Ann: High Grade Results Continue at Oposura, page-127

one option is to fund Oposura mine development thru new equity​

I think there are other ways of funding a mine. One is presales. Another is debt. The success of any will depend on the business case put forward by the company. Surely they are working on this?

The danger is getting too fixated on single aspects of this that triggers assumptions that apply to different projects...then losing perspective with fear.


The thing is, this resource has been described in previous company anns as a flat table of horizontal mineralisation. AZS is basically proving up a previous resource under the Canadian system. The thickness is about 2 metres at the shallower parts, and many multiples of that at the thicker parts. Someone else can check the details on that with the current and previous drill results, but I'm pretty sure that's right.

That's cheaply accessible because it's closer to surface and not a vertical distribution overall.

Also the mineralisation is high at 10% and this is far from a minor factor. Plus the previous owner was fixated on the areas surrounding the entrance to the old mine, and only one form of mineralisation (I think it was quartz from memory). Whereas AZS has been also interested in the other forms of mineralisation which were involving sedimentary (limestone from memory) which has wider distribution.

Metallurgical testing is confirming that we can recover and process these different forms of mineralisation#. The early results are indeed exciting as 174% mineralisation is pretty good. I take the point made by another poster (@salpetie ?) that I should have worded that more carefully. But I meant contextually this is very good.

#Like I've said many times, AZS is excellent at revisiting previous assumptions, finding opportunity in what has been overlooked by other parties. So we got this mine cheaply. I've given examples of this previously but they include the significant silver find at Mesa de Plata and other work at Alacran with Loma Bonita finding Au and Cerro Alacran, which suggesting a Cu find is not out of the question. Teck seems to think it is all part of the one mineralisation system. Certainly it was sufficient for Teck to do a whiplash U-turn with exercising the back-in right, and making AZS temporarily a victim of their own success.

Also Cascada at Promontorio, which nobody gave a second glance the AZS exploration team used some lateral thinking to make a find.*​

Back to Oposura. That Zn distribution looks more like close to the surface cake filling, (not cake icing on the top like Mesa de Plata), BUT it's not vertical seams (and expensively deep) or low in % like many other mineralisations.

So we will have open cut on the areas close to the edges, and room and pillar for the other flat distributions. Each of these are cheap forms of mining and keep the Opex low. All this means people ,maybe should IMO calm down about discontinuities at the boundaries of the area. This has always been a small exploration area of 400 x 400 metres with concentration of the deposits.

So the particulars of this mine is the opex is very low, (as set out in my previous posts on the example of San Felipe which is to be distinguished from Oposura on the distribution of the mineralisation, there they have to use more expensive deep mining methods not just open cut).

Just to revisit previous analysis when applying the examples of San Felipe (and notable differences), the mineralisation target of 3 million tonnes of ore is for 250-300k of mineralisation at 10% zinc.
The reason the early results of the metallurgy is so exciting is the returns. We have mining recovery of 90% or so, and metallurgical recovery of 80%, that means rates of around 70% overall. With ore of 10% the volumes don't need to be as high. Precisely the thing that some were worried about in here, it means you can build a smaller and cheaper mill.

From say 300k tonnes of metal over the life of the mine, at $3k per tonne, then if you look at a mine feed of approx 1,00o tonnes per day, you get a mine life of 7/8 years. Those figures should define your economics. (In my previous figures I hadn't offset costs fully against the value of the mineralisation, but broadly 50% is not a ridiculous assumption). $30mil a year revenue doesn't seem far-fetched. It's not colossal but it's a reasonable living for starters.*


But there is more of Oposura!
There is still the unexplored western zone (albeit deeper from the cross section scheme due to the faults but sampling has been done at the far western end to confirm Zn). So this exploration should take place and confirm the continuation of the resource, once you have an economic mine in place. Obviously it will be more expensive to mine a deeper resource, but if room and pillar has been used in the eastern zone, it may be possible to do this also in the western deeper zone. Either way, by then you have an economic mine in operation. It's wise to do this in stages and separate out the western zone so you become a producer early on.

A CR might be needed to keep exploration going, as noted by Mossberg, but it's not going to be a huge factor n the overall scheme of things and for return to shareholders.

Losing perspective is the bigger risk IMO.

If AZS says Oposura is the flagship project, it's probably a good idea to try to work out why.

*Bearing in mind anything can happen with our other projects. Now on the backburner, I would not rule out Promontorio having a third act as Cu prices start to rocket. Sara Alicia it's question of luck if we get to extend that one. But wouldn't it be nice if we got some capital to develop an extended project?

More importantly, if as Mossberg says, a significant Cu find is made at Alacran - and this could be anytime - it could change things radically. There might be ways of getting Teck to buy us out. Just talking to someone with experience with making agreements in the industry, if a major wants to ultimately own the mine, they can be forced to buy out a JV partner if the JV partner offers to sell their share to a third party. I should have asked him if that could happen before a reserve is declared (as some are obsessed in here with reserve declarations) but I don't see why not. Mining exploration projects are bought and sold all the time at various stages of development.​

It's not possible to know precisely what's in the JV agreement with Teck but I can't imagine it goes beyond industry standards. At the time it seems they thought Alacran was useless, and put the backin right in case they were wrong. It's unlikely they would have bound AZS into not selling their share to a third party which would be more likely if you thought something of major value was involved. This possibility ups the ante and means that Teck would have to make a counterbid to any third party offer so they can do what they usually do and develop alone. If this scenario is correct, it solves the problem of the 4 years wait in case of a find. ​

Just speculating of course! But I note volumes are very low on AZS. Waiting for news!​