Bayhorse Silver: Moving Parts to Build a Business

Bayhorse Silver, V.BHS, silver, Oregon, Graeme O'Neill

I spoke to Bayhorse Silver (V.BHS) CEO Graeme O’Neill (pictured above) as he was getting ready to fly down to Oregon to spend time at the Bayhorse Silver mine over the weekend. It’s a frequent trip. Vancouver to Boise Idaho and then an hour or two driving to get to the mine site on the Oregon side of the Snake River.

During the week, wherever he is, O’Neill monitors the mine’s progress via streaming video – and hey, Graeme, why not make the feed publicly available once in a while? It is just one example of how O’Neill is leveraging technology to bring home the Bayhorse mine.

It would be nice to think of a mine as simply a mechanism for digging out and processing mineralized rock. But a real mine is a lot more complicated than that.

The economics and logistics of the Bayhorse Mine keep O’Neill busy. There are very few people in the mining world, or companies for that matter, that have ever opened mines, and he is one of those very few. “With our “direct ship” material we will be sending it in 20-foot containers which, generally, hold 20 tons of material. We get paid varying amounts depending on the grade of the material and where it is being shipped. That means we need to upgrade even our high-grade material to maximize our prospective revenue,” said O’Neill.

“Right now, we are working through the development material,” said O’Neill. That development material is the lower grade rock excavated for the haulage ways and for the tunnels which take the miners to the target high-grade rock. “Inside the mine, we have a composite map of all the work done in 1984 (the last time the mine operated). We have overlays and we can see a contiguous zone of mineralization. We have entered into the middle of a zone of 450 feet of mineralized material over 500 feet inside the mine. Parts of this zone have been “high graded” but the earlier miners left a tremendous amount of material and some of that is still high grade. The earlier miners were following veins but they missed a lot.”

As the miners are working, Bayhorse’s million-dollar investment in ore sorting technology is beginning to pay off. “We’ve had the sorter for six months and it has been operating properly for three months,” said O’Neill. “Part of the challenge was simply winter. But we also needed to put enough material through the sorter to develop and refine the algorithms. On the development material, we are seeing a 5 to 7 x upgrade. Material that goes in at 5 ounces a ton for sorting, gets us a sorted output material that is grading 20-30 ounces per ton.”

A process which will improve as the grade of the material fed into the sorter improves.  The environmental regulations of Oregon and the mine’s location means that the material has to be sent off-site for the majority of the processing. It costs the same to ship a ton of five ounce per ton material as it does to ship a ton of 1000 ounce material so as much upgrading is done at the mine as possible, as obviously, there is a lot more value in the 1000 ounce.

Dialling in the ore sorter is just one piece of the puzzle. “We have material which is too small to go through the sorter,” said O’Neill. “This fines material needs to be upgraded as well.”

Originally the plan was to have a dense media facility at the mine site which would process both the rock left over from the sorting and the fines but, for the moment, that is not practical. “Dense media plants are water hogs and power hogs and are difficult to deal with in winter” explained O’Neill. “We needed another alternative.”

Bayhorse shipped sample fines material to a company called Metals US which specializes in a process called Total Metals Recovery. “We’ll be getting a full report from Metals US in a couple of weeks but, so far, they have had great success using their process to recover the silver from our fines material. And it is not just silver. Metals US is recovering the copper, zinc, gold, lead and other elements which the Bayhorse material contains.”

The Metals US technology is a significantly updated version of metals leaching which is more environmentally friendly and very efficient. It is also optimized so that it need not occupy a huge footprint at the processing site. Which is a very real consideration for O’Neill.

“Right now we are stockpiling material and running material through the sorter. But we only have a limited amount of room at the site to stockpile,” said O’Neill. “We have our own mine crew rather than using contractors. Which is excellent because it lets us mine on a seven-day cycle. It is also challenging because we need to keep mining continuously.”

“The ore sorter can process 40 tons per hour so we are a long way from capacity there,” said O’Neill. “Our current bottleneck is crushing and separating the rock before it goes in the sorter, which we are dealing with. And a bit down the road we will have to start putting the waste rock back in the mine.”

A lot of the decisions O’Neill is making now are, in fact, investments in the future and safety of the Bayhorse Mine. While O’Neill is focused on the 100 ton per day production goal of the current mining operation, he is also creating the infrastructure needed to take the mine to 200 tons per day and beyond.

O’Neill compares the process to opening a store: you have to get a building, set it up, hire employees, train them, get the stock and only when all those steps have been completed, can you open your doors and start selling the goods. At each point in the process of building out the mine, O’Neill has to make sure the heavy machinery is kept operating and in good working order, balance capacity, recovery and very importantly, available funds, especially in this low price, investor averse financing environment, as opening a mine is an expensive business, all the while working towards the agreements which will let him sell the direct ship material and the recovered metals from the mine.

Of course, the market is impatient. So is O’Neill. As the largest single shareholder in Bayhorse, O’Neill wants to be able to announce actual revenue as soon as possible. “In the mine, we are determining how to mine the high grade at the back of the mine,” said O’Neill. “You have to have the high grade to boost the average grade.”

For the moment Bayhorse is all about concrete, hard news, progress. When that first sale occurs, it will be the first sale of many and, if Graeme O’Neill has taken care of the logistics and the economics, it will be the first of many profitable sales. Because, as O’Neill says, “Mining is a business.”


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