Bayhorse Silver

“Silver, in particular, has the potential to outperform gold significantly. For example, in the wake of the global financial crisis, the gold-to-silver ratio plummeted from 80:1 bottoming at 32:1, with the silver price topping out at ~$50/ounce. Recently the ratio hit a record 93:1, while the price is sitting at around $16/ounce. Yesterday, the ratio stood at 89:1 as shown in Figure 2.

This leaves significant room for silver to run. The annual silver market is only about $15 billion of value, and it does not take much to move silver’s price. Silver demand is already making a stealth comeback with the U.S. mint reporting a 43% increase in silver coin sales year-to-date as of June 30 and with ETFs gathering steam. If this investor interest continues, it will definitely push the silver price higher. (Sprott)

—

Sprott has always been bullish on precious metals and Eric Sprott himself has been instrumental in funding a wide variety of gold and silver plays. It is interesting that Sprott media sees silver as outperforming gold in the mid-term.

It is early days but the spot price of silver is flirting with USD 16.00.

Silver is an interesting, heartbreaking, commodity. For years at a time it putters along, gold’s dowdy sister; but once in a while, it takes off. And when it runs silver can easily double in a few weeks.

For silver explorers like Goldplay Exploration (V.GPLY) or near producers like Bayhorse Silver (V.BHS) a rise in the price of silver makes financing a lot easier to find. In Bayhorse’s case, the all in cash costs of mining, processing and refining its material are estimated to be less than USD $10.00 and ounce. Likely a lot less. $13 silver would make the mine generate free cash flow, $16 silver would mean the mine generated a lot of free cash flow; but if silver managed to range up to $20 or $25, the Oregon mine would be very profitable indeed. Trading at $0.085 Bayhorse could be an opportunity for investors to get into the silver world at an attractive entry point.

Goldplay is not as advanced as Bayhorse but it does have a 43-101 compliant resource estimate with an indicated resource of 36 million ounces and an inferred resource of 11 million ounces. CEO Marcio Fonseca is exploring the property methodically but the 43-101 resource could well be purchased by a senior silver miner.

In past Precious Metals rallies the metals themselves tend to go up first, then the senior and mid-tier companies producing, then junior producers and finally the explorers. However, the effect of the rise in senior and mid-tier producers share prices ripples through to the juniors in that in M&A situations the senior miners can use their shares to pay out the junior miners’ shareholders.

As I said, it is early days but precious metals, particularly silver, can explode literally overnight.

1. What is the relationship between Mineral Solutions and Bayhorse Silver?

Currently, we operate under a letter agreement that establishes a working relationship. This gives us the ability to do longer-term planning for the concentrate we produce. We work very closely with Mineral Solutions and provide them with the material they need to optimize and expand their process. Very much a win/win

2. Does the Mineral Solutions process work with lower grade material?

Yes, it does. But like any process, there must be a cost/benefit analysis done to see whether it is cost effective at lower grades. It is the same as producing concentrates for smelters. The higher the concentrate grade, the lower the cost per ounce. We conduct a cost benefit analysis on everything we do. Rick Low, our CFO, has substantial practical experience, as the past CFO of a producing mining company. He runs the numbers on everything to ensure we are not deluding ourselves on the costs.

3. How much money does Bayhorse save by processing locally rather than sending material to overseas smelters?

For a start, we save shipping. We have been quoted US$4,000 per 20 foot container load to ship to smelters in China. The maximum container weight is 20 ton. We were proposing direct shipping grade of approximate 150-200 ounces a ton, so the gross ounces shipped would have been 3,000 to 4,000 ounces per container load. Shipping cost per ounce between $1.00 to $1.34 per ounce. By comparison, Coeur D’Alene Idaho is approximately 370 miles and 8 hours (going at 50 mph average). A far cry from shipping to China, over 6,000 miles away and, assuming a timely shipment, two to three weeks for delivery at a minimum.

Then we have the refining charge, that is between $1.00 and $2.00 per ounce. At the top end including shipping, that would be as much as $3.34 per ounce.

But what really kills you is “the payout”. We were quoted payouts from a low as 76% to up to 81%, (including VAT) depending on the grade per ton. Smelters run up the Jolly Roger when they see a miner looking to sell/process/refine precious metals. The smelters can hold you to ransom. At the current spot price of Silver, $15.00, a payout of 76% is $11.40. 81% is $12.15.

So you get paid, say, $11.40 and you have to cover shipping and refining of $3.34, you would be lucky to break even . Of course, as the spot price silver goes up, the picture gets rosier, but shareholders want now, not tomorrow, and we want to operate profitably, not at a loss.

Mineral Solutions gives us the capacity to process and refine a few hours down the road at a reasonable fixed price per ton.

4. Can you give us a timeline on how soon Bayhorse will be able to ship a significant quantity of silver concentrate to Mineral Solutions?

We are already shipping silver concentrate to Mineral Solutions. We will be shipping in greater quantities when we’ve installed additional gravity concentration equipment and when Mineral Solutions has increased its leaching capacity which they are doing right now.

5. Do you have buyers for your .9999 grade silver? If so, how much can you sell?

Yes. As we produce refined .9999 fine silver, selling it is probably our easiest task. We can sell all we produce, to any mint, or even retailers, or individuals, in bar form. Bulk sales are of course easier for us.

As an example, Liberty Refiners, which is in a Joint Venture with Mineral Solutions, supplies the Sunshine Mint, also located in the Silver Valley of Idaho, with refined silver and gold. Even in this depressed precious metals market, Sunshine mints approximately 1 million ounces a week of refined silver. They source the silver from many refiners, including Liberty, and deliver minted  silver and gold blanks to entities such as the US Mint, and the Canadian Mint. They also do custom minting. If Sunshine buys our silver, that would be at spot, as they do not have to pay for shipping and insurance on any silver they purchase from us, because Liberty Refiners is located so close. Just like popping down to the corner store, so to speak.

6. We understand that there are other metals contained in the Bayhorse Silver deposit. Can Mineral Solutions recover those metals?

They can, but that requires additional processes that have yet to be set up. Silver can be removed from the concentrate and refined quickly and efficiently. The next set up will be copper, that is the next easiest to separate. After that, once again, the cost/benefit analysis comes into play.

7. How do you see things playing out over the next few months?

The precious metals market has been in a prolonged slump for over four years. Every little uptick that has occurred has been met with optimism, has been dashed to pieces, as the downturn has gone on. Every prognosticator says it will get better, and silver cannot stay at 85:1 with gold, but they aren’t miners. We have to deal with the real world as it is.

Low prices are the cure for low prices. Bayhorse has been bargain hunting for months to identify a property that will help us add greater value to the Company. We have found such a property in Brandywine, at what we believe is a bargain price.

With Brandywine we have added a gold and silver project with substantial exploration data, along with historic mining data. Brandywine balances our existing Bayhorse Silver Mine. It is easy to get to, and compared to many other company’s projects, relatively inexpensive to explore and support and, because it is in Canada, it is eligible for flow through funds.

So, we will raise flow through funds to explore Brandywine and we’ll keep mining, concentrating and shipping silver material from the Bayhorse.

The 37 ounce historic first pour is the first of many. What is in the pipeline right now and what can shareholders expect over the next few months?

Mineral Solutions is currently identifying the right particle size of the rock to get maximum recovery of the silver. They also want to do a combination of flotation and gravity work to get the highest concentrate grade to process through to refining, to achieve at least 98% plus recovery.

As we determine the exact grind particle size, we will change the configuration of the crushing grinding circuit to suit. Getting it right the first time is the difference between making it or breaking it, and many mines have had costly overruns by not getting this stage right. Just as we have had lots of very talented people get the mining right, we have extremely talented people doing the processing/refining stage. Better to be patient. This will not be done overnight.

We are looking to do a vertical integration of all the stages through to the final refining .9999 fine, or four nines. For comparison, LBMA good delivery bars are +/- 1,000 ounces and are only .999 fine, or three nines.

Due to the nuclear winter in the markets this past eight months that starved everyone of working capital, including Bayhorse, we did not get to the high-grade zones until late September. Which is why we are late getting all this work done. Mines take money before they make money.

Going forward,  Apex Geoscience will conduct the geological mapping and decide what we will mine first. While that is happening, we will put a new working drift into the Big Dog zone to enable bulk mining from two working faces, the Goldilocks and the Big Dog zones.

At the same time, subject to financing, of course, we will complete rearranging the primary and secondary crushing circuits, to speed them up and reduce identified bottlenecks. By the time that is finished, Minerals should have finished their work, and we should be well underway mining, processing and refining.

Does the Mineral Solution process allow the recovery of other metals in the Bayhorse Rock. What are those metals?

The Bayhorse mineralization is a polymetallic deposit, mainly Tetrahedrite, that is copper/silver, but also carries lead, zinc, and antimony as the minor metals. One of the problems with any refining process, is how to separate these minerals cost effectively. For Bayhorse mineralization, silver and copper are the primary metals and to refine them the rest have to be suppressed in the concentration stage.

This is why so many small mines have problems getting their concentrate to market. Smelters and refiners have almost disappeared in North America, with most now offshore. Every smelter has a primary metal that they process. For example, the Trail smelter primarily does zinc, with lead and silver. It does not do copper. Others do copper, silver, and gold, but not lead, zinc, and antimony. So, they either won’t take the ore, or charge an arm and a leg to the mine to get rid of what they call, “deleterious metals” that interfere with their recovery process.

So, we will probably get copper along with the silver, and try to defray the cost of getting rid of the lead, zinc, and antimony that will cause problems in the refining stage.

In terms of mining, have you identified a reasonable quantity of high-grade rock? What sorts of grades are you looking at and how much of that rock have you identified?

While we have identified what we believe is a reasonable quantity of high grade, we are leaving it up to Apex Geoscience to determine the tonnage and what the mining grades will be and guide the miners to get the most out of the mine. If you have a one-foot thick zone of 300 ounces a ton, you cannot mine that narrow, so it will have to be averaged over the actual mining width, that could be four or five feet, so that brings the average grade down. Mind you, the ore-sorter takes care of a lot of that waste, but waste still has to be mined to get the good stuff.

The material we sent to Minerals was averaging 300 oz per ton silver. This is without sorting. Straight from the mine face to Minerals. That gives an indication of the very high grades in the mine, and why Apex was able to establish the average 21.65 ounces per ton in the 43-101.

The miner’s adage, is drift into the high grade as narrow as possible and get the high grade to pay off as many of the upfront costs as possible, then when backing out, slab off the lower grades and leave as little behind as practicable.

Is your current Private Placement still open for subscription?

Yes, it is. Mining costs money, and to get to where we have positive cash flow we need additional funding.

The PP is a 10 cent share and a 2 year 15 cent warrant. We are already filling up the second tranche. Anyone wants to participate, email us at company@bayhorsesilver.com

Will you be announcing new pours with recovery rates as they occur?

Yes, we will. Minerals is being very careful in evaluating the silver recovery, just as we have been very cautious in everything we have done so far. Our goal is to get 98% plus recovery. The 1984 mining program was really concerned about recovery rates, as they were not up to their expectations.  That is why we are leaving no stone unturned in identifying the right crush/milling particle size, for flotation and leaching. The recovery numbers will be variable at first until we get the process fine-tuned, but we are encouraged by the preliminary results.

What is Bayhorse’s time line to commercial production and can Mineral Solutions scale to meet that production?

That is what the next couple of months are about. Minerals getting their part right, and telling us what we need to do to give them the right stuff, so we get our part right. This should all happen concurrently during this time. We will gradually ramp up to full production over the next few months. Hiccups will occur, but we have talented teams to take care of them.

At this point, what is the estimated all in cash cost per ounce of silver from the Bayhorse mine using the Mineral Solutions process.

Ah! That is the 64 dollar question. We have our internal numbers based upon the last two years of underground operations, and have put in a hefty number for the processing refining stage. We are targeting an all-in cash cost of US$10.00 per ounce, or less, but it will probably take 12 months of operations before we can say for sure what our exact costs are. Mind you, some of our costs should be lower, because we do not have to ship containers of concentrate to China, or suffer the low smelter payouts. Then there is VAT that does not get charged, nor potential tariffs.  All in all, we are much better off with Mineral Solutions.

We believe the mine will be profitable, or we would not be doing it, but ask me again in six months.

Bayhorse Silver Inc., (TSXV: BHS) (“Bayhorse” or the “Company”) is pleased to report that Mineral Solutions LLC, (Minerals) of Coeur d Alene Idaho, has produced the first refined silver from the high grade silver mineralization shipped to them for processing from the Bayhorse Silver Mine, Oregon, USA.

Maiden .9999 Silver Bar, Bayhorse Silver Mine

To view an enhanced version of this image, please visit:
https://orders.newsfilecorp.com/files/5015/43011_eaf81bf0846d9941_003full.jpg

Producing this first bar, containing 37.69 ounces (1.172 kg) of .9999 fine silver, with the Liberty Refiner Purity Mark, has demonstrated the effectiveness of the Minerals process on the Bayhorse mineralization. The silver bar was extracted from a portion of the 175 kg (386 lb.) of the samples sent to Minerals as reported in the Company’s news release BHS2019-01 issued on February 6, 2019.

Additional 12 kg samples of silver bearing material, extracted directly from the Bayhorse Bonanza Vein, and unsorted, has been shipped to Minerals. This sample assayed 338.5 ounces/ton (10,528.5 grams/ton) silver.

The highest grade sample of silver bearing mineralization taken from the Bayhorse Silver Mine was 4,835 ounces (150.37 kg) per ton, as reported in the Company’s news release BHS2014-01, January 14, 2014. (This sample was a selected sample and is not representative of the mineralization hosted on the property.)

The Company has shipped in excess of 175 kg of unsorted Bayhorse Silver Mineralization, of a variety of grades, up to bonanza grades, to ensure that Minerals has sufficient grade variation of samples to optimize silver recovery from their silver processing and refining process. The Company is working closely with Minerals in other areas of upgrading and processing of the Bayhorse mineralization through upgrading to refining to ensure we meet our goal of 98% plus silver recovery.

Bayhorse CEO Graeme O’Neill comments: “We are very pleased with achieving this milestone, that is one more step towards revenue generation from the Bayhorse Silver Mine. We look forward to continue working with Minerals to further enhance the silver recovery along with other metals from the Bayhorse mineralization. This refined silver bar was the first silver to be produced from the Bayhorse Silver Mine in over 35 years. This pour has confirmed the Company’s confidence in Mineral’s non smelter process for refining silver from both oxide and sulfide mineralization from the Bayhorse Silver Mine, and we look forward to a long term working relationship with Minerals.”

The samples were split according to ASTM sampling protocol. Assaying for the samples reported above was conducted by Christopherson Umpire Assayer of Osburn, Idaho. The analytical method used for the silver analysis consists of 1 Assay Ton (AT) samples subjected to fire assay with gravimetric finish. Base metals assay for the samples are subjected to an ICP 35 element, four acid digestion assay. Fire assays were done in duplicates with corrected silver.

The Company is not basing any decision to produce on a feasibility study of mineral reserves demonstrating economic and technical viability, and also advises there is an increased uncertainty and specific economic and technical risk of failure with any production decision. These risks include, but are not limited to, a drop in price of commodities produced, namely silver, copper, lead and zinc, from the pricing used to make a production decision. Failure of grades of the produced material to fall within the parameters used to make the production decision and increase in mining costs due to changes within the mine during development and mining procedures. There are also metallurgical recovery changes that cannot be anticipated at the time of production.

This News Release has been prepared on behalf of the Bayhorse Silver Inc. Board of Directors, which accepts full responsibility for its contents. Dr. Stewart Jackson, P.Geo., a Qualified Person and Consultant to the Company has prepared, supervised the preparation of, and approved the technical content of this press release.

On Behalf of the Board.

Graeme O’Neill, CEO
604-684-3394

Bayhorse Silver Inc., a junior exploration company, has earned 100% interest in the historic Bayhorse Silver Mine, Oregon, USA. The Company has an experienced management and technical team with extensive exploration and mining expertise.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

It’s not everyday that a friend and client pours their first silver. Bayhorse Silver (V.BHS) just did.

Update: A picture is worth a 1000 words but here is the press release to accompany the above picture.

Our friends over at CEO.CA do a stockpicking contest every year. This years is open until January 6th so go here https://ceo.ca/@evenprime/2019-stock-picking-contest  and give it your best shot.

We don’t do a lot of stock picking at motherlodetv.net but we obviously pay attention. Below are not recomendations, they are simply three stocks I think will do very well in 2019.

I post under a pseudonym and here are my picks V.BHS, V.WGO and V.PRG.

Two golds and a silver.

The logic? Well, Bayhorse Silver (V.BHS) has a silver mine in Oregon which is all of an inch away from shipping silver concentrate. Call it three months to actual silver production. My own view is that silver is going to outpace gold as precious metals come back from the doldrums. But a real producing mine with an upfront, already paid, cost of about 7.5 million dollars is a great start. Add to that the fact Graeme O’Neill has found a great big block of high grade material which is being mined and the fact he already has an ore sorter in place to separate the wheat from the chaff and you have to think V.BHS is going to trade for a multiple of its closing price of $0.12.

White Gold (V.WGO) is a completely different story. Right now it is a pure exploration play in the Dawson Range in the Yukon. It is a Shawn Ryan project with serious financing from Toronto. It is somewhat unique in the junior exploration space as it has strategic investment from two majors: Agnico Eagle and Kinross Gold. This is very much a district play with recent results suggesting that there is high grade gold close to surface. This year WGO drilled both its Golden Saddle and its JP Ross property targets and pretty much could not miss. And when it hit it was seeing gold values on the order of 15 to 30 gpt. Critically, while White Gold is exploring using helicopter driven methods, there is a road from Dawson City to the White Gold properties. No small thing in the Yukon. If WGO can establish a series of pitable deposits on its huge land holdings there is every chance its already strong share performance will continue. And if the price of gold keeps going up steadily, every ounce of reserves WGO discovers will add to its market cap.

Precipitate Gold (V.PRG) is a straight gamble. Precipitate has land directly adjacent to Barrick’s huge gold mine in the Dominican Republic. They have a geological theory which, in simplest terms says that there is a deposit of similar size buried beneath a “cap” of material about 200 meters thick. So, drill ten holes and see if the theory is correct. Most geological theories turn out to be wrong. However, PRG has a Board which tends to be right. I’ll bet on Quinton Hennigh (NOVO) any time. And the rest of the Board are seasoned explorationists. CEO Jeff Wilson will keep the money coming and the communications on track. But this is “drill to kill”. Pure hypotheses testing. If one of the holes hits mineralization the stock will run. How high? No idea but to win the stock picking contest I need a 10 bagger but, to kill it, I want to see NOVO like stock performance. This is a crap shoot. If none of the holes hit it will drop back to $0.05 on the value of its other projects; but if one or two hit, Wilson will make sure the world knows and the CEO.CA stockpicking contest is mine.

The CEO.CA stock picking contest is just for fun. But worth looking at for new investment ideas.

Our friend Graeme O’Neill, CEO of Bayhorse Silver, (V.BHS) sent a Go-Pro camera to the face with his miners. Not slick, not edited: just experienced miners looking at a pile of rock after blasting into what they hoped was a “High Grade” zone.

O’Neill hopes to have more video next week.

Bayhorse Silver Inc. (TSXV: BHS) (the “Company” or “Bayhorse”) announces, subject to TSX-Venture Exchange (TSX-V) approval, it has closed a 2^nd tranche of is three year, 12%, Convertible, Silver-Convertible, Debentures (the “Debentures”) for gross proceeds of to US$465,000. Total proceeds to date from both the 1^st and 2^nd tranche is US$690,000.

Subject to approval from the TSX Venture Exchange it is increasing the Debenture financing from 200 Units to 220 Units, for gross proceeds of US$1,100,000. The Debentures shall bear interest at a rate of twelve (12%) percent per annum, payable annually in arrears. Additionally, at the election of the Holders, the Debentures will be convertible into common shares of the Company at C$0.125 cents per share in accordance with the policies of the TSX-V, or, conditional upon notification by the Corporation of silver production, the Debenture holder may elect to convert the Debenture principal and accrued interest into ounces of silver at a conversion rate of US$15.50 an ounce.

Each Debenture shall entitle the Holder to twenty thousand Warrants the “Debenture Warrants”) exercisable into common shares of the Company at Canadian $0.25 per Debenture Warrant Share until three years from the date of issue. In addition to any other exemption available to the Company, participation in the Debenture financing is also open to all existing shareholders, even if not accredited investors, under the “existing shareholder” exemption of National Instrument 45-106 as promulgated in Multilateral CSA notice 45-313 in participating jurisdictions.

The funds raised are for working capital for the Bayhorse Silver Mine as well as general and administrative costs.

Purchasers of the Debentures shall be granted pre-emptive rights during the time they hold the Debentures to participate in any future issuance of debt securities of the Company. Finder fees may be payable on a portion of the financing according to the policies of the TSX-V.

Graeme O’Neill, a Director and Officer of the Company is subscribing for 5 Debenture Units for a total to date of 35 Debenture Units. Rick Low, an Officer of the Company is subscribing for 3 Debenture Units.

This News Release has been prepared on behalf of the Bayhorse Silver Inc. Board of Directors, which accepts full responsibility for its contents.

On Behalf of the Board.

Graeme O’Neill, CEO
604-684-3394

Bayhorse Silver Inc., a junior exploration company, has earned 100% interest in the historic Bayhorse Silver Mine, Oregon, USA. The Company has an experienced management and technical team with extensive exploration and mining expertise.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Bayhorse Silver put out its maiden 43-101 compliant resource estimate on September 24, 2018. We had questions and Graeme O’Neill, CEO of Bayhorse (V.BHS) was kind enough to have answers:

Bayhorse reported a 6 million ounce 43-101 compliant inferred Why not measured and indicated?

With respect to the Bayhorse Mine, we built the mine first, based upon the extraordinary amount of solid geological data we obtained, paid for by someone else I might add. Then, using that additional data we developed during building the mine, we established the inferred resource.

Taking an inferred resource to a reserve would cost us an enormous amount of money.

We have built the Bayhorse Silver Mine and developed the resource for just on US$5,000,000. Peanuts compared to many other mines. Not only that, but we have state of the art processing facilities at the mine

We are in the middle of a silver jewellery box, where the previous operators drilled out and defined 26,000 tons of high-grade silver. Based upon our anticipated daily mining rate of 100 tons/day, that is close to one year’s mining available to us at right at our fingertips. The old-timers rarely had more than a year of blocked out “ore” ready for mining ahead, and during that year of mining, they replenished it so they always had that year of operations ahead of them. So do we need to develop ten years of material ahead at a huge upfront cost? Or should we keep developing a year of material ahead of us at a minor cost? We are practical people and we don’t spend money we don’t have to.

I am sure everyone knows about the Pareto Principle. It says that 80% of results come from 20% of effort, or expenditures. It is true for pretty much everything. Typically, a company raises money to explore, finds mineralization, explores some more, drills and drills and drills, and comes up with a resource, which it takes to a measured and indicated reserve and then does a PEA and then a full feasibility study. Then, once financing is secured, after spending a substantial amount more money, and lots more time, they permit and build the mine. Then, a year after they open the mine, they probably start to generate revenue.

We did it backwards. Built the mine, with a brand new 900-foot haulage way, a 100 ton a day, state of the art upgrading facility,  and then we established the resource, and are already mining: all for $5 million. It would cost another minimum $5 million to bring the resource to measured and indicated reserve status. We would rather spend that money mining, upgrading, and getting cash flow. There is still a lot of work to do, such as getting ready for winter, but we are well advanced at that, so we have no disruptions during the winter months.

Everyone wants a guarantee. What we guarantee our shareholders and investors is that we are doing what we said we were going to do, and delivering on it. Maybe late, but delivered nonetheless. But proper funding is required to get anything done.

Does Bayhorse have a processor available to ship material to?

We do, and we have indicative proposals to sell any concentrate we make to smelters, with proposed payment at the mine gate when picked up. But we are constantly looking to improve our bottom line. For example, using flotation, typical recovery is 90%, and our testing has shown that we will get the typical flotation recovery. Then the smelter will pay us 90% of the spot price of silver for the concentrate. Deductions after deductions. That reduces the bottom line. In the event we build a Total Metals Recovery processing facility as proposed by Metals US, we will get pure silver, and eliminate sending concentrate to smelters and refiners, and the attendant costs of shipping to the smelter and refinery.

At this point what does Bayhorse have to do to begin mining out its 1000 ton block?

We are right now increasing an existing 30-foot raise installed in1984  into the first mining block, from 7 x 7 dimension to 10 x 10, and timbering it to meet MSHA safety requirements. This raise is in high grade mineralization and into the mining block. We expect this to be completed in the next two weeks. Then we start dropping the mined material down this raise and we will be upgrading it straight away

What are your plans to extend the resource?

Apex Geoscience is drafting up a drilling program so we can bring the conceptual exploration target into a resource category. A number of 200-foot holes from inside the workings extending outside the known mineralized envelope. There is sufficient geological data to believe the zone dips to the south and to depth. The old-timers mined used hand steel, not today’s pneumatic drills, very labour intensive, to open the workings up. They were very experienced and would not have done it if they didn’t believe something was there.

Once you begin mining what is your estimated throughput per day? Can that be increased?

We are set up to do 100 tons/day, 300 days a year. We built the haulage way for a 200/ton a day operation, and our miners are confident we can achieve that throughput. We want to make sure we have consistent throughput though, so we will gradually ramp up to it

You are using a “Conceptual mining and processing costs were estimated at $US100 per ton of mineralized material” and an “average grade of 21.65 troy ounces per ton (opt) silver (Ag)”. If I divide 100 by 21.65 I get a cost per ounce of $4.60. Is that roughly correct and what does it say about the profitability of the Bayhorse Mine?

We have a substantial amount of cost data developed during this past year. Mining costs, maintenance costs, upgrading costs, however, it is only after operating for a year that we can say with certainty what the actual costs are. Of course, we have a good handle on the mining costs, that are under $50/ton, but again, taking out large blocks is a little different from driving a haulage way, and we have to support a much larger back.

For reference though, the average all-in sustaining costs (AISC)  for primary silver mine is around US$10.25 per ounce. That should be used as a rough rule of thumb until accurate numbers are developed after the first year of operations.