When you are speaking with Marcio Fonseca you actually hear two different voices: the first is the measured voice of a professional geologist on the trail of a discovery, the second is the seasoned voice of an investment banker fully aware of the economics of mining.
As expected, on February 7, Goldplay Exploration (V.GPLY) released its maiden 43-101 resource estimate on its San Marcial silver Project, located in Sinaloa, Mexico. The geological substance of the report is, “The Mineral Resource consists of 36 million ounces of silver equivalent (“AgEq”)2 at an average grade of 147 grams per tonne AgEq in the Indicated category and an additional 11 Moz AgEq at an average grade of 99 gpt AgEq in the Inferred category”.
Asked if he was surprised by the result, Fonseca is very clear. “I was not surprised that the resource increased from the historical resource going from 22 million ounces to 39 million ounces.”
“We worked hard to really define the high-grade Breccia,” said Fonseca. “We were seeing 200 gpt and we estimate that the breccia holds 19 million ounces. This is a very high value per ton rock. We’re estimating that it will have an all in cost of between $30-35 which leaves a good, fat, margin.”
In the press release, Fonseca is quoted as saying, “The Mineral Resource provides a strong foundation to realize the full potential of the San Marcial Project. We are progressing with detailed, systematic exploration of the under-explored additional 3.5 km of mineralized trend. Recent surface exploration results have already confirmed new exploration targets in the vicinity of the mineral, representing future upside opportunity for resource expansion in 2019.”
It’s here that Fonseca’s investment banker side comes to the fore. “We’re moving from an exploration company to a development company,” said Fonseca.
The point of the maiden resource estimate was to gain a thorough geological understanding of a section of the mineralized corridor Goldplay controls. “There is much more than the five hundred meters,” said Fonseca. “We have targets and we want to do more trenching and do more holes. But trenching rather than drilling holes will help preserve our capital. We have the permits to drill.”
“We know that there is much more than the 500 meters,” said Fonseca. “Now we need to show the market that we are not constrained. And we need to show people that the project will make a lot of money.”
“Where we go next is to build the business case and show that there is future upside,” said Fonseca. “We want to become attractive to a strategic partner.”
Building that case and releasing a maiden resource estimate also drew market attention to a company which has been flying under the stock market radar. “When we put out the release the stock went up,” said Fonseca. And then, a few days after the release, the stock went back down. “We building a base case at $0.25,” said Fonseca.
The maiden resource estimate is a step along the way to that base case. “We hope, by the end of February, to have a metallurgy report and then we’ll start working on a mine plan,” said Fonseca. “In six months we’ll have expanded the area. But we want to do things at low cost.”
Fonseca can see the need to drill more holes but he is in no hurry to incur the expense. “We could drill more holes and drill deeper but we are really trying to develop an open pit.”
Because it is Mexico the question of security always comes up. “Where we are is very stable. We’re not in a remote area,” said Fonseca. “We’ve had no trouble and we have not seen any big changes.”
While Goldplay is going “step by step”, it is taking those steps quickly. The company optioned the property in May 2018. It sampled historical results as it waited for its drill permits which were granted in October. Five months later Goldplay has a significant 43-101 compliant maiden resource.
Fonseca learned one thing as an investment banker: time is money. He’s wasting no time at all.