Mexus Gold US (MXSG)

[bobbyinredwood]

MINE TRIP REPORT!!!

Thanks to GSB for the boots on the ground! Here's the original link:

http://ragingbull.com/forum/topic/1024256

http://ragingbull.com/forum/topic/1024255


This last weekend, 2 other shareholders (I’ll let them identify themselves in their own posts should they so choose) and I finally made the trip to Mexus’ Santa Elena property near Caborca. Paul Thompson met us at the front gate and we spent a few hours touring the property, including the newly revised placer operation which, as we all know from today’s PR, is now operating at 600 tpd. We then drove the 30ish miles further south to Caborca, where the company rents a modest house/office where we relaxed some and spoke with company staff, then all went for some fine steaks at a wonderful local restaurant. During our time together, many questions were asked and answered, and no surprise, some weren’t.

I will likely write more as time permits, but for now, following is my broad take on some of what were/are some of my biggest questions. Again….just my gut sense given what I saw and heard….all fwiw.

Most important to me:

• Paul Thompson: Quite different from the impression I had from others’ descriptions and especially from my own few brief conversations. Again, shows not to make hard judgements about people before you can talk in person, looking one another in the eye. Really liked him. He is surprisingly soft-spoken, calm and measured…not the cantankerous and somewhat defensive man I had expected. Bright and also cagey/shrewd in his thinking – a good thing. A lot of experience and a network of industry contacts/ friendships I hadn’t realized he had. Readily admitted he is not the world’s best communicator, but reminded me too that often people want communication about matters it is simply not smart or prudent to broadcast publicly, especially given our small size and where the mine is located (i.e. security related issues which are very real). While we may disagree some about the psychological importance of clear, transparent and regular communications with shareholders in order to generally build confidence and trust, I came away with a much clearer understanding – and appreciation -- of Paul’s approach given realities on the ground.

Cutting to the chase on the subject for now, I think Paul is almost exactly the right person to be leading the company, at least at this stage -- an opinion I didn’t expect to come away with. He is unbelievably handy and frugal regarding all the machinery and practical matters of running this kind of operation and, from what I could see, the small crew really respects him. He is clear, good-humored and respectful in his communication with them…and there is real trust there…almost familial and very team-like. If this were an old movie, Paul could easily be played by Gary Cooper or Jimmy Stewart…modest, with a good sense of humor… but nobody’s fool. Very important: Paul has a very clear vision of what he is doing and what the company’s priorities are and need to be….what constitutes a good deal for us and what doesn’t. If the gold is there (see below for a bit more on that), I think Paul will produce it efficiently and at a per oz cost that will turn out to be one of the world’s lowest. Was I taken in by Paul’s “folksiness” in person? Perhaps a little…but I don’t think so re the important things. Like Popeye, he yiz wot he yiz…and personally, I feel much more confident that he is, in fact, the man for the job at hand.

• Santa Elena: I am no geologist so I can’t speak reliably to the claims made for our flagship property. Paul believes the gold is there in quantity and so do his senior staff, the family-members Guillermo “Memo” and Julio Balthazar…as do many others….with a good chance of more than the 1 million AU equiv oz that has been spoken about when all is said and done. It is located only a few miles from Fresnillo’s Noche Buena Mine, one of Latin America’s largest gold/silver operations…so the location pedigree is there…and the Balthazar family has been pulling gold from the property for generations. Paul showed us the primary quartz veins crisscrossing the initial target area of our property… about 600 acres close to the property entrance and the highway -- as well as how each section will likely be developed. He also showed us the copious equipment we have at our disposal…ready for much of the expansion we’ll hopefully soon be undertaking…and all purchased 2nd hand at good value by a guy who knows the equipment world from years of experience…and who can fix anything, to say nothing of creating custom adaptations that work more efficiently than the original.


For now, we are back where we were before the Trinidad episode: placer production to give us cash flow to pay our bills and maybe a bit more à then, when explosives permit is secured, crusher processing of higher grade ore, where increased cashflow will pay for a concerted drilling program (finally!) to determine larger extent of appropriate ore for leaching. This is where the bigger $$ returns will come. Ultimately this is what Paul is here for, the reason for his persistence over the years…and I think, the rest of us too. With today’s PR re placer upgrade to 600 tpd capacity, we appear to once again “on our way”

• San Felix (Trinidad): Paul clearly didn’t want to discuss this in any detail other than to admit it turned out to be a time-wasting mistake. I will respect his wishes to not discuss this here except to say that he was aware of the risk factors before doing this deal…and that he only went ahead after careful consideration and consultation with his advisors (of which there appear to be more than I knew). Why? Had it worked, it was an great deal for Mexus which would have catapulted the company up several levels of importance in 1 attractively-priced fell swoop. So in short…not the ill considered move I had thought, but a carefully calculated risk that unfortunately didn’t work out. A big difference, at least in my book. Lastima (a pity), as they say in Mexico…and now adelante (forward)! Will we be paid the 4M owed for the sale of our share of the jv? Paul maintains yes…and I guess we’ll soon see. ‘Nuff said….

• Office and Staff: I think it’s important to mention that Mexus rents a modest but secure 3-bedroom house in town, the entry and livingroom of which double as the company’s local office. The important part here is that the office is run by 2 very capable women, both graduates of Sonora U’s business program. They are friendly, very capable and very organized. Everything is carefully classified in folders, and ordered on shelving. Gave me a good feeling that this is a serious enterprise being taken very seriously by all who work there. Equally important, they have a great communication with Paul. An important part of the team. Brothers Memo and Julio B are Paul’s right hands at the mine. Memo oversees the operations and crew on site in Paul’s absence and he too is soft-spoken and very capable/handy with machinery and maintenance. Paul seems to completely trust his abilities and demeanor, leaving him in charge when he is absent. Julio, more of an extrovert than Memo, is Paul’s right hand /voice with higher-level administrative tasks, such as following up in Hermosillo or Mexico City with environmental compliance and permit-related issues. Both seem to be very good guys…and all seem to get along well and are now friends. A good team from what I could see. (All were at the dinner we had together)…and that team spirit comes, as it generally does, from Paul at the top.


Will Mexus become the success we all hope for? Paul himself readily admits we have a ways to go to get to full speed and that there is still risk. That said, and making the assumption we actually do have a good deal of good-grade gold at the mine, I was encouraged by what I observed and, while not ready to say it’s any kind of “sure thing”, I feel far more confident about the entire venture and less stressed about managerial issues now that I have “seen for myself”. So for me, who not long ago was seriously considering simply selling my position and putting the entire “Mexus Adventure” behind me, the trip was very worthwhile…and I will likely be adding some to my position.


All for what it may be worth….