Almaden: Succeeding In A Tough Resource Market With World-Class Management And Gold-Silver Discovery

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With approximately $5.5 million in the bank, a 3.5-million-ounce gold equivalent Measured and Indicated resource, zero debt and a robust, updated preliminary economic assessment, Almaden Minerals Ltd. CEO Morgan Poliquin says the company is in position to not only survive this tough market but to continue adding significant value at a deep discount. While other companies are trying to figure out how to keep the lights on, Almaden has been active. The company recently completed a spinout of a large portfolio of exploration projects and royalties—including a royalty on Ixtaca—into Almadex Minerals Inc. and purchased an option on a mint condition mill that reduced the initial capital cost estimate by some $70 million. In this interview with The Gold Report, the second-generation geologist points to the fact that 95% of the Tuligtic property, which hosts the Ixtaca Zone, remains unexplored and that the company can drill for about a third of what most operators pay. He says that the company’s market cap is less than the savings from the purchase of the mill, as an indication that a potential buyout is a plausible scenario.

Drill and Crew at Ixtaca. Photo courtesy of Almaden Minerals.

Management Q&A: View From the Top

The Gold Report: Almaden Minerals Ltd. (AMM:TSX; AAU:NYSE) recently released an updated preliminary economic assessment (PEA) for the Ixtaca gold-silver deposit in Mexico. One of the highlights was the purchase of the used Rock Creek mill at a severe discount. Why is that investment—and the way the investment was structured—important to the future of Almaden?

Morgan Poliquin: We are in a challenging mining environment. That is obvious. What is less obvious is the opportunity. We know that the end of the down cycle is going to come eventually. Our strategy is not only to survive these markets, but profit from them. That is why our first instinct was to find ways to reduce capital costs of the potential mine at Ixtaca by looking for used equipment. Oftentimes, used equipment can be a pile of rusty junk. In this case, it was a brand new mill that operated for only six weeks before the company that owned it took it offline during the economic collapse of 2008. As shown in our updated PEA, the new mill is a big part of the reason that we could reduce our initial capital expenditure from US$244 million (US$244M) in our September 2014 PEA to US$100M in our recent one. Also, the mill acquisition is structured as an option to acquire, so there is also some flexibility for us.

TGR: What are the next steps for the Ixtaca project? When will investors see the next catalyst?

MP: The next engineering steps are a prefeasibility and a feasibility study, as well as permitting the mine plan. So the next steps are very straightforward—continue to derisk the project by completing the detailed engineering and getting the mine permits. We’ve already done most of the field work required. The mill feed in our new mine plan is already 97% Measured and Indicated. So a lot of the detailed engineering is behind us. For the civil engineering, on-site data collection is being completed. The next steps are to compile all of that into prefeasibility and feasibility studies and get our mine permits in place.