Arizona Mining

Full-steam ahead at Hermosa

In a time when a significant number of minerals and mining exploration companies are feelings the ill-effects of a prolonged depressed global resources sector, there are still companies that are bucking the trend and garnering tremendous success. Arizona Mining Inc., with headquarters in downtown Vancouver, is one such enterprise that would seem to have immense potential on the horizon.

Arizona Mining is a Canadian mineral exploration and development company that is keenly focused on the development of its Hermosa property in Santa Cruz County, Arizona. As of now there are two distinct project sites on Hermosa: the Central Zone project, with silver-manganese deposits; and the Taylor Zone, with lead, zinc and silver deposits.

In July, 2015, Arizona Mining acquired about 300 acres of patented mining claims from the Asarco Multi-State Environmental Custodial Trust. The addition of the land package, adjacent to the Company’s existing 154 acres of patented mining claims, is expected to profoundly enhance surface lands for future mining operations.

The birth of Arizona Mining a decade ago is intertwined in conjunction with two other companies that were each founded by the same individual, Richard Warke, an experienced and successful industry professional who spearheaded the launch of all three enterprises within a four-month span in 2006. The companies founded by Warke were Augusta Resources, Ventana Gold and Arizona Mining.

The Canadian Business Journal recently spoke with Warke, who currently serves as Chairman at Arizona Mining. In analyzing all three projects simultaneously upon acquisition, it was swiftly determined they needed more hands on deck from the outset in order to maximize potential.

“We put together a full management team for each company,” Warke says. “Gil Clausen came in as President and CEO of Augusta. I stayed as Chairman and founder of all three and then we assembled a full team for Augusta and did the same thing for Ventana and Arizona.”

Ventana, with gold and silver deposits, is located in the historic California-Vetas mining district of Colombia, and Augusta, with copper on its Rosemont mine in Arizona, each got off to lightning starts, and because of that there was an inside joke was that Arizona was the poor little sibling that didn’t get as much attention.

The first president at Arizona Mining came from a background of running monumental companies in the oilsands business with an abundance of sizable mining projects. However, it can often be a challenging transition in switching from a big-company mentality to a much smaller one. That scenario turned out to be the case, resulting in a transitionary period that wasn’t particularly a smooth one.

“Arizona Minerals struggled during its first three to four years in existence but the overall success in the group was exciting. Ventana was started in 2006 and we sold it in 2011 for $1.6 billion in cash to Eike Batista,” Warke says.

Meanwhile, Augusta Resources grew from a 140 million tonne deposit at the Rosemont mine in Arizona to over 900 million tonnes. It’s still open and has lots of great potential. It was sold to Toronto-based HudBay Minerals in June, 2014 for just under $700 million.

“We’ve had some really nice success in the last nine years,” Warke says. “As those two projects advanced in their maturity in and around 2010, we made a change with management at Arizona Minerals. We had been very successful at expanding the deposit. Hermosa went from just under 50 million ounces to just a little over 330 million ounces. It’s a silver-manganese deposit.”

Manganese has often proved to be somewhat perplexing for the marketplace but it is the fourth-largest traded commodity and is primarily used for strengthening steel. It’s a very buoyant market with supply coming from China and Gabon. There isn’t a primary producer in the United States and so the team at Arizona Mining put together a preliminary economic assessment (PEA) scoping study.

Arizona Mining’s Chief Operating Officer Don Taylor, who was the lead geologist at the time, found that the Central Zone could yield 500 million ounces of silver – and it’s still wide open. But when he transferred his focus to the northwest he determined there were exceptionally nice grades of lead and zinc along with the silver. Needless to say the team was intrigued and further work has been conducted in that area over the past couple of years.

“We’ve expanded now a zone that I feel comfortable in saying it could be a world-class lead-zinc deposit,” Warke says. “We’re just scratching the surface and I think the market is going to be quite shocked at the size and the grade of this project. We’re very excited with what we have here. Ventana and Augusta were phenomenal but we might have saved the best for last.”

The mineral inventory unveiled by Arizona Mining has been staggering, and in fact is something Warke says he hasn’t seen in his lengthy career in the industry. The first seven holes of the drill program that showed high grade lead, zinc and silver intercepts over significant thicknesses.

“A half-billion ounce silver deposit is probably what this will end up being, let alone what we feel will be a world-class lead-zinc deposit and then we’re still looking for potential porphyry,” Warke says.

At Hermosa, the new area where the lead-zinc has been found is now aptly named the Taylor Zone to go along with the Central Zone. Cumulatively, it has the potential to be one project that ultimately could have two or three huge mines on it.

A solid management team is now in place at Arizona Mining with a core administrative group that has been together for about 20 years. In addition to new President and CEO James Gowans and COO Don Taylor the other executives include: Paul Ireland, who serves as Chief Financial Officer; Greg Lucero who is Vice President, Sustainable Development; Purni Parikh, Vice President, Corporate Secretary; and Johnny Pappas, Director of Environmental and Permitting. Warke, Gowans and Taylor are joined on the executive board of directors by Poonam Puri, Don Siemens and Robert Wares.

“My strength is finding projects and helping to raise capital,” Warke says. “Don Taylor is a geologist and has great mining experience. Given that we believe this is going to rival some of the biggest lead-zinc silver mines in the world, we felt we needed a world-class mining operator, and that’s how we came up with Jim Gowans.”

Gowans was recently co-President of Barrick Gold but made the move to Arizona Mining, obviously believing in the vast potential opportunities of where it is today and where it can be. He joined the company on Jan. 1 of this year.
It can often be difficult to ascertain what is ahead in exploration and mining, however, Warke first wants to put some delineation on the deposit, which means developing a drill program and assembling capital to have five or six drill rigs in an effort to try and delineate the size within the Taylor Zone. It’s anticipated that most of the first six months will be focused on drilling.

Mining is an industry that requires a great deal of patience with numerous methodically developed drilling and resource feasibility studies and metallurgical work to filter through, and then there is the time-consuming permitting aspect. The process never seems to move quickly enough when an excellent prospect is in clear view. In addition to that, a company in the commodities business faces aspects that can and cannot be controlled, such as price points and market conditions. What a company can control is the quality of the project being worked on as well as the level of time, effort and finances spent.

“Whether you are in gold, copper, zinc or whatever, it really comes down to analyzing the project that you’re going to buy and be as efficient as you can,” Warke says.

Even during times of slowdowns in the financial markets, and with lower commodity prices, there is always a supply-demand ratio with base metals, which is another positive factor working in Arizona Mining’s favour. Such is not the case with gold and silver, where much of the fortunes are dependent on emotional trading.

“Assuming the financial markets reach a relative form of stability and continuity we feel that within four years we could be in production and would be one of the top lead-zinc producers in the world,” Warke confidently says. “We’ve got a very good group here, including a strong board of directors and management team. We’re very excited about the future.”