It is always a pleasure to speak with Tom Larsen, CEO of Eloro Resources (ELO.T). Even if it means reading a long and very technical press release. A release which, boiled down to essentials said that the company drilled five definition holes at its Iska Iska property in Bolivia and hit higher grade tin or silver or both mineralization in every one of them. And there are more holes to report.
Along with increasing tin grades, ELO also reported the best silver interval in the world for the week, 43.5 meters of 52.73 gpt. Nearly two ounces a ton of silver. Larsen was very pleased.
“I’d like to have a PEA out yesterday,” said Larsen. “But it doesn’t work that way.”
“We’re drilling to enhance the economics of Iska Iska. We want to have a solid Net Present Value for a minimum 12 to 15 years, but the mine will continue on for decades,” said Larsen. “Processing is key feature of the project so we are investing time and money on investigating what options we have to pre-concentrate the various ore types whilst establishing how to concentrate the various minerals with minimum operational complexity and capital cost. We are currently focused on the tin and silver associated with the Tin Intrusive Breccia (TIB).”
What is referred to as the “starter pit” will expand into the silver/tin transition area and then into the pure tin domain. The current processing strategy is evolving but likely to encompass a lead-zinc pre-concentrator employing the latest TOMRA XRT technology, followed by a conventional differential lead-zinc flotation circuit which will produce silver as by-products in both lead and zinc. The tin ore will require a separate plant which again is likely to involve a tin pre-concentrator, again utilizing the latest TOMRA XRT ore sorting technology followed by a multi gravity concentration plant and a fuming plant to process the tin concentrates. Metallurgical and mineralogical work is currently being carried out on the silver rich zones to establish which flowsheet of the two can be used to process this material most efficiently.
“What we are finding is that the tin grades improve as we go West into the tin intrusive breccia domain,” said Larsen.
Part of the deep dive into how to process the material at Iska Iska involved shipping samples to Tomra, an ore sorter manufacturing company whose test centre is located in Wedel, Germany a few miles from Hamburg.
“I went to Wedel,” said Larsen. “Amazing. The technology has improved significantly over the last 18 months with two software and one hardware upgrade which permits the sorting of finer particles down to 6 or 7mm, we are embracing this technology in what we do at Iska Iska.”
“A lot of people really do not understand ore sorting,” said Larsen. “The most tangible benefit of ore sorting is to reduce downstream costs by removing mine dilution from the more costly grinding and concentration plant. However, there are also lots of less tangible benefits such as reducing the Tailing Storage Facility (TSF) size, reducing water consumption, generating a potential source of TSF building material or source of aggregate as well as allowing the miners to use less expensive mining methods where appropriate to do so, generating greater dilution that the ore sorters subsequently remove. Because of the impact ore sorting normally has on operating costs, ore sorting reduces the cutoff grade which permits lower grade mining blocks to be processed that would not be economically viable without ore sorting”
Being able to include material from the tin domain in the upcoming PEA will give Larsen the solid NPV he needs. However, even with a great NPV and a generational mine life, ELO, until last Sunday, suffered from what can be described as a “country risk” discount. For the last twenty years Bolivia has been ruled by the left wing, “Movement towards Socialism” party. Last Sunday, Presidential elections were held and MAS, as it’s known, was reduced to a little over 3% of the vote. Three right wing candidates led the polls with a runoff election to be held in October. No matter which candidate wins that runoff, MAS was comprehensively defeated and this changes everything.
“When we have been talking to large companies, major balance sheet investors, the Bolivian country risk was often pointed out as a reason to wait,” said Larsen. “Which was difficult but it also gave us the opportunity to develop Iska Iska our way. Which may mean the eventual deal will actually turn out better for our shareholders.”
Iska Iska is so big and contains so much tin, zinc and lead as well as silver that it has attracted attention from large companies and even nations looking to secure strategic supplies. Larsen is tight lipped as to which companies or sovereign wealth funds he’s talking to but, it is a fair bet, that there will be more now that the MAS threat has receded. “Iska Iska is big enough that it might be bought as a strategic investment to ensure, for example, a steady tin or silver supply for an entire country for many years,” said Larsen.
Larsen is certain of one thing, Iska Iska will be sold. Whether as a whole project or as two, world class deposits, one tin/silver, the other silver/zinc/lead. “We’re explorers, not miners,” said Larsen. “We are bringing Iska Iska to the stage where the Mineral Resources are clear, and the processing options are optimized using metallurgical and financial modelling. This provides shareholders with the optimum best initial processing set up to recover the different metals and potential buyers will have the information they need to make an informed evaluation and make, what we hope, will be a substantial offer.”
Larsen will not be strapped for cash as ELO extends and defines the mineral resource at Iska Iska. ELO recently announced it was doubling its 5 million dollar, bought deal private placement to 10 million dollars with the underwriter, Red Cloud Securities who have exercised their over allotment option to put an additional 2 million into the deal.
There should be a steady stream of news from ELO over the next few months. Which should please shareholders who took a bit of a hit as the shares dropped from $1.35 to the private placement price of $1.15 with the announcement of the bought deal private placement. Eloro is not a company you really trade, rather you sit patiently and wait for the buyout. Larsen has worked hard to keep the share count under 100 million and, even with the financing, he is very close to achieving that goal.
Right now, ELO has a market cap of 109 million dollars. Is the sale price of Iska Iska a billion, 10x the current price? Without the country risk discount, I would think Iska Iska is worth at least that. Potentially far more.