How important is it for PPX to have the construction permit for the Igor plant?

The pre-feasibility study (PFS) envisions an integrated underground mine plus a heap leach processing facility. Having obtained the permits to construct the heap leach facility is a benchmark for the company, as we can make the transition from utilizing a toll mill, to processing the material for our own behalf, generating much greater cash flow. The key components of the processing facility have been shipped from China, so it is full speed ahead for the company, with the goal of commissioning the plant toward the end of Q2 2019.

How is the Igor project shaping up in terms of its economics?

The internal rate of return (IRR) of the project is quite high (59% to nearly 71% post-tax depending on the gold price). This is because the capital remaining to put the project into full production is less than US$4 million. We have an all-in sustaining cost (AISC) of just over US$800 per oz, which is in the lower quartile of gold projects worldwide. Right now the plan envisions a near 8-year mine life at 350 tonnes per day (mt/d), for a total production of over 120,000 oz gold equivalent, but the exploration and reserve expansion potential at Callanquitas and Portachuelos should allow for more tonnage, higher gold output and a longer life.

How competitive is Igor to face lower commodity prices?

At Callanquitas we have developed our underground mine to the point that it is already working at 120 to 130 mt/d. The mine has already produced over 8,000 oz of gold since we started our test mining and bulk sampling program in 2017, so we already have 18 months of experience behind us, plus all the capital investment needed to develop the mine has already been met. Now, for a modest capital contribution, we are buying our crushing plant, an agglomerator and a Merill Crowe plant, all of which can take up to 1,200 mt/d in the future. At some point we will also be looking at a conventional milling circuit (CIP/CIL), because as we get deeper into the ore body and transition into the sulfides, we see silver grades come up.

The one thing you cannot do is count on high prices for any commodity over the long term. You have to be very conservative so your operations are sustainable over a wide range of commodity prices. While I am enthusiastic about finally seeing gold and silver prices moving in the right direction, we are still going to be prudent operators and work as if we were at US$1,100/oz gold.

What is the overall importance of silver for Igor?

In the portion of the ore body that we are mining currently, silver is a minor value contributor, but as we go deeper, this changes dramatically, with grades of 400 or 500 grams per mt. This is why, as part of our ongoing exploration of the project, we send samples for metallurgical testing to help us maximize silver recovery in the future.

Once you commission the plant, you have a plan for 17,000 m of drilling in 2019-2020. What will be the focus of the campaign?

The focus of the exploration drilling campaign will be threefold: first, drilling in and around the existing Callanquitas reserve, to be the driver for mine expansion. Then, we need to do a lot more drilling in the Portachuelos discovery. The sheer size of that system requires us to start defining the limits of the deposit; Portachuelos has the potential to be a game-changer for us. The third area will be Tesoros, located in the southern part of the Igor project area. If you add all the drilling that has been done until now, including the historical drilling, there has been 30,000 m completed at Igor. So, adding 17,000 m between 2019 and 2020 to that database would be a huge jump forward.

What is your relationship with the Igor and Callanquitas communities?

These two communities are very close to the project and they have been involved in the entire process since the early stages of exploration. Because of these long-term relationships, we have been able to reach agreements that are fair for all parties. We are able to provide employment opportunities to virtually everyone in the area, but also we want to establish programs that are more sustainable, expanding schools and developing infrastructure such as irrigation canals. 25 years from now we may be done with mining, but this infrastructure will still be there.

We have seen significant M&A activity across major gold producers. Will we see similar developments in the junior spectrum?

I definitely see the M&A space stretching down into the junior level. What we have seen in 2018 is that when equity markets dry up and people start having difficulties in raising cash for exploration or mine development, you start having good projects that end up getting orphaned in companies that simply cannot move them forward. In other cases, you have companies that need to acquire new assets, or they stagnate. So we are going to see a lot of consolidation, also across our space, for better deployment of capital, more efficiency and better returns for investors.