Buying A Gold Mine...Literally For investors looking for a way to profit from the gold bull market, what could be better than a gold mine?
That’s just the opportunity that Montan Mining (MNY.V) now offers.
But unlike other gold miners, this still-tiny company has figured out a way to make sure their mine doesn’t run out of high-grade ore.
Dear John, What’s the quickest way to gains in the current market for gold? Go from ground zero to producing gold...fast.
Of course, there’s one big draw back to gold mines. Every one is a burning match: Eventually they all run out of ore. But Montan Mining (MNY.V) has figured out a way around that — by getting high-grade gold ore delivered to its facility from countless mines in its region of Peru. The company was one of the first to move into Peru to take advantage of a unique situation: Huge amounts of gold production by local, small-scale miners were in danger of being shut down, as the government passed laws requiring them to sell their ore to modern, environmentally safe processors.
A number of North American companies set up shop to process the high-grade ore that these miners were producing. And most made good money doing this.
But Montan is about to take a big step to get ahead of the pack.... Silently Moving To The Lead As noted, toll-milling of gold ore has become a popular play in Peru, thanks to a recent change in Peruvian mining law that requires small-scale local gold miners, of which the country has an abundance, to have their ore processed at licensed mills.
This process helps the country mitigate the environmental impact of artisanal mining and allows the government to generate revenue from this part of its mining sector.
The law has been a boon for Canadian-backed mining companies with the expertise and the capital to set up shop, particularly in the country’s southern region, which is ripe territory for small-scale mining.
And while a number of companies have congregated around the Chala area in southern Peru, Montan Mining is targeting a gold-rich area a couple of valleys to the south in the Caraveli region of the country’s Arequipa district. This area has a long history of mining by locals.
Also unlike other companies, Montan appears to have cracked the code on toll-mining in southern Peru by securing a huge advantage: It’s buying an in-place processing facility (perfectly located to toll-mill nearby captive production)...plus a fully-permitted and developed gold mine! Largely unnoticed by the market, the company has quietly arranged to purchase the Cerro Dorado project in Caraveli, Peru. The deal for the project will include not only the complete mill and processing facility, but also the past-producing Rey Salomon mine, which comes fully permitted and appears ready for almost immediate production.
Once this deal closes in the very near future, the market will suddenly realize that tiny Montan Mining has moved from anonymity to the head of the pack in gold processing for the entire region. From Ground Zero To Gold Production The deal for Cerro Dorado is likely to close soon...just as gold is catching its next tailwind up from the recent global political volatility. Once it closes, Montan Mining will be able to turn the key on a toll-mining operation that will generate instant cash flow for the company.
And we’re not talking about low-grade mineralization here. Past production indicates that there’s high-grade gold to be had in this part of the world. Rey Salomon has generated 1,675 tonnes of 11.8 g/t gold since 2012, and the mine’s current owner produced 670 tonnes of 15.23 g/t gold just during underground development in 2007.
As this latter total indicates, Cerro Dorado comes with a wealth of underground development, with more than 1,200 meters of drifts, 317 meters of adits and almost 50 mining faces available for immediate exploitation.
Management is well-connected in this part of Peru and looks likely to grow its mill feed base significantly in the next six months by cutting ore supply deals with the bigger players in the Atico Valley.
Montan’s Rey Salomon mill should be a magnet for small-scale producers in the area who don’t want to incur the expense of hauling their ore to the Chala mills.
Given that its operational management was responsible for the expansion of Peru’s largest private toll miller from a few tonnes a day to over five hundred tonnes a day, you have to like its chances of delivering a similar success story with Montan.
And, thanks to the recent volatility in the gold market, investors have a chance to buy into a literal gold mine while the market is still asleep at the switch. As a result of this market oversight, the company’s share price is primed to move strongly once production kicks in. Once the market begins to appreciate Montan’s ability to monetize its Cerro Dorado plant and property, significantly higher valuations will be in order. That’s especially true when you consider that the company plans to double production in the next year.
While other companies have focused strictly on the milling aspect of this play, Montan stands ready to benefit from the security of owning its own mine — its own source of ore — as well as ore from local miners.
From ground zero to gold production in a flash, Montan is poised to shock the market in the very near future.
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