The positive. They actually do have water which will help mining in any event should they find enough ore of good grade to support mining activities. Mining operations do have a large water requirement, so having water is actually not a bad thing. Obviously too much water has a capex cost element to it as well, which is not good. As I am typing on a iPad can’t link a video showing a underground salt mine actually located under Lake Erie in the USA. There are enough underground operations worldwide, so dealing with water shouldn’t theoretically be a problem IMO.
The negative is they don’t know how much water is there and it’s length, and at this stage what the permeability of the rocks are and hence the extent of the water issues in terms of depth. Planning and installing appropriate dewatering systems in mining, especially in underground mines will help in any event, so this is more of a hiccup than a fait accompli. But obviously it impacts your capex if you need extensive dewatering systems and associated infrastructure in your mines to deal with it, noting the project itself is located in a environmentally sensitive area already. So the fear here is around project feasibility and the fact IMO the environmental approval process might get even more difficult. Having said that, they could find the ‘sweet spot’ in areas where the water issue may not be as prevalent as where the current drill was drilled.
Having said the above, hitting water in your mining and exploration operations is common, it is just how you plan for it. Obviously exploration programs help so unfortunate that some of the first drill holes here have stopped because of the issue, but now planning your exploration drills around hitting water and therefore using the right technique will help with the issue in the drills going forward IMO. The only issue is that I suspect this will slow exploration drilling down at this stage, which in part is not good for ARE at the stage in, in effect, in its inaugural exploration program. Noting especially because it’s exploration is already in a sensitive area and drilling the holes has been slow to date because of this fact itself, I suspect drilling may take longer itself.
When you consider the length of time it is proposed to take in drilling 7,000 metres to 10,000 here, which has even surprised me which indicates to an extent how the environmental issues are impacting the speed of the drilling program, compared to typical exploration of a few months for the same drill amounts, patience becomes a virtue (and really not helped here that the first hole by the looks of it is likely to have results not that great). It is about finding the sweet spot here. Obviously, ARE are planning 8 to 10 holes at a depth of 700 metres to 1500 metres so drilling is slowed to start with by depth of drill compared to other onshore exploration you see in other commodity sectors of drilling to 400 metres, meaning they drill more holes for the same meterage there, but the principle on time remains the same. The market becomes impatient hence risk reward.
The uncertainty here is given the small number of holes to be drilled in this exploration program, despite depth, and length of time to set the drilling pads between drills at each location by the looks of it and then not been able to go to depth on some of your first holes is a concern, so let’s hope they do more better planning for their next drills.
For disclosure I no longer hold. I sold after the first drill result, and more to do with the length of time around drilling, given this is an inaugural program. If I was holding, whilst I would be annoyed with the last hole around the water issues, I would only become concerned if in the next few holes, and especially after the planning to go into resolving the issue, they had the same problems again with the same result. Anyway, will keep an eye out here, but hope for those who have held for so many years that you do hit that sweet spot in this campaign.
All IMO IMO
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