John in action during a site visit earlier this year (I wasn’t present)
My previous call (July) with John can be found here
Cash
To keep the rigs running a cash infusion is desirable (read: needed) before the end of the year. Regulus is exploring several options as we knew before. I’m expecting a final outcome in November.
Beaver Creek & the Denver Gold show kicked-off meetings with interested parties, both long term retail interest/support was received as was interest from the usual suspects (I leave the interpretation to the reader).
Commenting on a possible strategic investment, John is very cautious of such a potential deal to be in the long term benefit of Regulus. We have to keep operation control (where the drill hits), not misread any small print/clauses (NSR, royalties, blocking rights, etc.) & keep the flexibility and independence of a junior.
RouteOne is a very nice cushion to fall back to if needed, something many juniors are (rightfully) very jealous of. This is giving them some leverage to play hardball.
Drilling
Drilling is advancing well. Four rigs are turning, with one rig changed for a better/higher capacity one recently. The drill crews have learned from recent experiences and are showing good control over the drilling. Which is good as we know that they are drilling some though rock up there. This is also good to hear as you don’t want a drill ‘stuck’ before the target depth is reached or a hole that ends in mineralization due to technical issues.
Hole 36 is completed. Ongoing holes are 34-35-37 and these are at final meters. Hole 38 has started. Regulus will group the four pending assays for -most likely- a November release.
The drilling to the north up until now includes holes 30 + 34+35+37 drilled from three neighboring pads. Even without the pending permits, these are envisioned to add serious tonnage to the existing resource. If the company’s theory holds up, these should consist of cleaner material and hence move the epicenter of the proposed open pit more north, towards Regulus land claims (opposed to on CMC’s ground).
There hasn’t been much chatter about hole 36, which is targeting the eastern side of the current resource. The resource is wide open in that direction & wasn’t drilled with enough density in the RE, due to insufficient surface access. Which is now solved. As such, hole 36 has commenced.
Neighbors
Way more interactions with the neighbors (both CMC & GFI) than in the past. It’s good, we want to get started. Overall communication is picking up. This already started after the resource estimate release but it switched gears after the Denver Gold show. Regulus ideally wants another year of drilling under the belt so as to maximize the known resource & its potential to the north. If they ever decide to pull the trigger (or are forced to act by another), the foundation of their due diligence will be strong.
Newmont completed their FS for their Autoclave at Yanacocha. The discussions are now at the level of project finance (roughly $2B CAPEX estimated) and the options between and for the different project partners (BVN & Sumitomo).
Goldfields project pipeline is light with only Salares Norte. Their publicly released forecast has them producing until 2025 at Cerro Corona at which point production drops off sharply due to stockpile processing (until foreseen closure in 2030).
Tantahuatay’s 20ktpd base case (phase 1) would maintain social contacts, employment levels & would be easier to get through permitting. Phase 2 has a 60ktpd scenario. Ideally, you don’t leave a gap between the transition of oxides and sulphide extraction.
If you look at the overall resource and potential of the entire area, John envisions a 100 ktpd scenario possible. It’s all about the final mix & balance of ownership, CAPEX, LOM, recoveries, etc.
Beaver Creek
50+ meetings back to back, mix between regulars/LTH/ new interest/ industry players/… Many expressed interest if a PP would be open.
“Beaver Creek was a fantastic event” – John Black
Majors to are conscious they need to replace ore (no news there), what is quite interesting is that also the major gold players are sniffing around copper assets as long as a gold credit is there. Which conveniently is the case at Regulus. The attending mid tiers could be open to take positions in assets where they don’t have the operating role. They want exposure, not the daily ops worries.
Talking with other copper players regarding the arsenic challenge in the industry, it was an eye-opener to see that “the gold guys” are way more relaxed about pressure oxidation as they have autoclaves themselves (NEM, GFI, etc.) . They are interested in high volumes at decent grade.
Copper price
John’s personal opinion on the copper price is that fears of recession are keeping the lid on it, maybe even more than the ever-going trade talks. When the first major steps into the M&A market, the rest will follow suit. It’s gonna move fast when it starts.
Permit & Politics
Still confident that the permit (to drill the northern targets) will come before year’s end.
Peru politics – Regulus’ President and COO Fernando Pickmann is happy with the new mining minister (as he was also with his predecessor). No worries there. There seems to be an overwhelming local public support for the president.
Ecuador politics – Solgold related: Locally they are well integrated, well known, well organised. It’s more national/international NGO pressure & negative views. Wouldn’t want to be in their situation. No implications for Peru/REG beside that the general thought “South America is a tough place to do long term, stable business” could pop into investors’ heads again.
Fwiw, I’ll be meeting John in London at the 121 Event 20-21 November. If you can make it, I’d gladly accept -decent- beer(s).
The usual disclaimer; I own shares. I’m not compensated in any way for this article. This is not investment advice. Do your own due diligence.
Cheers, Pete
