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Friday, August 26, 2016

Ana Paula - Cuida su salud... y belleza

Ana Paula, Wow. This is what an exploration geologists is looking for.

This is what a junior exploration company IR representative looks like in the wild
Not the girl, you perverts, the rocks she is sitting on, some nice alteration in the background.....

Great grades and cheap to build, surely the perfect deposit?

I'm going to do 2 posts on Ana Paula, one on the geology and a second on the numbers in the PEA.

We'll gloss over the security issues (you can read them here, here and here - just some friendly kidnapping, robberies and disappearances from the area, nothing to worry about), and just focus on the geology.

Summary:
  • Ana Paula is small - only 2.25 Moz gold, but:
    • In the PEA, they say they will only mine 0.96 Moz, just 43% of the deposit via an open pit
    • So the remaining 57% will not be mined - unless gold prices go way higher
  • Short mine life - just 8 years - major companies want 15+ year mine lives. 
  • Metallurgical complexities - Gold is associated with arsenopyrite (contains arsenic) and pyrite
    • Great recovery with flotation (94% for Au and 87% for Ag) but produces a crap concentrate with >10% As.
    • However, if you do a leach on the concentrates you can get recoveries of 80% Au and ~50% Ag.
  • Blue sky potential - good property with lots of potential to find more deposits, but there are major security issues in Guerrero at the moment.
The most interesting things about Ana Paula is her enormous grade and IRR (link). It has everything, including underground potential. Here is a section showing the grade blocks in the deposit. 
The dashed lines are proposed pits
Wow, it looks great, but why don't the pits go deeper? There is gold everywhere, with a bigger pit you'll mine more gold and have a nice long mine life? This confused me (which isn't too hard).

So I compiled the data, brought it into 3D tand had a look. You see is that most of the gold is found in a vertical pipe in the middle of the deposit. The rocks surround it look relatively unmineralized.

TAG's official "badly drawn pit" in grey.
At Ana Paula, accoridng to the PEA Timmins will be mining 2.6 tonnes of waste for every tonne of ore (this is the strip ratio). Waste costs money to mine (unless you are Corvus with you magical self-mining ore), and you want to keep this ratio as low as possible.

I've created a few sections below, one long section (basically a N-S slice through the deposit) and 3 cross sections (E-W slices) that are 100m apart to show you how small the Ana Paula deposit is. You'll also see that a common theme is for companies to pick the 'best' section to show off their deposit.

Long section (basically my version of the fancy one above)

We can see this narrow high-grade pipe continuing to depth
Cross section 1 - 8000N - through the core of the deposit - what a stunna - this will stay in the investor presentations forever.
lots of lovely gold - do you like the promo hole going down the guts of the high grade zone.
Cross section 2: 8100N - this is 100m south of the section above - what do you notice?

Not much gold here!
Not very obvious? Where is the pink stuff? All the high grade has gone!

Cross section 3: 7900N - this is 100m to the south of Croiss Section 1 - what do you see?

Some high grade at depth, but not much close to surface.
We have more gold, but the good stuff is deep, and you only have a narrow sliver of low grade near surface.

These 3 cross sections are just 100m apart (1 football field, or 1.5 hockey rinks), and we can see that we go from lots of gold to not much over a very short distance. How many of the 'crap' sections can you find in the IR material? This is the only image that shows the size and shape of the mineralization.

AP circled in red - check out page 9-4 in the 2016 PEA for the original version

Did you notice the black "U" shaped line on the sections? This is the outline of my badly drawn pit (TM), which is a simplified version of Timmins' $1400/oz Au pit limits.

  • Above the line - what Timmins says they will mine in the open pit (if gold prices are $1400/oz)
  • Below the line - what they won't mine - this is the "underground potential"

You can see that there is a lot of gold below this line. How much are the leaving in the ground?

It's a tiddler!
So AP contains 2.25 Moz Au, but if we look at life of Mine (LOM) summary, we see this:
circled in red
So they are only going to mine 957,000 oz Au, but they have 2.25 million ounces, so that is only 43% of the gold in the deposit, the remaining 57% is just going to sit in the ground.

OK, I understand, the property hasn't been fully explored, they focused on the high grade zone to fully understand it blah blah blah.
There must be lots of potential to find more and make the deposit much bigger?

nope...
Just a quick guide to help you understand the map above.
The colored blobs are my gold grade shells, and the big blob in the middle is the Ana Paula deposit
The black lines are the drill-hole traces.

You can see that there is 230 holes that have basically drilled everything around the main deposit,and they haven't much more, just some bits and bobs. This has been a well drilled deposit. There probably isn't much more to be found here.

OK, we've established that it is small, there is little potential to expand the known resources, but everything else if fine?

Sorry guys, when you look at the metallurgical results, and read the text, Timmins repeatably state that the gold is found in/with pyrite and arsenopyrite (an iron arsenic sulfide). Here is a photo.
Au = gold; ap = arsenopyrite (an iron-arsenic sulfide)



With flotation you basically recover the sulfide minerals as well as the gold and silver. At AP with flotation they get recoveries of 94% for gold and 87% for silver. This is good. Unfortunately, the concentrates contain >10% arsenic, this is bad. I'm not sure how many smelters would process this, but if they did the penalty charges would be huge. Fortunately, Timmins' have done leaching work on the concentrates - doing flotation followed by leaching on the concentrates they can recover 80% of the gold and 50% of the silver.

So, double processing, and you loose 50% of the silver and 20% of the gold, but you produce dore, which is nice and cheap to refine.

phew...

Look at the leapfrog model (here) and spin it around and make your own opinion.