It’s no secret that the stock markets have not been in a giving mood towards junior mining companies for the better part of seven years, due in large part to the 2007-08 global economic crisis, which in many ways the international economy has still not completely recovered from. During those intervening years many smaller companies have been unable to forge ahead, lacking the necessary working capital to sustain their exploration projects. However, there have also been great success stories, including Anaconda Mining (TSX:ANX), a very progressive junior gold miner and exploration enterprise that continues to buck the trend in spite of a depressed worldwide minerals and mining industry thanks to its innovative thinking and a well-designed corporate business plan.
Anaconda Mining is a Toronto-based, publicly-traded entity that has uncovered substantial gold-mining success on the Ming’s Bight Peninsula in the Baie Verte Mining District in the north-central part of Newfoundland. The company owns and operates the Point Rousse Project, which contains the active Pine Cove mine and mill as well as about 6,000 hectares of property. With current gold production and many exploration targets, there is tremendous potential for years to come.
The Canadian Business Journal recently spoke with Anaconda Mining CEO Dustin Angelo, who has been at the helm since September 2010 and has served as a corporate director since November 2009. Despite the overall downturn facing the industry he says a great deal of progress has been made at his company over the past five years and the proof is in the results.
“When I came on in the summer of 2010 it was essentially a turnaround situation and we had just completed an upgrade to our mill where we had installed a ball mill and flotation circuit. We were looking to do about 700 tonnes per day in production and ore processing,” Angelo tells us. It took from the summer of 2010 until May 2011 for Anaconda Mining to reach that goal, and from there it wasn’t long before output was increased to 900 tonnes per day and recovery was up to 80%.
From May 2011, Anaconda Mining continued to optimize production of the mill resulting in recoveries that were even higher, to the point where they’d reached a level of 85%. In addition to that, the company’s throughput increased to 1,050 tonnes per day with no significant capital expenditures and an availability that is running in the low 90% range. By this time, the company was successfully running operations in the black.
“We paid off all of our debt,” Angelo says proudly. “We went from having nearly $10 million of debt to zero, paying it all off by May 2013.”
Prior to becoming debt free, Anaconda Mining made the decision to sell off a non-core asset in Chile in December 2011 while also expanding property holdings in Newfoundland from 660 hectares to 6,000 hectares of contiguous land on the aforementioned Ming’s Bight Peninsula. Anaconda now controls an area that essentially covers 20 kilometres of strike length of gold trend and several gold deposits and zones, including the active mining operation at the Pine Cove deposit. Following the sale of the Chilean mine, Anaconda Mining had been receiving lump sum payments along with royalties when the property first went into production in 2013. Royalties came in for the remaining part of 2013 and all of 2014, but with the market slowdown in the iron ore industry the company that purchased the property has been in financial straits, leaving Anaconda having not received the expected royalties and lump sum payments for some time.
“Any cash flow out of Chile is on hold, but we still have ownership in the sense of royalties and those milestone payments,” Angelo confirms.
As the original project began to vastly expand in magnitude it became quite evident that the best decision would be to undertake a corporate rebranding to better identify the full scope of the operation.
Previously known as The Pine Cove Project, that name only referred to the much smaller area the company started out with. Now, with much larger property holdings, the project is known as the Point Rousse Project, not only because of the operating mine and mill but also to signify control over four deposits and numerous showings and gold occurrences where Anaconda made the first discovery in the peninsula in 30 years, now commonly referred to as the Argyle Zone.
“It’s a massively different project than when it first started,” Angelo notes.
New equipment has aided in efficiencies to a certain degree but Angelo is quick to point out that the primary positive contribution to the company’s bottom line has come from the operating team and their ability to manage the circuits and learn to improve upon the operating capabilities of those circuits.
There was significant experimentation with different grind sizes, different reagents and things of that nature to try and optimize each individual circuit and how they work together.
“We didn’t necessarily spend a significant amount of capital on the mill after we started going, as opposed to learning how to optimize it,” Angelo says.
Due to its size, Anaconda is in an interesting industry position in that it often gets lumped in with junior miners. What should not be forgotten, however, is that they are also a producer, and a very good one at that. The vast majority of junior miners have enough on their plates in tackling exploration or development, but Anaconda goes one giant step further by leveraging their operations into full production mode.
“A lot of the feedback we get in the market is that they find us very interesting because we are a producer – producing cash flow and we actually haven’t raised money in the market in about four years. We’ve generated it all internally, primarily through cash flow from the project and a little from the Chilean sale,” Angelo says.
Over the past four years Anaconda’s success has generated more than $25 million in operating cash flow, so there hasn’t been a need to go to the markets which, as Angelo admits, is a very good thing because it is highly doubtful there would have been any capital investment opportunities to secure.
“I don’t think we’d be very successful because the overall sentiment of the investor base is very low and the money is just not there right now,” he candidly states.
Angelo estimates there could be another three to four years of life expectancy remaining at the Pine Cove pit but Anaconda has exploration plans around the fringes of the pit area that could possibly extend the life for a longer period of time.
“Overall our business strategy is to look at a number of different targets on the property where we can develop certain deposits that continue to extend the life of the project,” Angelo says. “What we’ve been doing for the past couple of years is about 15,000 ounces per year of production and sales. We consider that our minimum baseload production.”
The team at Anaconda has targeted a couple of main areas to continue the trend of that type of mineralization that they can put through the mill at 1,000 to 1,100 tonnes per day and the type of grade that would provide about 15,000 ounces a year. There is also another deposit called Stog’er Tight, which is about 3.5km down the road from the Pine Cove pit, where the hope is that the deposit can be an extension of the project which, if successful, could mean 10 or more years of project life.
Beyond the current primary focus are also other areas of the peninsula where Anaconda controls deposits that suggests the grade is higher, so while there may be lower tonnage areas, they’d be higher grade – likely in the 5 to 10 grams per tonne range. Ultimately, Angelo would like to put those areas into production and layer them on top of the regular baseload production.
“If we’re doing 1,100 tonnes per day of baseload production and add another 300-400 tonnes per day of higher-grade material at a certain grade and certain rate, we hope to double production to 30,000 ounces a year,” he says.
Another reason for immense optimism came during Anaconda’s third quarter, which is in the cold, snowy wintry months of December through February. Historically the lowest-producing quarter, it turned out to be nothing short of outstanding, thanks in large part to weather-proofing initiatives the company implemented.
“This year we had a record quarter for any quarter, doing more than 4,500 ounces in production and sales,” Angelo says. “The two primary things we did were to enclose our crusher, which is the crushing unit that feeds into the ball mill. It was the only part of our milling process that was exposed to the elements and we finished the enclosure of that, so it was protected for the entire winter. Then we added some reagents to the ore feed to prevent clumping and lumping when it goes through the crusher so we were able to manage the throughput much better by keeping the feed protected from the elements.”
The weather proofing initiatives and preventative maintenance program at the Pine Cove mill paid huge dividends, resulting in a 38% increase in throughput and an 8% rise in availability compared to the same quarter in fiscal 2014. During the three months ended February 28, 2015, the gold sales volume of 4,508 ounces represented a 59% increase over the same period in fiscal 2014 largely due to increased mill availability, throughput and grade. Mill availability increased from 84% to 92%, an additional seven operating days for the three month period, year over year.
The region where the Point Rousse Project is located is a very mining-friendly area, which makes it a great environment for working. There are no unions to deal with and the property has no issues regarding any First Nations land claims being situated outside any contested geographical locations.
Angelo says there is an excellent relationship with all the neighbouring communities and with St. John’s, with respect to dealings with the government’s Department of Natural Resources and Environment.
Anaconda Mining has also engaged in co-operative opportunities with the College of North Atlantic and various government agencies. The company carries out various research and development projects that include university professors and participation in several different automation R&D projects. Students from the College of the North Atlantic have worked in the Anaconda mill and received a thorough training program. Many company employees reside in the peninsula, and for that reason a number of educational initiatives were put forward to help them develop skills for other positions in the industry, the result of which has been beneficial for both the company and the community at large.
“We get training dollars reimbursement for improving the education of our employees so we’re constantly working with governments and educational institutions,” Angelo says.
In April 2014 Anaconda headlined an exploration summit in St. John’s where a number of invitations were sent out to university professors, senior members from the Canadian Geological Survey and the U.S. Geological Survey. It was a one-day seminar and workshop to generate ideas, tools and experiences to maximize the potential of finding more gold on Ming’s Bight Peninsula.
Through the tough times and the better times, a company is always only as good as the workers it employs. Angelo makes it clear that his staff members are definitely the backbone of the successful operations at Anaconda Mining.
“They are the ones from the beginning that took the company and project from a turnaround situation to a mature production phase which is now in a growth phase. We’ve done a great job of educating our workforce and given them the tools they need to succeed,” he says. “We highly value safety, integrity, reliability and resourcefulness. You won’t find a group more resourceful than us, whether it’s operational, financial or technical. We’ve always found ways to overcome challenges by working as a team. It’s all about the people.”
Anaconda Mining has also generously donated tens of thousands of hard-earned dollars for the regional hockey rink and to the local fire hall. In honour of the company’s record third-quarter of 4,508 ounces, Angelo and his staff donated $4,508 to the local swimming program to provide swimming lessons to the local children.
It’s evident that Angelo and his team are thrilled and excited about the vast potential with the overall property package and historical exploration that dates back to the 1980s. There are 35-plus gold occurrences just on Anaconda’s Ming’s Bight Peninsula. Being the only company that has controlled the entire package creates widespread potential from an all-inclusive standpoint. Added to that is a sophisticated computerized database of all the historical gold anomalies and the drilling and geophysical information to help better understand the trends as to where the gold could and should be.
“We’re looking at targeting one million ounces on this peninsula,” Angelo says. “When there is a working mill and infrastructure in place and paid for, the incremental cash flow in finding and producing a million ounces of gold is tremendous. We have grown the company employee base and have a high-morale workforce that looks forward to coming to work every day.”