Eloro (ELO.T) CEO, Tom Larsen, has a huge job: he has to explain the geology and commercial potential of the Iska Iska project in Bolivia. An interview with Larsen needs to cover a lot of ground beginning with the market reaction to the company’s most recent news release.
“We need to get back to $3.00 to $4.00,” said Larsen. “We were hurt badly when the regulator would only allow us to use Net Smelter Return rather than silver equivalent which is more common and better understood in our first Mineral Resource Estimate.”
As Bob Moriarty puts it at 321Gold.com, “the change in nomenclature cost investors $129 million or a loss of 55% of what the company was worth in August.”
The regulator was part of the story, the other part was the statistical effect of widely spaced drill holes. It’s a complicated subject but, bottom-line, to improve the modelled resource ELO needed to drill 40 to 50-meter spaced “infill” holes and the first of those holes were reported in the most recent release.
The mineralization encountered in these infill holes is impressive. The headline hole came in with 62.84 meters of 339.82g silver equivalent per ton rock with many other high silver equivalent intervals in this and other holes. As Larsen commented in the release, “They demonstrate substantive higher-grade intervals, especially for silver, in the potential starter pit mineral resource area that may now be potentially upgraded and expanded.”
There are still six infill holes to be reported which will give Eloro further confirmation for an updated, and upgraded, revised MRE. “We want to do it soon,” said Larsen. “But it has to be right.”
“We’re seeing better grades,” said Larsen. “And as grade goes up, especially in the deeper sections of the starter pit, tonnage increases.”
At the same time, work has been progressing on the 10,000 kilos of bulk sampling taken from the metallurgical holes drilled earlier in September. “We shipped this material to Cornwall for metallurgical testing and some of it was sent to TOMRA in Germany for testing with the XRT ore sorting technology we want to deploy,” said Larsen. “These bulk samples will give results which are more indicative than smaller bore drill holes.”
The XRT ore sorter testing is important to the economics of any potential mine. The starter pit at Iska Iska already has a very low 1:1 strip ratio and with sorting technology much of the lower grade rock will be stockpiled when it comes to processing the material. Which, in turn, decreases the CAPEX of the project.
The starter pit at Iska Iska is currently seen as a silver/polymetallic operation. But, at a more granular level, there are different domains. To the North East zinc/silver is the predominant base metal, to the South West there is less zinc and more tin/silver.
A zinc/silver concentrate has become much more interesting as Chinese interests are planning to build two large zinc processing facilities in collaboration with the Bolivian government. 1.5 billion dollars worth of zinc processing will come online in the next three years. These sorts of plants need reliable feedstock and may give Eloro a chance to maximize the return on its zinc/silver concentrate. Typically, plant investments of this size will try to secure supply with multi-year offtake agreements. The zinc/silver resource at Iska Iska could prove to be the largest source of feed in Bolivia.
The tin/silver side of the Iska Iska equation remains a work in progress. “We are seeing higher grades of tin as we drill further south,” said Larsen. “We’re adding tin zones.”
The tin grade is important but what Eloro needs to see is tonnage. Processing the tin requires a “fuming” plant which runs 30-40 million dollars and there has to be enough tonnage to justify the investment.
“We will continue to definition drill to improve the MRE,” said Larsen. “Iska Iska is good rock. We’re not running into any deleterious material, no arsenic. We’re able to drill a hundred meters a day per drill. We want to do more infill drilling and more metallurgical holes. We’re seeing better silver grades in the met holes. Much better.”
The fact is that ELO is doing Preliminary Economic Analysis level work while it is updating its Mineral Resource Estimates. Which actually makes a lot of sense as Iska Iska is so big and so richly endowed that the MRE’s need to be prepared for the deposit one section at a time. Figuring out the “starter pit”, drilling the infill and doing the metallurgy and XRT sorting analysis keeps Eloro geos and consultants very busy. However, as CEO, Larsen also has to consider how best to commercialize the deposit, line up potential partners and maximize the value of Iska Iska for his shareholders.
Getting set back by an overcautious regulator’s requirements had hit the Eloro share price but it changes nothing about the huge Iska Iska deposit. The share price has been marching back as tax selling tapered off. The share price should continue to come back in the New Year as Larsen releases the results of more infill holes, an updated MRE, perhaps an updated and revised MRE and then a PEA later in the year.
“We want to show a billion tons of commercial material,” said Larsen. It is not an idle boast. Tom backed it up with $39,000 in personal market buying from $2.16 to $2.43 reported Christmas Eve.
(Disclaimer: I own Eloro shares and may buy or sell at any time. Do your own due diligence. Give Tom a call.)