit D). In the next stage of exploration, Anaconda plans to step out to the West and East Zones, the Gabbro Zone and the East Gabbro Zone, which are closest to the current resource.
Also the company published new resources for its existing Pine Cove deposit, which has been continually mined since 2009 with a current production rate of approximately 15,000 ounces per year.
The mineralisation consists of a series of stacked mineralized zones across 350 metres that vary in strike length from 25 to 250 metres. The latest estimates included reserves:
Mineralisation extends down dip for approximately 800 metres, though approximately 300 metres of the dip extent has been excluded from the current resource estimate since it is not currently feasible for open-pit mining because of its depth (between 175 and 300 metres from surface).
Production Expansion through New Deposits
Anaconda’s goal is to double annual production of gold from the current production of approximately 15,000 ounces to approximately 30,000 ounces. It also wants to extend the life of the project to 10 years or more. The strategy to this is to develop two styles of mineralization:
- Develop more Pine Cove-like pits (i.e. Stog’er Tight) that provide bulk tonnage at roughly 2 g/t
- Exploit high-grade veins like Deer Cove, Romeo & Juliet, that can be blended with the Pine Cove pit feed (or future Pine Cove-like pits) at a lower incremental cost while increasing the overall head grade.
The Point Rousse deposit is being targeted as it has a high-grade “layer”, which along with a marginal increase to throughput, would produce the incremental ounces to reach approximately 30,000 ounces of annual production. Anaconda envisions creating an operating complex on the Ming’s Bight Peninsula with multiple pits and trucking the ore back to the Pine Cove mill.
Following the Trend
Anaconda’s concession sprawl across most of Ming’s Bight Peninsula in Newfoundland. It exploration has identified, three primary gold trends within the Point Rousse Project area, with a cumulative prospective strike length of approximately 20 kilometres.
These trends are:
Scrape Trend – this consists of a belt of highly prospective rocks approximately 7 kilometres long and approximately 1 to 2 kilometres wide. It begins southwest of the Pine Cove mine site and continues eastward to the community of Ming’s Bight. The Scrape Trend includes the Pine Cove, Stog’er Tight and Romeo & Juliet deposits, the Anoroc and Animal Pond prospects and a new discovery referred to as the Argyle zone.
Goldenville Trend – an 8-kilometre long belt of highly-prospective rocks centered on an iron stone unit referred to as the Goldenville Horizon. The Company believes the trend to be highly prospective because it contains numerous prospects of ironstone-hosted gold as well as the Corkscrew deposit recently optioned by Anaconda. This horizon is associated with the historic Nugget Pond mine, which produced high grade gold.
Deer Cove Trend – this is located in the northern part of the Ming’s Bight Peninsula and consists of a belt of prospective rocks approximately 3.5 kilometres in strike length. It is associated with the Deer Cove thrust fault and includes the Deer Cove deposit as well as various other showings and prospects.
The slump in the Canadian dollar has done wonders for those miners fortunate enough to have mines in-country. In ar. Some issues are still working themselves through though. The disposal of the Chilean assets produced a hit of $2.26mn in the last financial year but that is now behind the company as is the negative foreign exchange effect from holding that asset.
It’s important to note the hefty non-cash depreciation & amortization number. When one focuses only on EBITDA (seeing there is no tax and infinitesimal interest expense) it is evident that there is significant potential for the company to start accumulating cash.
It almost goes without saying that as the company is not splurging on anything, it is very averse to share issuance and in fact the number of shares on issue is lower than it was four years ago!
The market has not given much credit to Anaconda for being onto something with its “small is beautiful” concept. Production is king and right-sized production meshes with our mantra even more. Anaconda certainly has a vast territory that appears prospective for many other deposits to feed its central mill.
Now the asset mix has been cleared up and the focus narrowed down to a wide range of concessions but within an area where the company has special knowledge and local standing. The earnings picture should be looking up. Certainly a return to repeated quarters of positive net results would be welcome, even though as we have shown the company is already consistently producing positive EBITDA. Therefore Anaconda has all its ducks in a row to become a “nice earner”, still a rare thing in the gold space.
Christopher Ecclestone is the EU Editor for InvestorIntel and is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten ... <Read more about Christopher Ecclestone>