A repost from TML- Excellent read
Mexus is in a stage of optimization and they will either succeed and earn a profit or they will not and dilute excessively and sap all potential profit. The outcome is binary and no words on a message board will change that. The doubters will always take a (warranted) pessimistic point of view and largely ignore data points that don't fit their perspectives while the believers will do the same with the inverse.
I think both sides raise excellent points...and also frequently [argue illogically]. The outcome is binary, yes or no, but the percentage likelihood is distorted by both longs and skeptics and I think both get it incorrect because of their implicit biases. I am guilty of this too but when interactions become very polarized it is often smart to take a step back and observe.
A skeptic can easily throw out the boilerplate warning that exists in every stock and mining stock in the world and be confident that they will be statistically correct over a large sample size-- but you can't do this accurately on an individual basis without considering the specifics of the equity/mine in question. If you just look only at the risk column it is significant and will negatively skew your perceptions. By this stuff I mean the generic posts about mining being risky, information I would hazard 100% of the board is aware of, yet is repeated every day.
So for good measure:
Mining is a very risky industry and most of the explorers fail to find an economic discovery and end up wasting their shareholder's money. There are thousands of mining stocks yet only the top 5-10% significantly outperform their peers and generate most of the sector performance --stock picking is crucial. There are hundreds of scam mining companies who only mine gullible investors instead of metals. It costs tens of millions if not hundreds of millions of dollars to open an average small scale hard rock mine and even doing the most stringent and costly studies and exploration will not guarantee the commercial success of a project. Several reputable geologists in this industry (Cook et al) estimate that only one in ten thousand geological anomalies (prospects) become a profitable mine and that developing them from discovery to production now takes well over 10 years on average in North America (slightly less in Mexico, slightly more in Canada). Mining is risky, prone to extreme delays, expensive, dangerous, immensely time consuming....and a potential lucrative business if successful. So knowing all that, if you just pull up a random ticker of a penny miner and had to speculate in one second on the chance that it would become a successful miner and earn a profit for its shareholders... I would estimate it is 1% at best, probably a small fraction of that. So if you were a junior mining bear you could be right most of the time without ever even opening your eyes.
A rational person therefore would never invest/speculate in this sector unless they were confident they could increase their success rate. The rewards for a successful project are great, but they aren't so great that anyone with sense would tolerate less than a 10-15% shot at making 10x your money. I think some will argue you can't increase your success rate and that investing in a junior without billions in studies and earnings is always a gamble- it is too complex to figure out, has too many variables etc. I don't agree with this line of thought at all and as proof I would point to a couple dozen good stock pickers that have such high accuracy that they sit so many standard deviations away from the dart board that it is 100% obvious they are on to something more than mere chance. Winning the lottery once is luck, winning it 4x in a row or 5/10 tickets is worth investigating how they are doing it.
Which leads us to "how?" How do guys like [censored names of stock pickers] pick many more successful juniors than should be possible?
Well, they openly tell us. Is it pure random chance? No. Prayer? No. Lucky rabbit's foot? Nope. It is methodology and research tempered with common sense and experience. They discovered after doing this 100s of times that certain attributes in a company make them much more likely to succeed in the long term. Identifying them means a greater chance of success. There is obvious stuff, you want dedicated management with skin in the game and interests aligned with holders, you want them to have cash, you also want a high quality project/property in a low cost district where it is easy to get permits etc.
[note this is on topic, a discussion of a common argument and not the posters who make them]
Which leads to some of the most bizarre conversations on this board essentially trying to answer the question, "Are the Mexus claims likely to contain economic gold worth mining?" Some skeptics may opine that they don't believe that to be the case, or that they cannot possibly know until everything is Swiss cheese or dore. I find this very conservative position to be strange and illogical. It is as if no mining in human history has ever been accomplished without the SEC. I have invested in early stage discoveries many times - and I did this not because "I couldn't possibly know" and "just felt lucky" but because the potential discovery was of obvious impact and of significance even to a layman. It just matters if it is comparatively impressive - average and below is risky, but if you have high grades competitors and potential partners are drawn to the margin. This is important because obviously impressive stuff is easy to market and communicate/contrast with other projects. Potential discoveries can be identified early without huge data sets and without a university degree/expertise. In my experience, results can be objective and built a within a more subjective overall opinion that can form a speculative thesis if there is enough evidence. Skeptics will pretend we cannot possibly have ANY idea of whether Mexus' initial deposits are economic and this is absurd. We don't need to be accurate to a percentage point, we just need to get a general sense of the potential and likelihood of discovery.
All we are trying to do is decide if we have enough reasons/evidence to make an informed speculative bet on Mexus.
[This example is on topic because it is a very common argument repeated on this board. If you insert Mexus specifics the case is not as quite as compelling as my example but it still demonstrates the absurdity of the argument that success is impossible without exhaustive exploration and studies.]
Let's do a little mental experiment:
Some prospectors in Alaska arrive following rumors and discover abundant minerals nearly everywhere they look, but none of the gold they were seeking. They keep looking and find strange green rocks. Eventually they discover shining pebbles made of what seems to be copper and so they follow them to a valley where the pebbles seem to be heavily concentrated, getting larger as they go. Soon they can't take a step without tripping on the big rocks. The team spreads out and discovers that in fact most of the giant boulders in the valley seem to be made of nearly solid copper of absurdly high grades. The team surveys the area and finds a similar level of copper boulders strewn throughout the valley and copper fused rocks leading up into the mountains, stretching for as far they could see. They make camp and one man finds a several large gold nuggets in a nearby stream. One of the team is shocked when his cook fire smelts the nearby ground into a molten puddle, while another explorer breaks his leg on one of the elephant sized copper boulders while posing for a picture.
Now what should they do? What makes the most sense?
1. They begin mining immediately on a small scale, starting with the most obvious high grades. They then reinvest profits in equipment and exploration and expand over time.
2. They cannot possibly know anything about anything and no judgements or opinions could possibly be made about the viability or potential of the deposit. There is no conceivable way to know if a field of giant boulders made of copper is valuable or even feasible to process without spending many years and millions in studies while hiring the best experts in the world. Without the SEC the Pyramids would not have been built.
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Common sense matters, even if it should be renamed, "rare/uncommon sense".
Which brings us full circle to Mexus and the long side.
There exist many pieces of evidence that points to a high likelihood of Mexus possessing several hundred thousand ounces of high grade gold within a system that could potentially hold millions more(imo). This area is highly likely to contain an economic gold deposit beyond what has been outlined by Lemas and 100s of grab samples and limited RC drilling and coring. Even though these would not even technically qualify as "inferred" or "indicated" resources on a 43-101 I am more than confident they exist.
Why is it so hard for some to conceive that a gold deposit could exist on land that had:
-Recent multi-million dollar production from a tiny section of the Julio shaft between the 50 and 100 foot levels, allegedly taken by one man with hand tools.
-Multi-million dollar historic production from Spaniards and family artisans over 100s of years.
-Multi-thousand ounce historical production from placer production.
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-very large high purity nuggets discovered near surface, indicating a nearby lode source.
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-Cortez Boot - nearly 400oz nugget, largest in the Western Hemisphere discovered a short distance away to the north.[Suppressed Image]
-The Trend. The Sonora-Mojave Megashear trend is home to some of the largest mines on Earth. Other mines on this low cost trend often stack and produce profits from deep pits with grades less than .5g/t, equating to a very high competitive advantage for Mexus' grades, at least during the first couple years of production. Examples include [censored].
-3rd party shareholder confirmation of near surface samples, shaft area.
-3-5oz/t Julio hanging wall assay.
-1km long vein system with historical assays over 100 oz/t, mined in pockets from surface.
-Abundant visible gold in drill core from Julio area and in shaft wall samples. No stock photos here, just gold.
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Finding gold is always a long shot but searching on claims like these dramatically increase the odds.
Now none of this "proves" the deposit is economic, it only serves as evidence that the property is not exhausted and would be much more likely than average to contain economic gold--at the very least far more so than random chance or someone digging in their backyard by orders of magnitude. When I factor in the potential of the property down to say 500 feet the numbers get enormous. Even using only the tip of the iceberg, there is a 100% chance in my mind of at least one un-mined bonanza pocket near the existing shaft and ~200,000 oz contained just in the easily accessible material available at surface.
Considering the development time, progress rate, and ongoing education and dedication of management, I think this is an excellent speculation with a high chance of success and a compelling risk/reward equation at this moment in time.
Consider this:
Mexus has initially stacked high grades. If Mexus had stacked low grades in line with many nearby peers that would be difficult to change and make money off of without a large scale operation. This high grade represents their potential margins and anything above 1g/t is quite high for this area. Stacking up to ~3g/t+ with pockets of higher grades is exceptional and represents such a thick margin that I think it would tolerate almost monumental mismanagement and low efficiency and still make a small amount of money. If the gold isn't in the ground or stacked on the pad it cannot be extracted --Mexus has proven beyond the shadow of a doubt they have some very high grades and this is the most important part.
It should be noted there are gold mines out there that have failed even with high grades stacked upon their pads/ran through their mills. It isn't enough to just mine good grades - they need to be leached and processed effectively. Getting this right is one of the reasons for some of the development studies we glossed over, saving time and money, but also by its very nature necessitating a potentially long optimization phase and the expectation thereof.
There are many ore types that are very complex and require a lot of metallurgical testing and tinkering to find an optimal cost/benefit to extract. Sometimes a mine will stack sulphide rich ore and even with high grades, gets low % recoveries into the pond. Sometimes the ore needs more crushing, roasting, agglomeration etc meaning this could cost a lot of time and money to crack and not doing it may lead to a failure. Many of these complex ores will require capex and equipment worth over one billion dollars for a commercial operation. Yet Mexus, despite perhaps suboptimal crushing, is clearly leaching the ore at an impressive rate. The pond is pregnant- getting to this point is by far the most difficult challenge in this type mine and they are done. Imagine they instead stacked high grades and there is nothing in the pond - that is a lot of potential work to figure out, with many expensive pitfalls.
The last step is recovery and here I would posit that given the grades of the pond and the operation of a fully functioning MC, the recovery of gold is a certainty. I don't see how it could not be recovered without some kind of serious flaw in the construction or engineering of both of the plants. No amount of money can improve what's in the ground and increasing recoveries can often be enormously expensive but this is different. This is close to the last step, essentially the X in the alphabet of mining, and can be fixed with money and time. The delays aren't ideal but expected when mining with a shoestring budget. Next up: golden laces.
