A Mountain of Mexican Gold and Silver

Written by Gerardo Del Real
Posted March 25, 2019

Joining us today is Almaden Minerals (NYSE: AAU) (TSX: AMM) President & CEO Morgan Poliquin.

With gold now having firm support above $1,300/oz. Almaden's Ixtaca project is looking fantastic. Read on for the latest information on it.

To your wealth,


Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader.

Gerardo Del Real: This is Gerardo Del Real with the Outsider Club. Joining me today is the President and CEO of Almaden Minerals (NYSE: AAU) (TSX: AMM), Dr. Morgan Poliquin. Morgan, how are you this afternoon?

Morgan Poliquin: I am excellent. Thank you very much. I hope you're well as well.

Gerardo Del Real: I am. Thank you for asking, and thank you for taking time today. I wanted to catch readers up on Almaden Minerals and the Ixtaca project. This is a project that's a feasibility-stage project, a polymetallic gold-silver deposit. The numbers, frankly, are excellent. Using $1,275 gold, which we’re above, and $17 silver, which we're slightly below, you have a 42% after-tax IRR. You have Proven and Probable Reserves of around 1.4 million ounces of gold and 85 million ounces of silver (about 2.5 million ounces gold equivalent).

Frankly, I visited the project and as far as community relations go, Almaden does as good a job as anyone in the industry. And so hence the reason for our dialogue today, Morgan. There have been reports in the media, and I don't want to get into too many details because I want to focus on the project, where it stands and what it looks like moving forward. But there have been some media reports recently that make it appear as if Almaden Minerals is the target of an anti-mining campaign, which is not accurate. And I wanted you to come on and kind of set the record straight on what really is going on down there. Because frankly there's a lot of people with a lot of opinions that aren't from the community, oftentimes aren't even from the country. I know you have your finger on the pulse. I'd love your thoughts.

Morgan Poliquin: Well, thank you very much for the opportunity. If I may, I'd like to sort of back up and give a bit of a panorama of Mexico, and why we're there, and how we approach things with community and local stakeholders. That's probably the best way to answer the question. In 1992, a new mining law came into effect that, as in Canada and the United States, allowed for foreign ownership of mining claims. This is when groups like us came to explore and develop projects bringing a large amount of outside capital into Mexico for finding and developing new and old resources.

So it's been very positive for the development of the mining industry in Mexico but also Mexico which has seen the development and discovery of new resources for the benefit of the country. In our case we came in at that time to explore in an excellent geologic area and made a new discovery. We found the Ixtaca Project in 2001 and staked it. For new claims staked in Mexico and under the mining legislation, just like as in Canada, it's a lease from the people of Mexico and involves a mining royalty for any production that will come down the road, and it doesn't include access to the surface rights. Those surface rights have to be granted by the surface rights owner, if there are surface rights over the area of the mining claims.

So, right from the get-go our process is to obviously respect the surface rights owners and request access to the areas where we explore prior to being able to even enter the area. In the case of Ixtaca, those are private surface rights, which we've been able to lease or purchase over time. So our process of exploration is pretty straightforward. Obviously, we made a discovery there in 2010 after years of prospecting, and we've been through the feasibility studies and have submitted our environmental permits. We recognized, however, that in this area there is not a lot of modern metal mining and the local stakeholders haven't a great familiarity with it. So we decided to do something about that, we're quite entrepreneurial I feel, and we have tried to do our best and be innovative with respect to community relations and transparency, to do it better if we could.

Transparency is a word, but where rubber hits the road for us I think is for people to see and understand precisely what we have in mind. And how we did that was take around 500 local inhabitants up to now on tours of operating mines in Mexico. Thankfully operating companies allowed this access. So it's not us just talking about this development proposal, which local people don't have a past familiarity with, it's them having the opportunity to see it in person. So education's been a huge component, but continual open dialogue through monthly meetings with local community members, and annual large open houses where we present the progress of the project, and most recently in December, the feasibility study, the basis for the current permitting. We recently summarized all this work in a news release I hope that people will have time to read on our website along with a video showing our years of working with local communities.

That's the background. As you mentioned, there are outside groups who don't think that the mining law is fair or want to change the legality of mining and would like to see constitutional changes that make mining more difficult I would say. And look, we respect activism. Activism is an essential part of a social democracy, we've all seen that over the last hundred years. But we also respect the functioning of the social democracy. And if the Congress and the Senate of Mexico want to bring in new mining law, well we'll respect that then and learn to work with it. But, in the meantime, some of these groups are filing lawsuits against the government of Mexico to change, as I say, the mining law.

What we do is focus on what we can, which is our local community relations, which demonstrably we've had a very transparent program through which we feel we have gained trust and strong support for the project. We don’t rely on this however and we brought in an independent third party to review the social situation, and to ensure that we fully understand the demographics and the true nature, culturally of the local inhabitants so that our consultation is done in the most sensitive and open manner. This third party who did the first for the mining sector, as far as we're aware, EVIS, essentially a social impact assessment, which involves studying, as I say, cultural identity aspects, demography, and also asks the local stakeholders whether they know the company, whether they had interactions with the company, what their concerns were, and also what their hopes and dreams were.

We listened to that feedback and we made modifications to our project along that process, but we did rely on independent experts for this study. And I note that the government of Mexico is talking about more formalization for the process of community relations, as they have with the oil and gas industry. This EVIS as a requirement there, for example. So, we're happily, I think, ahead of the curve in that and meeting international standards for review and transparency. I mentioned we were entrepreneurial, and what that means for me in community relations is that we're really trying to do things better all the time and in an innovative way. At the end of the day we wish to work with local stakeholders to bring positive change. We see them as partners for local development not to be used in some broader strategy for legal change.

So that's a quick summary of how I see the panorama out there. There are broader things going on, broader dialogues about how development should be done. We came to Mexico thinking the mining law was a fair one for everyone and have strived to respect private property owners and communities, and that's what we've tried to do while at the same time bringing ourselves to account by inviting third parties to review our efforts including consultants, NGOs, and the media. We are proud of this work and hope all our stakeholders feel that way too. We got our full permits submitted. Another thing I would say is when news articles are coming out usually it's when you're permitting. In that respect, the timing of these things are probably to be expected.

Gerardo Del Real: So to be clear, as far as the permitting process goes moving forward, you have good dialogue state-wise and federally. Is that accurate?

Morgan Poliquin: Absolutely. In fact, the sub-secretary of mining — mining in Mexico is not its own ministry, it's a sub-ministry of the secretary of the economy — the new sub-secretary of mining actually came and attended our annual open house in December to see the true nature of the project. We were very gratified to see that the federal government, the state government, and the municipality are engaged and want to know about the development. We feel we've been very open and transparent with them and we're very gratified that they've engaged with the project to understand it as best they can on behalf of their constituents.

Obviously, the new president of Mexico has made a number of statements about mining, which are clear to us and to the industry, and I hope all stakeholders that they would like a good mining investment in the country going forward and that they recognize it is an important way to improve rural economies. And obviously mines are not everywhere. Mines are only where you find them. So there aren’t mines everywhere. These are very rare things. But new discoveries like Ixtaca represent new wealth for the people of Mexico and they can benefit the entire country in terms of federal income taxes. There's a new royalty that was instituted, which involves a large component now going to municipalities and states, or more regional taxation that directly benefits communities local to mines. So look, I think the federal government is being very clear that they want good mining in their country.

Gerardo Del Real: Morgan, I want to thank you for the update. I want to ask you briefly. Moving forward, I know there's already a robust resource, I've always been excited about the exploration upside. You had news, I believe a month and a half to two months ago, that indicates and suggests a potential for new discoveries. Can you speak to that briefly?

Morgan Poliquin: Yeah. This was discovered in 2010 and we've had a pretty tough market ever since. And we've had our heads down focused on de-risking the resource, and that means that we haven't had the resources either time-wise, or to be blunt, financially when you're focusing on feasibility studies to do exploration. But we think this is the tip of the iceberg.

We think, for example, that the discovery we made over a kilometer away, in something we call Tano zone, was very indicative of that potential. There are large alteration zones on the property, which haven’t been drilled properly or at all. These gold-silver veins aren't for the most part exposed at surface. So you know it's drilling that is needed to find more, but if you look at something like the Waihi district in New Zealand, if I'm not mistaken, it's produced around 6 million ounces. They continue to make new discoveries over 100 years later from first mining in that district. Oceana's mining that now. There's new veins found all the time and it's a drilling problem, but we're very early in that process. So the resource that we have, we think is indicative of much more to find, potentially.

Gerardo Del Real: Excellent. Morgan, you have a market cap U.S. approximately just north of $70 million. I believe it's $90 million Canadian. You own a mint-condition mill, which replacement cost would be approximately about U.S. $70 million. You get the gold and the silver and all the exploration upside basically for free. I'm excited for the rest of the year. I'm looking forward to seeing drills turning. And I want to thank you very much for providing an update.

We'll make sure to put a link up to the video (click here) that you and your team recently published that speaks to the efforts you've made in regards to community relations. Thank you very much, Morgan.

Morgan Poliquin: Thank you very much for the opportunity. It's a pleasure to be able to speak to you and the Outsider Club. I really appreciate it.

For the past decade, Gerardo Del Real has worked behind the scenes providing research, due diligence, and advice to large institutional players, fund managers, newsletter writers, and some of the most active high-net-worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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