Eloro: Too Big to Understand in Bolivia

Eloro’s (ELO.T) CEO, Tom Larsen, is “Blown away.”

Eloro’s share price has been in free fall since the company put out its maiden 43-101 compliant Mineral Resource Estimate at the end of August. It was a whopper of a silver/polymetallic resource: “670 million tonnes containing 1.15 Billion In-situ Ounces Silver Equivalent”.

“It’s totally unique,” said Larsen in a phone interview. “The Exchange and Micon wanted us to use NSR rather than Silver Equivalent ounces. In a PEA you can do both. But on a NSR basis, in the upper pit we would be getting $35 per ton back from the smelter on an operating cost of around $9.40, the arithmetic is clear.”

“But the MRE was misinterpreted,” said Larsen. “First, we were criticized for the delay in getting the MRE out. Then people started complaining that the “grades are too low”.

“The late MRE was my responsibility. The timeline didn’t reflect the fact that the metallurgical testing would be a time-consuming process,” said Larsen. “I won’t be making that mistake again.”

“The reality is that the grades are more than adequate. People seem to ignore that, for the first ten years of mine life on the upper pit the strip ratio is 1:1. One of the lowest in large scale silver mining in the world. Adding ore sorting to the equation will drop costs even further.”

The real problem for Eloro’s share price was that these very encouraging results dropped into the current, depressed, market. “We’re not in a solid market,” said Larsen. “People’s temperament and patience are stretched.”

Releasing news that three metallurgical drill holes had been completed and that work had commenced on testing both the silver/polymetallic and the tin/silver domains with a view to understanding the metallurgy and amenability to XRT ore sorting was just another excuse to sell ELO. As Larsen put it, “Things are not correlating.”

“We are completing a 4000 meter infill drilling program at Iska Iska right now. Our first round of drill holes, all of which were mineralized, had 100 to 150 meter spacings,” said Larsen. “The infill holes will be drilled in the higher grade areas with 50-meter spacings. We expect the grades to be higher with the infill.”

In many ways, the market’s reaction to ELO’s press releases reflects the fact that Iska Iska is very, very, big. It can make communications a struggle. “Just working on the upper zone of the silver polymetallic would give us 8-10 years of profitable mining,” said Larsen. “We’re getting great recoveries and we are not even including the tin values.”

Larsen, having been burnt putting a timeline on the MRE, is not going to be pinned down on what happens next or when. However, the results from the infill holes will likely be released as part of an updated MRE. Then it is a countdown to the Preliminary Economic Assessment, the PEA.

The maiden MRE had quite a few PEA-like features. Actually, taking a preliminary pass at sorting out the metallurgy of both the silver polymetallic domain and the tin silver domain were large strides in a PEA direction. The silver/polymetallic PEA will likely detail 150-200 million tons of high grade rock in the upper, open pitable, zone.

After interviewing Larsen he suggested I watch Dr. Bill Pearson’s well-received presentation to the Toronto Geological Discussion Group on Iska Iska. Dr. Pearson has 48 years of direct exploration, development and production of minerals world wide. Well worth watching at this link.

Speaking about the polymetallic domain Dr. Pearson states, “It’s in the bank. We’ll improve and expand it, but it’s in the bank. As an explorationist I’ve done my job.”

“Now I want to go after the tin,” said Pearson. “We already have 110 million tons but it is getting bigger.”

“We have two world class projects on one property,” said Larsen. “Two domains. Maybe it will make sense to do two PEAs.”

“I am upset about the share price, but I know how it will go,” said Larsen. “Optionality for non-dillutive financing. Or a major might look at picking up 5-10% of Iska Iska on the strength of the PEA.”

“Looking at the bigger picture, there is a rail line about 6 kilometers from Iska Iska. Which makes custom mining, crushing and ore sorting on, say, a 25,000 ton per day, 12,500 tpd preconcentrate set up potentially very attractive,” said Larsen. “There are processing facilities for pre-con within Boliva.”

Larsen himself is heavily invested in Eloro. “I have 7, 8 million shares,” said Larsen. “I might buy more.”

The take away on Eloro is that the upper portion of one of the two domains contains 150-200 million tons of rock which could be mined and sold NSR $35, operating cost of $9.40, suggest substantial NAV numbers, in the billions, which will be substantiated in the PEA. The current market cap is $116,349,000.

Larsen can do the math.