Special Report: Equus Mining (ASX:EQE) is one of the rare junior explorers positioned to make money from the current gold and silver boom.
Late last year, Equus Mining signed a binding deal with TSX-listed miner Mandalay Resources to acquire the Cerro Bayo Mine district and infrastructure in Southern Chile.
Equus has a ‘dual-track’ development strategy for Cerro Bayo.
One, explore the numerous exciting ‘greenfields’ gold and silver targets while two, re-evaluating the existing brownfields resources close to the Cerro Bayo processing plant.
That’s right — the deal includes a processing plant which has produced about 600,000 ounces of gold and 45 million ounces of silver since 1995.
The plant has only been under care and maintenance since June 2017.
Together, this represents a transformational opportunity for Equus to become a significant producer in a world class gold silver epithermal district.
The exploration upside is substantial
Equus is currently drilling gold-silver mineralisation beneath the historic Taitao pit, and aggressively advancing brownfields and greenfields exploration on high-priority targets.
The Taitao pit was mined between 1995 to mid-2000, when the gold price averaged ~US$300/oz and silver ~US$5/oz.
Current prices, paired with its proximity to the processing plant, makes Taitao a compelling opportunity for Equus to become a profitable near-term gold and silver producer.
In the last quarter, Equus completed 1,385m of diamond drilling drilling at NE and Central Taitao, with better results including 19m at 1.26 g/t gold and 10.0 g/t silver from 68.5m. With a maiden open-pit resource expected at Taitao shortly.
Meanwhile, standout maiden drill results at the greenfields (previously unexplored) Droughtmaster prospect – 12km from the processing plant — includes 3.81m at 20.4 g/t gold and 55.5 g/t silver. The company will be drilling down dip from this high grade hit during its next drill program.
Results at Droughtmaster to date are interpreted to relate to the upper portions of a wide, large-scale epithermal gold system.
There’s good potential for high grade discoveries along this 2.5km-long fault trend, the company says.
Greenfields drill target definition is now underway, with a second phase of 2,500m follow-up drilling planned.
Near term cash flow
With gold and silver ripping to fresh highs, current owner Mandalay Resources has now decided to resume production at Cerro Bayo.
Mandalay plans to commence processing of low-grade stockpiles in early Q4 2020 at an initial rate of 40,000 tonnes per month.
This gives Equus a ‘free look’ at the plant in operation and, given they can take over the operations at any time, could transform this $24m market cap explorer into a low cost, low risk near-term producer with plenty of upside.
The option agreement means Equus has up to three years to finalise the acquisition – but they can also take over the project at any time.
Should Equus exercise its option, it will issue Mandalay 19 per cent of its shares and a 2.25 per cent net smelter return (NSR) on future production.
This story was developed in collaboration with Equus Mining, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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Barry Stroman was a reporter for Zerg Watch, before becoming the lead editor. Barry has previously worked for Wired, MacWorld, PCWorld, and VentureBeat covering countless stories concerning all things related to tech and science. Barry studied at NYU.