Ann: Standout Intersection Bolsters Droughtmaster Potential, page-16

Equus working towards Cerro Bayo restartAustralian junior Equus Mining aims to complete a resource estimate in the coming months ahead of a planned mine restart at the Cerro Bayo gold-silver project in Chile, which it has optioned from Mandalay Resources.Cerro Bayo in ChileExploration / Development > Feasibility02 June 2020CommentsSharePaul HarrisThe company sees considerable potential in the Cerro Bayo property on the western fringe of the highly productive Deseado Massif—which hosts several operating precious mines to the east in Argentina—as previous operators focused on production rather than exploration.Equus signed a three-year option with Mandalay in October 2019 months after a management restructure which brought in former Macquarie banker John Braham as managing director."The previous MD spent 10 years with the company and wanted to hand over the reins to someone with more deal-making capacity. Six months later we did the deal on Cerro Bayo. We had properties peripheral to Cerro Bayo and always knew Mandalay were miners not explorers and so there would be an opportunity of them running out of ore and doing a deal," Equus COO Damien Koerber told Mining Journal.That opportunity materialised due to the most unfortunate circumstances when Mandalay's Delia NW underground mine near Laguna Verde flooded in June 2017, killing two miners, forcing the company to declare force majeure and the suspension of operations. Difficult times continued for Mandalay including liquidity issues in 2019.Lack of exploration at Cerro Bayo meant the mine inundation effectively sterilised the resources which Mandalay had defined, however, Equus sees potential all over the property, with the initial focus for a potential mining restart being the Taitao pit and Marcela mine, which prior to Mandalay, were exploited by Coeur Mining. Coeur pulled out 190,000oz from Taito between 1995-2000 and left some 55,000oz at Marcela."Our thesis is for brownfield exploration peripheral to centres of historical production, but the real push is the greenfields potential, as it is a very under explored property. To be a good explorer you have to see things which others don't," Koerber said.The Taitao pit was drilled out in the past with 66,000m of drilling and Marcela was drilled out with a resource. Initial drilling at the Droughtmaster target has provided encouraging results with an intercept of 3.81m grading 20.39 grams per tonne gold and 55.44g/t silver. Equus has already identified high potential exploration targets such as Cerro Diable and Los Domos, which could become satellite deposits to feed the central mill at Cerro Bayo.A key target is Frison, an area where prior to Equus there was not one drill hole or geochemical sample. Importantly, it is a dog-leg from the Delia vein. "Frison is an extension of the vein corridor sitting 150m above the mineralisation at Delia where Mandalay had 200,000oz of resources. While Delia is a northwest trending vein, Frison is east-west trending, which is what you see at the Cerro Moro mine, and where you see a high-grade shoot as the vein becomes more dilationary," Koerber said.With A$1.5 million in the bank, the company is funded through to the completion of a resource estimate, but it will need to raise in the coming months to continue exploration.Equus is planning to post a resource update in the September quarter and then complete mine-restart studies through to November."We plan to do a financing once we have the resource calculation out and the idea would be to raise sufficient funds to be able to drill and permit for the next 9-10 months. The drilling budget will be spent on greenfield targets," Koerber said.Cerro Bayo comes with pretty much all the plant and infrastructure for a mining restart including a 1,500 tonnes per day flotation plant, which previously achieved average recoveries of 87% gold and 91% silver, minimising the capital likely to be required, hence the intention to develop a mine restart plan rather than a preliminary economic assessment."About 200,000oz of resource would be four to five years production, so that is a ball-park figure we are looking at to feed into the mine restart study. Production would initially aim for 40,000-50,000 ounces a year of gold-equivalent. Coeur had several years where this plant produced 120,000oz gold-equivalent, so if we have good exploration success we can produce more," Koerber said.With precious metals prices riding high, Koerber believes it is realistic to restart production in a little over a year, particularly as the government of Chile is keen to see new projects come on stream as it seeks to repair the economic damage caused by the COVID-19 pandemic."In the ideal world, it could be six-to-nine months to get back into production, but 12-15 is more realistic. The Marsela mine needs to be dewatered, which would take three- to-six months. Some of that time is permitting, but we are seeing there is a bit of desperation to get projects moving and the mining minister made it clear the [agencies] need to fast track projects," he said.Under the option agreement, Mandalay continues to pick up the tab for many property expenses, allowing Equus to focus its budget on exploration and proving up the mine restart plan. If Equus exercises its option, Mandalay would receive a 19% equity stake in the company as well as a 2.25% net smelter returns (NSR) royalty which kicks-in once the project has produced 50,000oz. Equus can buy the entire NSR for US$4 million. "We are not putting any money into care and maintenance. Everything is going into exploration until we exercise the option," Koerber said.