Latest / Kitco MINING / Kootenay Silver’s La Cigarra Project Enters a New Growth Phase | Jim McDonald

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Kootenay Silver’s La Cigarra Project Enters a New Growth Phase | Jim McDonald · Kitco MINING

• 0:05
  SPEAKER_00: Welcome back to Kiko Mining.
• 0:06
  SPEAKER_00: I'm Jeremy Safron.
• 0:08
  SPEAKER_00: Silver continues to be one of the most important metal stories in today's resource market.
• 0:12
  SPEAKER_00: Industrial demand remains strong.
• 0:24
  SPEAKER_00: Now, for resource investors, one of the key value drivers is watching a company move from exploration towards development.
• 0:30
  SPEAKER_00: Now, Kooteny Silver has just taken a major step forward.
• 0:33
  SPEAKER_00: The company released a preliminary economic assessment for its 100% owned La Cigara silver project in Chihuahua, Mexico.
• 0:41
  SPEAKER_00: The study outlines a 14-year open-pit mine life, an after-tax present value of uh$763 million and a 41% after-tax internal rate of return, not to mention a payback period of less than two years.
• 0:57
  SPEAKER_00: The company has also continued to advance its high-grade Columba silver project, uh, giving Kooteny both a development stage asset and a high-impact exploration story in one of the world's most established silver jurisdictions.
• 1:08
  SPEAKER_00: And joining me now to discuss these numbers is Jim McDonald, president CEO of Kooteny Silver.
• 1:13
  SPEAKER_00: Uh, Jim, welcome back to the desk.
• 1:14
  SPEAKER_00: Good to see you.
• 1:15
  SPEAKER_01: Yeah, good to be back.
• 1:17
  SPEAKER_01: Jeremy, thanks.
• 1:18
  SPEAKER_00: I'm excited.
• 1:19
  SPEAKER_00: I mean, I was taking a look at this latest press release.
• 1:21
  SPEAKER_00: It's been an interesting time in the market.
• 1:23
  SPEAKER_00: I kind of want to start with La Cigara.
• 1:25
  SPEAKER_00: I mean, this PEA, it's a it's a major milestone for Kooten, as you as you know.
• 1:29
  SPEAKER_00: I mean, it gives kind of investors that first clear look at the potential economics of the project.
• 1:35
  SPEAKER_00: I mean, when you look at this 14-year mine life and you know, the$763 million after-tax MPV, then you got this rapid payback period.
• 1:45
  SPEAKER_00: What do you kind of want investors to take away from this study regarding the scale of this asset?
• 1:53
  SPEAKER_01: Well, uh it's first an economic assessment on the deposits, really important.
• 1:58
  SPEAKER_01: The numbers are great.
• 1:59
  SPEAKER_01: Uh 14-year mine life, that's fantastic.
• 2:02
  SPEAKER_01: And it's in a district we're 20 kilometers away from an operating district that's been going for 500 years.
• 2:09
  SPEAKER_01: And so we're in an area where once you're in production, you're replacing your reserves for decade after decade.
• 2:16
  SPEAKER_01: So it it this is going to be, in our view, a very long-term asset.
• 2:20
  SPEAKER_01: The numbers for development look great.
• 2:22
  SPEAKER_01: So we've got to start pushing this down the pre-feasibility and feasibility path here.
• 2:28
  SPEAKER_01: And for Kooten Silver, what this is doing is it's transitioning us from Explorer into a developer.
• 2:35
  SPEAKER_01: As you pointed out, this is now a development project.
• 2:38
  SPEAKER_01: So we're going to get a re-rating on these ounces.
• 2:41
  SPEAKER_01: Up until now, uh getting valued on the Colomba project only.
• 2:47
  SPEAKER_01: So big shift going on here.
• 2:50
  SPEAKER_01: The market has not digested this yet.
• 2:53
  SPEAKER_01: It will eventually start to give value for La Ceguera and Colomba combined.
• 2:58
  SPEAKER_01: So that there we're looking ahead for that.
• 3:01
  SPEAKER_01: It's very exciting times for us, and our assets have never been stronger, actually.
• 3:06
  SPEAKER_00: You know, it's interesting you bring up, I mean, it's been such a volatile market in mining, but we're seeing some premiums here.
• 3:12
  SPEAKER_00: I mean, for investors that kind of matter, I mean, obviously, this this is it's not a remote greenfield project, right?
• 3:18
  SPEAKER_00: I mean, talk a little bit about that proximity and what it means in practical terms.
• 3:22
  SPEAKER_00: I mean, 500 years mining, I mean, there's a huge culture here.
• 3:26
  SPEAKER_01: Yeah, well, that's right.
• 3:27
  SPEAKER_01: It sits in the famous Peril District of Mexico, so infrastructure is excellent.
• 3:32
  SPEAKER_01: Only 20 kilometers away to the nearest operating mine to the south of us, uh, right on the same mineral trend.
• 3:39
  SPEAKER_01: So it opens up lots of possibilities.
• 3:41
  SPEAKER_01: There are existing mills there with capacity uh that opens up some possibilities.
• 3:48
  SPEAKER_01: Uh the PA is envisioning our own build, our own plant and process plant, of course.
• 3:54
  SPEAKER_01: Uh and so um, but you've got these variables.
• 3:58
  SPEAKER_01: So when you get on to down that path of uh feasibility and uh mind decision or mind build decision, then you have to finance it.
• 4:10
  SPEAKER_01: Of course, that feasibility gives you the instrument with which you can finance, and you want to be building market cap along the way, and then it becomes some combination of equity and debt, probably, or a mining company uh really wants the asset or buy it out 100%, or even JV it.
• 4:29
  SPEAKER_01: So there's lots of uh different possibilities how to move this asset forward now.
• 4:36
  SPEAKER_00: I mean, I want to talk about MA here in a minute as well as joint ventures, but before I mean the silver price leverage here, we got to get into that because the PEA uses that$50 uh kind of silver price in the in the base case.
• 4:47
  SPEAKER_00: And silver has clearly become a much more important macro story for investors recently, as you know.
• 4:52
  SPEAKER_00: I mean, talk to me a little bit about how this specific projects kind of give shareholders leverage to a stronger silver market here.
• 4:58
  SPEAKER_00: And what does you know the upside look like if we apply current spot prices to that model?
• 5:04
  SPEAKER_01: Yeah, so tremendous upside here.
• 5:06
  SPEAKER_01: We we've got four different deposits and a huge inventory of silver in the ground.
• 5:11
  SPEAKER_01: La Siguer just being one of them, and the very first we've done an economic study on.
• 5:16
  SPEAKER_01: So we uh the analysts that cover us have only been valuing Colombo up till now.
• 5:23
  SPEAKER_01: And so this is going to add a lot of value on the uh just on the analyst target side, but leverage-wise, it was what you really asked about.
• 5:32
  SPEAKER_01: And this study is most sensitive to silver price.
• 5:35
  SPEAKER_01: So uh from the base case of$50, a 30% increase of silver price takes that NPV from$763 million USD after tax to just under$1.3 billion and takes the IRR from 41% to 64% after tax.
• 5:54
  SPEAKER_01: So you can see the leverage there.
• 5:57
  SPEAKER_01: And with the recent highs in silver, it you can just imagine what the potential upside is on uh with regard to silver price increases.
• 6:08
  SPEAKER_00: Absolutely.
• 6:08
  SPEAKER_00: Yeah, I mean, exciting market.
• 6:10
  SPEAKER_00: Uh it's still undervalued in terms of this latest news release.
• 6:13
  SPEAKER_00: I mean, you you you recently strengthened the company's treasury with a bot deal financing.
• 6:17
  SPEAKER_00: I mean, Kootenai is well funded for the next, you know, 18, 24 months of normal operations.
• 6:22
  SPEAKER_00: Obviously, that PEA outlines that initial cost of capital, just over$332 million to build Cigara.
• 6:29
  SPEAKER_00: I mean, uh, you got this current financial runway completely secured.
• 6:33
  SPEAKER_00: So just talk to me a little bit about this approach to eventually, you know, financing the construction while protecting shareholder value.
• 6:39
  SPEAKER_00: What are your thoughts here?
• 6:41
  SPEAKER_01: Yeah, well, it it's a methodical stepwise process now.
• 6:48
  SPEAKER_01: So we got two lead projects suddenly.
• 6:50
  SPEAKER_01: We had Colomba that has a uh big finance drill program.
• 6:55
  SPEAKER_01: We're about 50% of the way through in that.
• 6:57
  SPEAKER_01: That's designed just to expand the resources on Colomba, the high grade vein system.
• 7:03
  SPEAKER_01: And our focus had been in the last five years on Colomba because of that, because it's a sort of discovery that could possibly work at any silver price.
• 7:13
  SPEAKER_01: Now that we're in into a silver bull market, we do we started and delivered the PA in La Seguerra, and now suddenly we have this asset coming to the fore.
• 7:24
  SPEAKER_01: Next steps for it, or a drill program to be adding value to the comp to the asset in the company.
• 7:32
  SPEAKER_01: There's a gap zone within the resource, very lightly drilled, has the potential to add 10 to 20 million ounces.
• 7:38
  SPEAKER_01: We're going to start drilling that in early fall.
• 7:42
  SPEAKER_01: And then if that's successful and there's continuity through that gap zone, and it adds those kind of ounces, we can have a very quick uh update on the PEA.
• 7:53
  SPEAKER_01: In the meanwhile, and concurrent with that, we're starting to do some of the de-risking and studies that are going to be required for pre-feasibility, feasibility at the same time.
• 8:04
  SPEAKER_01: And those would be things like geotechnical work, rock mechanics, and what to tell you what kind of slopes you can have in your pits, uh, additional metallurgical work on the flow sheet optimizing that, and um and and hydrology work to show you what what sort of uh what's the groundwater doing, what's that local aquifers doing, how much water do you have to pump in?
• 8:28
  SPEAKER_01: Is there enough just right there for processed water, or do you have to seek it elsewhere?
• 8:34
  SPEAKER_01: So those things will be started concurrent with that drilling program uh to start in the fall.
• 8:41
  SPEAKER_01: Then that will all lead to the next level of study, and you're adding value, and hopefully the market's recognizing that and you're getting share price appreciation.
• 8:50
  SPEAKER_01: So when you do eventually come to feasibility in a mine decision, then you then you've got a lot of trade-offs to consider.
• 8:58
  SPEAKER_01: Equity, debt, some combination, maybe a mining company steps up and wants to do a JV to provide the capital to production.
• 9:06
  SPEAKER_01: Uh, there those there's a lot of options there to consider at that point.
• 9:11
  SPEAKER_00: You know, Jeremy, I mean, that's that that is important.
• 9:13
  SPEAKER_00: If you can add another 10 to 20 million ounces through that gap zone drilling, I mean, how much does that kind of change the scale of Cigara?
• 9:20
  SPEAKER_00: I mean, are are we talking about simply adding ounces, or could this kind of meaningfully improve even that mine plan and kind of the project economics here?
• 9:29
  SPEAKER_01: Yeah, if success it'll it it will improve it, it'll it'll improve it uh materially for sure, because this is within the pit shell already, this area.
• 9:40
  SPEAKER_01: So it's rock you're moving that you're getting no uh no revenue on.
• 9:46
  SPEAKER_01: So if it's containing a whole bunch of silver, suddenly you're getting revenue.
• 9:50
  SPEAKER_01: That and that and that's going to change those numbers on the PA to the positive side.
• 9:56
  SPEAKER_01: No, and no question about it.
• 9:57
  SPEAKER_01: And what's great is it's not a lot of drilling.
• 10:00
  SPEAKER_01: Uh, this program is going to be less than a$3 million program to drill it off to enough density to at least inferred indicated or at least inferred categories.
• 10:14
  SPEAKER_00: Great time to be a silver producer as well.
• 10:16
  SPEAKER_00: I mean, you know, obviously, while uh Sigara kind of now has the development spotlight, your your Columba asset, I mean, it's it's a major growth driver.
• 10:24
  SPEAKER_00: You recently increased your drill program there to 60,000 meters.
• 10:28
  SPEAKER_00: Uh, you've talked before about a quote grade line at Columba where kind of grades increase as you go deeper.
• 10:34
  SPEAKER_00: So for investors watching the assay results, I mean, what are what are you looking for as this expanded drill program continues?
• 10:42
  SPEAKER_01: Yeah, so we're you know, we're looking for more of the same.
• 10:46
  SPEAKER_01: The we're basically have a grid pattern along the veins that are and resource bodies identified to date because we haven't found the edges of them.
• 10:57
  SPEAKER_01: So we're the first half at least of this program is defining the edges of what we already have, and then we move into the next uh set of targets, which would be where we have drill results, positive drill results with no follow-up yet, and then after that, expanding from there.
• 11:14
  SPEAKER_01: The gray line is referring to an elevation line, and so this deposit is classic vein epithermal vein system, and they have tops and they have bottoms.
• 11:25
  SPEAKER_01: And we can see the top exposed right at the surface at the at the erosional low places.
• 11:30
  SPEAKER_01: So um as you go up topography, we're in this cold air and a like a cone shape.
• 11:36
  SPEAKER_01: So as you go up topography, you're literally above your silver zone.
• 11:41
  SPEAKER_01: So uh it has suffered almost no erosion, whatever was deposited here originally, still sitting here to be discovered.
• 11:48
  SPEAKER_01: And the gray line is that elevation where the silver um the top of the silver zone is.
• 11:55
  SPEAKER_01: So it's a good guide for expiration.
• 11:57
  SPEAKER_01: You want to drill to that level and deeper when you're on your structures.
• 12:01
  SPEAKER_01: So that that's the whole thing about the gray line.
• 12:04
  SPEAKER_01: And so far, we see mineralization uh open down to 500 meter depth.
• 12:10
  SPEAKER_01: So there's a lot of um you know, vertical extent to be tested here.
• 12:14
  SPEAKER_01: Um you know, it gives us a lot of confidence in what the ultimate upside here is.
• 12:20
  SPEAKER_00: You know, I mean you you hold nearly 120 million measured in indicated ounces across four deposits.
• 12:26
  SPEAKER_00: And obviously, while Columba and Cigarra, what we're talking about now, take the spotlight, you also control that that Promontorio and Lenagra projects.
• 12:35
  SPEAKER_00: I mean, are these assets you kind of plan to advance internally?
• 12:38
  SPEAKER_00: Are they maybe prime candidates to be spun out or so you know sold to kind of help fund your development plans at Cigarra?
• 12:45
  SPEAKER_01: Lots of options to consider there.
• 12:47
  SPEAKER_01: So the the first thing we're doing with those deposits are some internal desktop studies by an independent.
• 12:54
  SPEAKER_01: It'll just give us a guideline to tell us these assets start to look work at what silver price uh in terms of becoming economic.
• 13:06
  SPEAKER_01: So the desktop study considers uh you know plug plug-in numbers for capital bill operating costs, etc.
• 13:15
  SPEAKER_01: And it's the first guideline of to understand that.
• 13:19
  SPEAKER_01: And then that will help guide us as to what we do and when.
• 13:23
  SPEAKER_01: And uh, you know, all of those things are on the table.
• 13:27
  SPEAKER_01: It could could end up being a sale, could end up being a spin-out, depending on what's happening with the other two.
• 13:32
  SPEAKER_01: But big picture, we've got a pipeline of four projects to be developed here, advanced and developed at some point, uh, with La Ciguerra now in the lead of that development pipeline and Colombo right behind it on its heels in one company, four projects in a pipeline in in one jurisdiction, Mexico.
• 13:54
  SPEAKER_01: So, you know, as a whole asset, it's got a lot of value for a mining company to consider for acquisition.
• 14:04
  SPEAKER_00: Yeah, well said.
• 14:05
  SPEAKER_00: And obviously, you know, Mexico remains one of the world's most important silver-producing countries.
• 14:09
  SPEAKER_00: Now, Jim, there there are some shareholders still looking at Mexico and they worry about, you know, permitting and policy change and jurisdictional risk.
• 14:16
  SPEAKER_00: Uh, I want you to kind of address that concern because obviously, you know, Cigarra is located in Chihuahua, surrounded by historic and active mining operations.
• 14:24
  SPEAKER_00: What's your experience been operating in the in this specific kind of region and how does that local mining culture support your efforts to advance these projects through the permitting process?
• 14:34
  SPEAKER_01: Yeah, Columba and um La Cigarra are both in Chihuahua state.
• 14:39
  SPEAKER_01: So Chihuahuas is a great mining state.
• 14:41
  SPEAKER_01: Uh they're very supportive of the mining industry.
• 14:45
  SPEAKER_01: Uh they they like the mining industry, they got some big mining districts there, of course.
• 14:51
  SPEAKER_01: Uh and so it's a great what you know, one of the best places in Mexico to be working on a project and advancing it towards uh production.
• 15:01
  SPEAKER_01: So very supportive on that side, uh, very fortunate.
• 15:05
  SPEAKER_01: Also, security-wise, uh quite calm, relatively calm, quite calm.
• 15:11
  SPEAKER_01: We've been in Mexico for 25 years, so there's certain areas that are hold a lot of risk in regard to that.
• 15:18
  SPEAKER_01: And we we don't go there.
• 15:20
  SPEAKER_01: So we've turned up some incredible looking opportunities uh because of that.
• 15:26
  SPEAKER_01: And and so uh if it were too risky, we wouldn't be there.
• 15:32
  SPEAKER_01: So uh development-wise, these two projects are really well located, good infrastructure locally, especially La Cigarra with operating mines just 20k to the south.
• 15:42
  unknown: Yeah, yeah.
• 15:43
  SPEAKER_00: Um, MA, obviously, it's on everyone's head, uh, minds, uh, top of minds.
• 15:47
  SPEAKER_00: We've been talking about it a little bit.
• 15:48
  SPEAKER_00: I mean, from a broader market perspective, we're seeing some major producers actively looking for these projects to replace their depleting reserves.
• 15:55
  SPEAKER_00: I mean, does having this new economic study at Les Cigarara Cigara open up kind of more strategic options?
• 16:01
  SPEAKER_00: I know you talked about JVs and kind of partnership conversations.
• 16:04
  SPEAKER_00: I mean, I know you can't say anything if you are, but you're having some conversations.
• 16:08
  SPEAKER_00: I mean, it feels like there's some movement in the MA space.
• 16:12
  SPEAKER_01: Well, the the the there has been some pretty big movement on some recent MA and the especially in the gold sector, uh lesser extent on silver, but it's it's bound to happen here because the producers are making so much money now, and you have and you want to grow your reserve base and your production profile, and the quickest way to do that is through acquisition.
• 16:36
  SPEAKER_01: Also, if you're a silver producer, there's not an awful lot of assets out there for uh available.
• 16:43
  SPEAKER_01: And so yeah, we yeah, we expect to see some action there.
• 16:48
  SPEAKER_01: This PA is just freshly out.
• 16:50
  SPEAKER_01: I think it's going to open a lot of people's eyes and investment and mining community for a few reasons.
• 16:57
  SPEAKER_01: It's quite strong PA.
• 16:59
  SPEAKER_01: First of all, the production profile is great.
• 17:01
  SPEAKER_01: I mean, we're looking at the first five years of producing over six million ounces a year in that study, is what it predicts.
• 17:09
  SPEAKER_01: So very, very strong numbers.
• 17:11
  SPEAKER_01: You look at the silver space, especially when you're moving to the mid-sized silver producers, and uh their production profiles may vary sort of three million to nine million ounces a year, but that's out of several deposits, not just one.
• 17:28
  SPEAKER_01: And here's one deposit that can deliver 6 million ounces a year for the first five years, and tremendous upside potential on the expiration.
• 17:37
  SPEAKER_01: So to lengthen that mine life, the pro the the probabilities for main lengthening the mine life and even increasing production is are really good.
• 17:48
  SPEAKER_00: Yeah, yeah.
• 17:48
  SPEAKER_00: And I mean, bringing it back here, Jim, as we wrap up, I mean, you know, we got this potential re-rating from Cigar's PA.
• 17:54
  SPEAKER_00: I mean, the next wave of drilling at Columba, the chance to add ounces at Cigar, uh, you know, we I guess this the broader silver market, too, is finally starting to pull capital back into primary silver developments.
• 18:06
  SPEAKER_00: I mean, what do you say to investors who are kind of watching from the sidelines and waiting for the next prove point before stepping in?
• 18:13
  SPEAKER_00: I mean, it's a compelling story here at these prices.
• 18:16
  SPEAKER_01: Well, uh yeah, we we certainly are a compelling story at the at these prices.
• 18:22
  SPEAKER_01: And the whole sector right now is is there's a lot, a lot of value not being recognized in the market.
• 18:29
  SPEAKER_01: We've been, you know, believers that we're going to be entering a silver bull market here for quite some time.
• 18:35
  SPEAKER_01: And now we've done that.
• 18:36
  SPEAKER_01: It really lagged the gold price and it always follows the gold.
• 18:41
  SPEAKER_01: We believe this is a multi-year bull market.
• 18:45
  SPEAKER_01: We also believe that at the end of this market you're going to have a period of less volatility and sort of sideways movement in the channel of the silver price at some price, in our belief, much higher than what we are now.
• 18:59
  SPEAKER_01: You look at the last precious metal bull market, and silver started out at about$4.5 to$5.5, went, broke out over$50, and then settled down in a channel for a long period of time of basically 20 to 25.
• 19:17
  SPEAKER_01: So that was the new floor.
• 19:19
  SPEAKER_01: And so we're going to see the same thing happen here in our view.
• 19:23
  SPEAKER_01: Uh, we've had this explosive first move to unbelievable prices in an incredible short period of time, 120 silver.
• 19:32
  SPEAKER_01: Now this pull back, and it'll have another one or two legs at least before the dust settles.
• 19:40
  SPEAKER_01: After that, the base is going to be much higher.
• 19:43
  SPEAKER_01: That's what we know.
• 19:45
  SPEAKER_01: Or that's what we believe.
• 19:47
  SPEAKER_00: That's what you believe.
• 19:48
  SPEAKER_00: I mean, Jim, to your point, I mean, you you've also been in the business for a long time and you've seen a lot of silver cycles.
• 19:54
  SPEAKER_00: I mean, just on a personal level, how does this moment kind of compare?
• 19:58
  SPEAKER_00: I mean, you get La Cigara now at the PEA stage, Colomba still growing.
• 20:02
  SPEAKER_00: Silver seems like it's attracting more investor attention.
• 20:04
  SPEAKER_00: Is this one of the more exciting periods you've seen in your career?
• 20:09
  SPEAKER_01: Yeah, in terms of the amount of money that's come coming in, it certainly is um I think um stronger than we've ever seen.
• 20:18
  SPEAKER_01: So the industry's changed a lot over 30 years.
• 20:22
  SPEAKER_01: And this and how how it operates, where the money comes from.
• 20:26
  SPEAKER_01: You've got these now large funds and the ETFs and other things that weren't in existence uh or to the extent they are today 30 years ago.
• 20:35
  SPEAKER_01: You know, 30 years ago, we'd access a lot of our capital from brokerage houses and high net worth individuals and uh that sort of thing.
• 20:44
  SPEAKER_01: But now you've got a lot of managed money uh and big funds.
• 20:50
  SPEAKER_01: So when you see these huge actions and and these signals that you're in now into a silver bowl market, a lot of money comes in, especially for companies with the resources or entering development stage like us.
• 21:04
  SPEAKER_01: The availability of money is is uh quite astounding, actually.
• 21:08
  SPEAKER_01: So it's really a great, great time to have these kind of assets and get them advanced because the capital is there available and at reasonable prices.
• 21:17
  SPEAKER_01: Uh we're and we're well financed now to execute the next month, work over the next 18 months.
• 21:23
  SPEAKER_00: Yeah, yeah.
• 21:24
  SPEAKER_00: Always nice to have the cash in the bank and that runway to get you there.
• 21:27
  SPEAKER_00: All right, Jim, great perspective.
• 21:28
  SPEAKER_00: Congratulations again on Cigar's uh PEA, and we'll be watching the next round of work closely.
• 21:34
  SPEAKER_00: Thanks, Jeremy.
• 21:36
  SPEAKER_00: Thanks, Jim.
• 21:36
  SPEAKER_00: Appreciate your time.
• 21:37
  SPEAKER_00: All right, thank you for joining us, and thank you for watching Kiko Money.
• 21:40
  SPEAKER_00: I'm Jeremy Safford.
• 21:41
  SPEAKER_00: Don't forget to hit subscribe to our channel to stay ahead of the market.
• 21:44
  SPEAKER_00: We'll see you next time.