Value Microcaps Junior Miners

[dr_airtime]

CGE.V – godfather of heap-leach’s sunset project.

Sources for this are the 321gold.com article, CEO.ca article, presentations, coffee with VP of Corporate Development last week and my further thoughts.

This is an initially tiny production play by the most eminently qualified mine builder for this type of play in the industry. Since there have been some world-class heap-leach grades of +1g/t from surface hit on Nicho North and El Nicho, the bigger opportunity here is delineating a district-scale property and then either developing it (with equity dilution) or selling it to Argonaut, Alamos, etc. – another Mexican heap leacher. The closest comparison I can think of is GoldGroup (GGA.TO) out of the 2008 financial crisis lows as they only had their heap leach Cerro Colorado gold mine at that point producing 20-30 oz/year and went from $.15 to $1.90 at 2011 sector high for a 13 bagger.

Chester Millar is 88 and known as the ‘godfather of heap leach’ and was the founder or initial property developer of Glamis, Alamos, Eldorado, Cayden and Castle Gold (latter bought by Argonaut). Got your attention? As likely his last project, he is bringing Corex Gold’s Nicho North zone on their Sonora, Mexico Santana property into production on $500k of capex. He owns a mining services company that is already on-site so most of capital and operating costs are paid via related party contractor fees. Since Chester owns the company this reduces any start-up risk as he doesn’t need to demand immediate repayment from the contractor (H Morgan & Co. Attachment 2 – slides 11-12). Furthermore, H Morgan is in Corex for equity so is also incentivized for successful production.

http://www.corexgold.com/s/NewsReleases.asp?ReportID=660680

Chester does things old school and believes in the non-dilutive, phased development approach using free cash flow to expand the mine. He can do this with the right heap-leach property of course. There is really no one else like him in the business, and no one more eminently qualified. If/when Chester passes, his mine manager is Chris Babcock who has been with Chester for 30 years and was president of Pediment and Castle (both acquired by Argonaut).

Castle’s (now Argonaut) La Colorada project is about 100km NW and Alamos’ Mulatos 50km NE. Management founded both mines and both are also heap leaches. They are pretty darn confident they don’t need to waste any money on studies and can just start leaching Nicho North. Chester’s record from laying pads to first dore pour is 89 days and he is aiming for less than 120 on Nicho North. Pads have already been laid and capacity of these first pads is 1M tonnes (a bit less than 30k ounces @ 1g/t after recoveries). First production is going to be in August or September most likely.

Nicho North is an outcropping hill with basically a zero-strip ratio for intial production, is oxidized and has world-class heap-leach grade drill hits like 93M @ 1.03 g/t from surface in SR08-05 (Attachment 1 – page 34).

This will be a tiny mine to start going for 10-20k gold ounces/year production, but Chester’s aim is to generate free cash flow to expand operations and explore the Santana property with El Nicho (main), North Benjamin, Ubaldo and other zones being prospective targets (Attachment 1 – page 15). El Nicho also has some world-class heap-leach +1g/t grade drill hits from surface. Since mineralization is at surface they don’t need an explosives permit and can mostly just drill and scoop the at-surface mineralization. Initially they are going to run for 8 hours per day at 150 t/hour for 1000 tonnes/day and feed ore into a jaw crusher (provided by Chester’s wholly owned contractor) and crush to ¼ inch before leaching. From the bottle-roll testing they know this will work**. This won’t be optimum crush size or throughput but they’ll find this out from production, rather than a costly feasibility study. Water is trucked in and cheap.

I calculated that after the capital raise that just happened, Corex should have about $500k of working capital after allocating about $500k to capex. Apparently a lot of the trade payables on the balance sheet are technically payables to either Chester or Chester’s wholly owned company as for two years he has personally paid for a number of studies and 19,000m of drilling on Santana and he doesn’t exactly need this money ASAP like most creditors as is ‘in the deal for the equity’. As a result, if Chester doesn’t call those payable the actual working capital is higher. Ultimate plan is the capital raise that just happened is the last one ever. This would only work of course if they explored the property on free cash flow and sold. Apparently Chester’s first hole was the 93M @ 1.03 g/t from surface at Nicho North I mentioned above. He knows where to drill….He has been involved with Corex for about 2 years.

The participants in the recent $1M PP were Chester (50% for $500k), Bob Moriarty (321gold.com), a tiny piece for Tommy @ CEO.ca apparently after the article was done, with rest to a number of senior brokers in Vancouver. These investors not trading these shares. Recent volume likely bag holders from old Corex getting out on volume.

You should note that the two recent articles that introduced Corex to the market were written by private placement participants from the $.05 range (Bob & Tommy), so there is some bias, but their articles don’t smell of that.

I am in at $.16 and would bet we never see Corex below $.12 again where there is a bit of technical support. I would by more down there. I was going to buy lower but the day I went to buy, Moriarty released his article and put Corex on the map so I was forced to buy at lows of the jump on that day.

**I asked Doug about this and bottle roll testing has not been announced to market – perhaps because they can’t or it wasn’t done independently for 43-101 standards? While this would typically be a red flag I am not concerned here and trust Chester.

Attachment 1 – technical presentation

http://www.corexgold.com/i/pdf/technical-presentation.pdf

Attachment 2 – corporate presentation

http://www.corexgold.com/i/pdf/corporate-presentation.pdf

Recent articles

https://ceo.ca/@tommy/mining-legend-chester-millars-formula-for-success

http://www.321gold.com/editorials/moriarty/moriarty051616.html