Almaden nears feasibility at Ixtaca

In 2010, Almaden Minerals (TSX: AMM; NYSE: AAU) drilled the discovery hole at its Ixtaca gold-silver project in Puebla State, Mexico. It was a brand new discovery, on claims company president and CEO Morgan Poliquin staked with his father, company chairman Duane Poliquin, in 2001.

Today, Morgan Poliquin says the project is about a year away from a production decision; a decision that can be traced back more than two decades.

Poliquin has worked as a geologist in Mexico since the early 1990s. In 1995, he theorized that Vera Cruz, Puebla's neighbour to the east, had potential for gold-silver mineralization. He and his father, both geological engineers, drove around taking samples. One came from the discovery outcrop that became Candelaria Mining's (TSXV: CAND; US-OTC: CDELF) Caballo Blanco gold project.

"That spurred us to do a regional program," Poliquin explains. "So I compiled all the geological data for Texas through to Guatemala and I spent a lot of time, for more than a decade, landing on every outcrop."

The two developed a project generator model. Prior to 2008's financial crash, their company had roughly 15 joint ventures. It lost most of them after the market turmoil, but the company remained in good financial shape so the company decided to drill some of the projects itself.

Almaden's Ixtaca project features a low sulphidation epithermal vein system hosted in limestone. The mineralization is not oxidized, and contains the silver-gold alloy electrum.

"It's not a vein," Poliquin explains. "It's hundreds of veins that define the vein zone."

Almaden president and CEO Morgan Poliquin.

The vein zone is hosted in very pure limestone, devoid of lead and zinc. The veins branch and reconnect. They form irregular blobs of limestone that dilute the overall grade.

Still, at a US$1,250 per oz. gold price and a US$18 per oz. silver price, the project contains 65.1 million proven and probable tonnes at a diluted grade of 0.62 gram gold per tonne and 37.7 grams silver per tonne for 1.29 million oz. gold and 78.82 million oz. silver.

"A lot of times you see the deposit characterized as a gold deposit," Poliquin says. "But it really is a precious metals deposit. When you look at it from the gold point of view it's a nice deposit, but from a silver point of view it's a top-tier project."

The company plans to recover the silver and gold on site using gravity and flotation to create a concentrate it will leach into dor?(C). The company has run ore sorting tests on a 2.2 tonne bulk sample that it says rejected 36% of the sample mass, increasing gold and silver mill feed grades by 39% and 47%. It plans to include further ore sorting tests in a forthcoming feasibility study.

To date, Almaden has drilled 160,000 metres at Ixtaca. It published a preliminary economic assessment in 2013 and a prefeasibility study (PFS) in May 2017.

The PFS outlined a US$310 million after-tax net present value at a 5% discount rate and a 41% after-tax internal rate of return. The project would cost an initial US$117 million with payback in 2.2 years. It has a 14-year mine life.

According to the study, Ixtaca could produce an average 78,100 oz. gold and 5.29 million oz. silver per year at a US$862 per oz. gold equivalent all-in sustaining cost. In total, it could produce 1.04 million oz. gold and 70.93 million oz. silver. It has a 5:1 life of mine strip ratio, with more than 50% of it coming after year six.

"It's been a challenging market to be taking something from initial discovery all the way to where we are now, but that's what we've been able to do," Poliquin says.

He says the company's instinct was to look for opportunities in a bad market. That's how it ended up owning the mill NovaGold (TSX: NG; NYSE: NG) built in Nome, Alaska, for its now-defunct Rock Creek gold mine.

"The Rock Creek mill is representative of what can be done in a bad market," Morgan says. "That plant was built as part of a $250 million capital expenditure to build the Rock Creek mine."

A driller at Almaden Minerals' Ixtaca gold-silver project in Mexico. Credit: Almaden Minerals.

The mill operated in 2008, from September to November, before financial woes forced NovaGold to shut down its mine and put its mill on care and maintenance. Almaden agreed to buy the mill in 2015 for US$6.5 million and roughly 400,000 shares and closed the deal in early October 2018. It recently finished dismantling and boxing the mill, and plans to ship it to Mexico in 2019.

In May 2017, the company announced drill results from a new zone 1.2 km southwest from the main Ixtaca deposit called Tano. The company hit 0.36 gram gold and 22.8 grams silver over 29 metres from 189 metres downhole and 0.83 gram gold and 2.3 grams silver over 89 metres from 154 metres downhole.

"We do clearly have the makings of resource expansion and satellite deposits," Morgan says. "This is a brand new district. The blue sky is clearly there. At the same time, we're very fortunate with our geography. There are no obvious impediments to development."

The project lies in a hilly area that has already been cleared of trees. Paved roads extend to within 2 km of the deposit and there is a highway most of the way from Mexico City. A few people live nearby, but there are no towns or villages. A very small, dispersed community called Santa Maria lives a few kilometres away. It's where Almaden houses its office and hires most of its drillers.

"We wanted to be a model of local outreach," Poliquin says. "Virtually all of our drillers come from local communities."

He says the company is finished with field work at Ixtaca - for now - and crunching numbers for a feasibility study it expects to table by the end of the year. At the same time, it's preparing to submit its full environmental permits for the project. Poliquin says the permitting process in Mexico typically takes six months.

Shares of Almaden are currently trading at 69 ? with a 52-week range of 63 ? to $1.35. The company has a $76 million market capitalization.