Mako to grow with San Albino build-out

Mako, backed by Wexford Capital, has brought in the mining team from its La Trinidad operation in Sinaloa, Mexico, to build out the initial 500 tonnes per day (tpd) operation, and aims to produce some 41,300 ounces per year. The preliminary economic assessment economics show an after-tax internal rate of return of 54%, a net present value of US$173.9 million, an all-in sustaining cost of $395/oz and an initial capital expenditure of $21.1 million."We will be looking at margins of $800-1,000/oz," CEO Akiba Leisman told Mining Journal during a site visit.Leisman has a bigger vision than that as he aims to double the plant to 1,000tpd by 2022 and develop its 150sq.km land package into a new gold district.It took a number of years to create Mako from a merger between Golden Reign Resources and Marlin Gold, beginning with a February 2014 royalty transaction under which Marlin Gold subsidiary Sailfish Royalty committed to provide up to US$15 million in capital to build San Albino with a 40% gold stream on the project area at US$700/oz subject to a minimum $280,000 a month going to Sailfish. This also saw the first equity investment by Marlin—majority owned by Wexford Capital—into Golden Reign. "This meant we had a say on what the project would be, but we never got to the point of the capital being deployed because we never agreed how the project was to be engineered," Leisman said. To accommodate the merger, the royalty was restructured to a 3% effective NSR royalty on the 3.5km2 of ground surrounding the San Albino project and a 2% NSR royalty on the remainder of the concessions.Prior to doing the royalty deal Wexford had undergone a change in investment vision in the gold mining space, moving from passive to active investors. "One of Wexford's biggest wins was investing in Galway Resources after Ike Batista's AUX bought it in 2012, but it was not a technical win. We couldn't work out why we made money on this investment, and that was when we decided we can no longer be passive investors," Leisman said.The Sailfish Royalty deal gave Marlin an initial foothold in Golden Reign, but it didn't make doing a bigger deal come any easier. With a lack of agreement on how the project should be developed, and the royalty dissuading other potential interested parties from approaching Golden Reign, an impasse existed until mid-2017 when Sailfish began talking about going public knowing that this could be the last opportunity to do something with the San Albino stream."We talked about restructuring the stream or eliminating it entirely, but in October 2017 the Golden Reign board rejected any proposal at any price and we subsequently cut off communication," Leisman said."Finally, we met in January 2018 and talked about combining Marlin and Golden Reign and we were able to negotiate the principal terms of what Mako is today over two days."Many companies are so afraid to tell their shareholders about what it will actually take to build a project. Gold Reign shareholders did not realise how untenable the situation with Sailfish was as they were presented with a narrative that was not realistic about how they were going to advance the project with the stream deal. The mindset of the Golden Reign management and board was to build the mine without spending any money and without any shareholder dilution, but the royalty agreement made it very difficult for them to take the project forward. The 2018 transaction needed to happen."Even with the deal agreed to, external factors made additional wrinkles. "We had a pit wall failure at La Trinidad, civil unrest broke out in Nicaragua and then a hurricane made a direct hit at La Trinidad, flooding the pit, two days before the Golden Reign shareholder vote, so we changed the economics slightly in favour of Golden Reign from the original agreement," Leisman said.Leisman relinquished his role as CEO in November 2018 but returned a few months later as interim CEO after Kevin Bullock resigned in March 2019, shortly after Wexford contributed 73% towards a C$4.5 million financing.Mako raised C$27 million via a rights issue in July which it used to fund an initial 7,000m infill drilling programme at San Albino that was expanded to more than 14,000m, finish the geological model and build the mine. This capital was sufficient to fund the majority of the capital needs of the project, although additional capital is needed to finish the project. "There was a substantial amount of engineering that needed to be redone as well as the geological model, and some exploration was merited on satellite targets at Las Conchitas. I made it clear to the board the company was not ready to go into production until we were comfortable with the underlying resource," Leisman said.He expects to undertake another financing in the first quarter of 2020 to raise around $15-20 million to complete the mine and build an initial mineral resource estimate at Las Conchitas by late 2021 or early 2022.Mako's focus is now exclusively on Nicaragua having entered into an agreement in December 2019 with Goldplay Exploration to sell La Trinidad, which is being decommissioned, and nine concessions totaling 104,095 hectares adjacent to Goldplay's existing portfolio in the Rosario gold-silver mining district in Sinaloa. The sale will release a tax liability currently ring-fenced at its Mexican subsidiaries from Mako's balance sheet, and potentially benefit from a small NSR royalty on the land package allowing it to benefit from any future exploration success. Mine buildSan Albino is a high-grade narrow vein deposit with low angle veins 1-3m wide, where dilution control will be a critical success factor. To this end, Mako will benefit from the experience COO Jesse Munoz (second from left, above) and his team gained mining a similar deposit at La Trinidad.The gold is hosted in white quartz veins which provide a strong visual contrast to the black graphite schist that surrounds them so the plan is to selective mine by using an excavator on top of the veins and mining back under the visual control of an in-pit geologist to take the vein and nothing else. Ore extraction will only occur during the day, with ore sections to be mined on 3m half-benches. Waste is to be removed continuously day and night. "We learned how to use an excavator guided by an in-pit geologist in Mexico to selectively mine. We used this method at the Colinas satellite deposit at La Trinidad and we were within 1% of our projected ounces in the reconciliation. We are using the same group of people here including the critical person, who is the production geologist," said Munoz. Ore will be crushed to minus-3/8 inch and fed into a 500tpd ball mill. Metallurgical test work results reported in December supported the mill design parameters and the use of a carbon-in-leach plant, which yielded optimised overall recoveries from 86.1 to 96.9%, depending on the mineralisation type and despite the presence of carbonaceous material. Gravity recoveries averaged 36.3% with higher recoveries possible with high-grade material. Mako is also considering whether to install an intense cyanidation reactor for the sulphide material, to improve recovery. "There is 0.5-1.5% total carbon content and it is the organic part that can make for processing issues, so we have to use CIL to ensure the cyanide is introduced at the same time as fresh carbon," said Munoz.Mako will also use dry stack tails even though this is not required by law. "This adds a few dollars per tonne on cost which works out at $10-15/oz but with high grades we can absorb this. We will backfill some tails and the rest will go into a lined facility which we will then encapsulate and reforest," said general manager Arnold De Herrera, who was part of the team that built the La Libertad mine in Nicaragua in the 1990s. La Libertad was restarted by Central Sun, which was then bought by B2Gold and is now owned by Calibre Mining.Munoz and his team are a critical factor for the future success of San Albino. With the company preparing to receive the concrete plant on site to pour the pads for the installations, he also plans to pour the pads for the expansion to 1,000tpd as well. "This will cost a little more but will be much cheaper than having to do them later when we don't have the mix plant on site," he said.He also made the company a significant saving on the cost of the mills. "We obtained a pair of mills from electric utility JEA that were used to make a lime slurry for a desulphurisation plant. They had been well-maintained and had low hours on them, so we saved a lot of money compared to buying new. We also saved a two-year lead time as no one has mills in stock," he said.Another example is the management of the local mining contractor who will start with 20t road trucks and upgrade to 40t articulated mine trucks after a year of operations. "I told the contractor he will be paid for availability as we need to move a certain amount of tonnes and so he needs to have spare capacity should any of his trucks go down. I also told him he has to make money and that if he is not, he has to let me know because if he is not making money then we have a problem that could lead to unnecessary downtime," Munoz said. Orogenic camp explorationThe focus in 2020 will be getting the mine and plant running, meaning regional exploration will temporarily slowdown from the pace in 2019. Dry commissioning will start in June with first gold pour due mid-August and commercial production by the end of the summer. But once the operation begins cash flowing, Leisman aims to turn the exploration funding tap back on so the company can realise his vision of turning the 23km-long gold belt within the Corono de Oro district that Mako controls into a new orogenic camp.Geochemical soil sampling is the main exploration method to identify areas with potential, which are then trenched to determine drill targets. "We have rock samples of more than 1g/t over the entire land package. Over 170 quartz vein showings, over 112 adits mapped, 148 mine dumps and 354 exploration pits," said senior geologist Frank Powell.Drilling in 2019 returned assays such as 3.1m grading 60.72g/t gold and 66.4g/t silver, 1m grading 376.49g/t gold and 103g/t silver, while trenching outside the current San Albino pit limits returned samples as high as 545.96g/t gold and 219g/t silver.To date, 517 drill holes for more than 50,000m have been drilled at San Albino with at least four sets of veins identified (El Jobo, San Albino, Naranjo and Arras). The geological structure is complex with sharp changes over short distances which required close-spaced drilling on 20m centres in a star pattern to confirm resources prior to mining. San Albino has an in-pit indicated resource of 656,000 tonnes grading 7.13g/t gold and 12.7g/t silver for 150,400oz contained gold and 267,700oz silver, and an inferred in pit resource of 880,000t grading 6.78g/t gold and 10.4g/t silver for 192,000koz contained gold and 293,300oz silver. Company geologists are working on an internal resource estimate for the mine plan. "Within the sections we did a fair bit of drilling with fans from the same drill pad, so a lot are closer than 10m," said Powell.Geologist Zoran Pudar has been at the project since 2009 and has overseen delineation of eight different zones like San Albino with the same type of veins, and sometimes better grades. Despite having a large land package, the frugal approach of Golden Reign meant little exploration was undertaken over most of it. "We have prioritised four zones to drill in 2020-21. The target is to define a similar resource as currently exists at San Albino," he said.The Las Conchitas area, some 3km to the south of San Albino, previously saw little attention but was a key Mako drilling target in 2019 with the aim of identifying another zone which could provide a second mining centre."From January to summer 2020, we will have two rigs doing close space drilling at the primary Mango target area at Las Conchitas. This will be a concerted effort to bring a resource that can be mined within two or three years from now. When the mine turns on, it will be a completely different situation. That will be the moment to go from the spot check approach to really cracking the code of the district," said Leisman.In December 2019, Mako snapped up the 12sq.km Potrerillos concession contiguous to and along strike to the north of San Albino, from Condor Gold for US$600,000. "We are confident we will find extensions to San Albino as we have mineralisation at the boundary. We are getting ready for aggressive exploration at Potrerillos after the mine starts production," said Pudar.Further afield is the Murra area, 20km away in northern part of the main concession. "Certain areas have multi-ounce material and open-pittable targets," said Powell.With equipment starting to arrive at San Albino, 2020 looks set to be a landmark year for Mako.

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