Mexus Gold US (MXSG)

[TMLonggun]

Some thoughts:

On the placer:

I have heard famous geologist Brent Cook on at least two separate occasions emphatically state that a placer should never be included in a public junior mining company (unless it is leased out).

I couldn't find an exact interview but the comments at the end of the video are interesting.

The only placer I know of in a public junior that has generated a return is Klondike and they leased out their placer land to the HOFFMANs (the worst miners ever) and they paid out a quite substantial royalty to the company at no risk to Klondike. Obviously even idiots can profitably run a placer mine - if the property, grades, and consistency are good enough. High nugget effect deposits (like Mexus' placer) are notoriously difficult to estimate.

Placer and hard rock mining are very different in many respects. Most of the placer miners I know are gamblers, dousers, and guessers while hard rock guys treat it like a job, are scientific, methodical and logical.

Placer grades are almost always inconsistent, even if they made a million profit one year or had x grade it is very difficult to determine if they will be able to maintain it during subsequent production, even with similar land and depth. Unless they drill and outline the pay layers and map it all very closely, treating it exactly like a hard rock operation. In theory it should work (Mexus has nuggets 10-100x the size I am used to on my placer claims) so it should be quite profitable - if they can maintain constant, consistent production. Obviously they cannot. Placer ops are way riskier than their hard rock peers and there is a bunch of problems with them (susceptibility to theft etc).

I am not accusing Mexus of theft but it does make me wonder how the operation could run for so long and move such a large tonnage and yet only produce such a pittance. It looks like we earned 1-2 days production total in half a year. Even if they only ran 1/3 of that time it still doesn't make sense. The only explanation I can see is that they severely overestimated the grade of gold in their new area and probably only did token confirmation.

Where there is gold much of the easy stuff is mined first and Mexus has had placer and artisan work on that land for hundreds of years. A lot of the surface stuff is probably spotty. Same on some of the claims I have access to (knowing which areas had previously dredged or mined is critical).

Could Mexus still make it work? Probably, but at this point it clearly does not make sense unless they put a known high grade zone in production and produce profitably from the get go. Losing money on every ounce is a terrible mining strategy.

Placer mining isn't as simple as: throw basically any dirt from 26 square km on the pad, leach, enjoy low cost MC gold production. Most placer miners do not even break even, it is a hobby. I honestly thought that Mexus' placer operation would be profitable, and that they would be the exception. I'll give Brent the point for this one, he was right and I was wrong. I always like to challenge experts but sometimes they are known as experts for a reason.

I (and many others) would pay for a Mexus Gold safari if they let
us keep metal detected nuggets. Maybe we could sell tours, it would generate more than the mining did.

Paul needs to communicate more:

Most of the questions asked over the years are answered in PRs and from publicly available information. As far as juniors go he has explained himself quite well as I have demonstrated numerous times by parsing together multiple PRs. Has everything he attempted succeeded? No, but he has done well given the circumstances. The project and our ultimate success is now in AR's hands, not PT's. Paul should say nothing and is probably allowed to say nothing in regards to this. Even once Julio is on the BOD of Newco the most important communication still has nothing to do with PT. The JV is the most important thing at Mexus and Paul was instrumental in getting to this point. The future of the Rancho does not require his active input. He could retire and sit on his shares and let the young dogs take over if he really wanted to.

Should he try and hibernate Mexus until AR makes a production decision? Or should he attempt to develop Ures and hope those results lead to more interest and higher share prices that make these very discussions moot? That's his call as CEO and is a tough choice, I don't envy the man one bit. There are pros and cons (and unintended consequences) to every action and decision. His success or failure will probably be dictated by forces largely outside his control.

On dilution:

Unfortunate but necessary. A lot of it has been on the books for years and is baked in the cake. PPs are dilution too, Mexus has always survived on dilution (like almost all juniors) and it will continue to do so until they are profitable or nonexistent. The notes are high % and are a dilutive burden on the company, but most of it has been there for a long time and was necessary to get us to today since most of us stopped funding PPs.

Dilution is also relative to value generated. If a 10 million dollar company borrows 1 million and uses that million to double the value of the company, was it really dilutive? (This is Corrado's CMI argument and it does make a tiny bit of sense - if the value is actually generated and not wasted and then claimed to have been generated).

At this point I think I could make a strong argument that dilution is less important than it appears. Does it really hurt shareholders if a stock goes up 10-50x and then has "half of its potential stolen"? Since without it we are splitting a goose egg, which is meager haul regardless of how few shares it is divided across.

Sometimes you must eat twigs in winter to make it the bounty of summer. Our summer will come eventually. This is an inevitability. Mexus will survive to production and regardless of whether they have 400m or 500m shares the price will be a lot higher than it is now. Of this I am certain.