Shareholders of Bayhorse Silver (BHS.v) have waited a long time for all of the details and logistics of the Bayhorse Mine in Oregon to fall into place. Graeme O’Neill, BHS’s CEO has been working hard for years to plan the mining operation, integrate the ore sorter and build a milling facility to produce concentrate. Every step of the way cost money and O’Neill has raised that money.
Is the long wait over? Pretty much. The what looks like a Rube Goldberg mill, but in fact which has very sophisticated equipment, situated in mining-friendly Idaho. has been processing relatively low grade material to test recoveries and to ensure the various components work properly.
Two weeks ago, the processed liquid was a light grey colour, this past week it became nearly black as some higher grade material was processed.
At the mine, according to a March 7, 2022 press release, “The first development stope working face at the Big Dog Zone has exposed a 2.5 foot wide, and 10-foot high seam of high grade silver mineralization from the floor of the working face to the back, and is open to both depth and elevation. The current planned stope working face has been panel sampled across and down the face prior to blasting, returning combined silver assays of 1,642 g/t (54.8 oz/t). Two other mineralized faces sampled before blasting returned 549 g/t (17.65 oz/t) and 112.6 g/t (3.63 oz/t) respectively.” Plenty of good material to work with and a mining plan which will allow the efficient and safe operation of the mine at a capacity sufficient to feed the mill.
To cap that off, BHS has an offtake agreement with Ocean Partners which means it can sell its concentrate upon production. Details of this agreement are confidential however it means that BHS will have a revenue source as soon as it makes delivery of fully assayed concentrate in the specified amount.
BHS has financed mine construction, the “at the mine” sorting facility and the Idaho mill with the proceeds of a series of private placements. BHS has approximately 208 million shares outstanding which, at its last price, gave it a market cap of 18.76 million dollars.
The current private placement for $800,000 – which I am participating in – was priced at $0.08 for a share and a full warrant. There is every reason to believe that this will be the cheapest BHS shares will ever be.
Being able to bring silver production online right now, with the price of silver holding at $25 and analysts expecting upward pressure, is one of those reasons. Another is the fact that O’Neill’s policy of paying as he went means that the company has no significant debt.
All of which means that when BHS sells concentrate the revenue, unimpaired, goes straight to treasury. After taking account of what I believe the estimated all-in cash costs should be, in my opinion, BHS should be profitable at a $20 an ounce silver price, very profitable at the current silver price and extremely profitable at anything over $25 an ounce.
Typically, I would interview O’Neill for this piece. But, realistically, there is very little he can say until the actual production numbers are in and have been press released. By design, Bayhorse has never done a 43-101 Preliminary Economic Assessment or a Pre-Feasibility Study. The holes it has drilled are largely definition holes for the guidance of the miners in the mine. Knowing where to drift is critical to keeping costs contained.
All of which means the Bayhorse mine has not been “derisked” in the conventional sense of that term. At the same time, because every step has been paid for and the mine is established, and mill is up and running, BHS is no longer an exploration play or a development story: it is a company with a fully functioning, ready to produce, mine and mill. BHS can be called a silver producer.
Silver producers are, in fact, businesses. Which means, in time, the market values them using standard business metrics. Right now the amount of silver produced per day or per month is unreported, as testing of everything is still being done. It is not “unknown” or “estimated” – O’Neill and his team have a very good idea of what the results are of testing at the mill and will receive assays on every bag. But they cannot discuss the number of bags or the assay results until those numbers have been publicly disclosed. Frustrating as Hell for shareholders, but those are the rules.
I speak to O’Neill, as I do many CEOs of companies I follow, on a regular basis. He is very careful to avoid “selective disclosure” but I have known him for years and I can report that I have never heard him happier or more optimistic. He’s worked very hard bringing the Bayhorse mine back into production and, now, subject to any last minute glitches, that we all know occur, he has.