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Bob Moriarty on MX Gold Corp

Bob Moriarty on MX Gold Corp

Bob Moriarty

Aug 15, 2016

One of the genuine pleasures I get from writing a new piece about a company and a project is finding that I am literally revisiting a project that I visited and knew from ten years or more back. It’s nice to know that I got it right in years past.

Recently a company now named MX Gold called me and said they wanted to advertise on 321gold. MX Gold has both a gold project and a giant moly project in British Colombia. The gold project is named the Willa Mine. The moly project and mill is called the Max Moly mine. That seemed familiar to me. It turns out that I visited the project in December of 2004 and wrote about it early in January of 2005.

The piece was very positive about moly and pretty negative about Scott Broughton of Roca Mines. The price of moly had shot up to $37 a pound. Roca had a giant resource at Max of 140 million pounds of moly at a .02% moly sulfide including a high-grade core of 10 million pounds in a 1.07% moly sulfide resource. If Scott Broughton put the Max mine and mill into production at a small rate of 200 tonnes per day at a cost of $8-$10 million he would have a cash flow of $100,000 per day and an IRR of 112% at $30 moly.

But Scott Broughton had this giant ego issue. And everyone who knows me and knows of him mentions it. It’s ok to be arrogant but before you get arrogant, you should have accomplished something in life.

Broughton took his sweet time making the mill just right. Rather than get into small-scale production in the 6-8 months as he said he could do, he took 2.5 years to get into production. By which time the price of moly started to tumble and kept going down. In 2012 the mill and mine were put into care and maintenance mode. By 2013 Roca was on dire straits and was forced to literally give away the $100 million dollar mill and moly mine millstone.

MX Gold, then called Discovery Ventures, made an agreement with Roca in late 2013 to acquire the mill and mine for about $5.7 million. While the price of moly had continued lower, Discovery had a high grade gold mine only 135 km from the mill named the Willa deposit.

MX Gold revised an earlier PEA for Willa in January of 2016. It makes forinteresting reading. At today’s prices, the gold/silver/copper ore has an in the ground value of about $262 per tonne. Costs of mining, transportation and milling work out to about $98 a tonne. While the existing resource only allows for a 4.25 year mine life, with a $21.3 million dollar capex the project will produce an incredible 83% IRR.

The Willa Mine is located in the Slocan and Sandon mining camps which hosted more than 20 mills and some additional 200 mines that shipped ore for processing in custom mills since discovery in 1890. With only a 4.25-year mine life, obviously MX Gold will be looking for more mill feed, both internally and as a custom mill. The Willa deposit is open in three directions and more resources will be found at some cost.

The real news for MX Gold other than the fact they practically stole a brand new mill for a few cents on the dollar is the hiring of Bert McPherson from Goldcorp. With a mill that was designed for use in processing moly ore and a gold mine that hasn’t been in production for many years, MX Gold needs someone with a lot of hands on experience. Bert McPherson comes with a boatload of qualifications.

Bert was mine manager lately of the Penasquito Mine of Goldcorp in Mexico with some 1400 employees. Just as a matter of interest, the mine was the 2nd largest in Mexico. He also was the VP/General Manager of the Tasiat Mine owned by Kinross in Mauritania. And he was the mine manager of Barrick’s Alto Chicama in Peru.

McPherson was hired as President and COO of both the mine and the mill. The company has been granted a permit for a 10,000 tonne bulk sample. It will take two to three months to get the mine and mill up to 500 TPD production but the startup period is necessary to work out the kinks that we all know will happen.

MX Gold is a lottery ticket. They stole a $100 million mill for pennies, have a small but potentially profitable known resource, first class experienced leadership and expansion potential in a 125-year-old mining camp. With the purchase of the Max mill and mine, they also got a $46 million tax loss meaning for a long time they won’t be paying any income tax.

If the stars align MX Gold has a lot of potential. In May the shares traded for as low as $.125 and have increased 200% since. In May the stock was dirt-cheap. Today the shares are more fully valued. Any increase from here will be based either on higher gold or positive results from the bulk sample and milling.

MX Gold is an advertiser and as such I am biased. I do not own shares. While I haven’t been at the Willa gold mine, I have visited the Max mine and mill before. The company is excellent at communication and the website well designed and informative. Please take some responsibility and do your own due diligence.

MX Gold
MXL-V $.365 (Aug 12, 2016)
MXLGF-OTCQX 141.5 million shares
MX Gold website

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