The Bayhorse Property, located near Huntington in south eastern Oregon, was the location of the largest silver deposit ever found in the state. It was mined in the early twenties and then again in 1984 when the price of silver dropped below $5 per ounce.
Bayhorse Silver (V.BHS) acquired the right to mine the property in 2013 and has been working on a mine plan ever since. The company had a 43-101 compliant Technical Report delivered in February of 2015.
Graeme O’Neill, CEO of Bayhorse realized that, while there was bonanza grade silver at the mine, there were also significant challenges.
“It would have cost a lot of money, 3-3.5 million, to drill from surface,” said O’Neill. “The permitting process in Oregon is complex and onerous.”
Without drilling from surface it is very difficult to come up with a 43-101 compliant Resource estimate or to do a pre-feasibility study. Which didn’t deter O’Neill.
“We have all the historic data going back to 1900’s including a 1926 flotation thesis. We have records of work done in 1976 by Hall of Famer, Andy Wallace, and the mining records, reports and surveys done when the mine last operated in 1984,” said O’Neill.
As importantly, Bayhorse has two teams of skilled silver miners actually working at the mine. They have been there for over a year. In its end of the year review press released December 13, 2017 the company stated, “Original projections were to mine at 100 tons per day for 300 days per year. However, as we are now operating on a 7-day-week basis, mining from two to three working faces 350 days/year, we can easily increase that to up to 200 tons/day, and will yield between 35,000 tons to 70,000 tons per year. Based upon Herdrick’s historic grade estimates, annual gross silver production at that mining rate is targeted to be between 640,000 ounces and 1,280,000 ounces.”
In that same release the company announced that its Steinert X-Ray Transmission Ore-Sorter had been commissioned which made the Bayhorse mine fully operational. It is a vital element to the economics of the mine.
“We realized that due to permitting, water and power issues we could not put a mill onto the mine site,” said O’Neill. “We planned to put a dense medium plant on the site which would have upgraded the ore by nine times but it was a power and water hog.”
“My background is in electronics,” said O’Neill. “We did the research on ore sorting machines. One machine which came up is the Steinert. It uses transmissive x-rays. We shipped 3.5 tons of rock to them to test.”
Steinert achieved excellent results on the sample and O’Neill wrote the cheque. A big cheque, the ore sorter cost a cool million dollars.
Essentially the machine takes crushed rock and runs it past a laser to ensure a single layer and then uses X-Rays to distinguish the valuable rock from the scrap. At the end of the conveyer belt an air ejector blows the mineralized rock into the “good pile” and lets the rest pass by.
“We are getting up to an 8X upgrade,” said O’Neill. “And the ore sorter can easily process 100 tons per day, as at full capacity it is rated at 40 tons/hour.”
Which matters a lot because part of the Bayhorse plan is to produce different grades of rock. The direct shipping grade needs to be 100 ounces per ton or better while the milling grade is somewhere between 20 and 100 ounces, the low grade is under 20 ounces.
While the Bayhorse Mine has historically produced a lot of 100 plus ounce a ton rock the deposit is not a discrete vein. “The silver flooded in at the margins,” explains O’Neill. Which means that there can be significant differences in grade as between rock extracted in roughly the same place. What the ore sorter does is give Bayhorse a way to divide the rock by value.
All of which sets Bayhorse up for a hugely productive 2018. For O’Neill there are three milestones to look forward to. “Number One: get cash from sales. Number Two: put the resource in place and mine 100 tons a day 300 days a year at 20 ounces a ton or better. Number Three: explore in the farther reaches of the mine to bring up the tonnage. One million tons is the target but there could be much more than that.”
As the mine progresses and the production and sorting process becomes more efficient, O’Neill is shooting for an all in cash cost of around $50 per ton. With silver trading at around $16 per ounce and with the grades Bayhorse is seeing, the mine should be generating free cash flow over the course of 2018.