Publisher's Note: Today we have the first of two parts of Gerardo Del Real's interview with Mr. Michael McInnis, Executive Chairman of Abacus Mining and Exploration (TSX-V:AME) (OTC:ABCFF).
Today and tomorrow, we'll see how Abacus is reacting to a permitting setback, along with how its Willow property may revive a copper mining property in a historic corner of Nevada.
To your wealth,
Nick HodgePublisher, Outsider Club
Gerardo Del Real: This is Gerardo Del Real with the Outsider Club. Joining me today is Executive Chairman of Abacus Mining and Exploration, Mr. Michael McInnis. Mike, how are you this afternoon?
Mike McInnis: Doing well, Gerardo, how are you doing?
Gerardo Del Real: I am doing excellent. I want to thank you for your time today. Outsider Club readers will know that Abacus Mining is a company that - full-disclosure, I'm a shareholder of - was a top pick for my Junior Mining Monthly newsletter.
That was predicated on a two-part dance, and the first part of that dance was the permit at Ajax that we anticipated would come in December.
That permitting decision obviously went against us. The permit was denied. Before we talk about all the exciting news at Willow, which is part two of this dance, I wanna talk about Ajax and just get your thoughts on what happened and where we're at as far as the project goes.
Mike McInnis: Happy to, Gerardo. Thanks for the opportunity to talk with you and give people an update on where we are.
As you've already pointed out, the permit decision was not in our favor. Very disappointing. We thought we had done a superb job on the report, the environmental report, and when we looked at the actions to see what happened, our view was it was two-fold.
One was a political decision. The current government in British Columbia is supported by the Green Party. There is a certain element within both the party and the Green Party that really does not favor a lot of development projects.
The second element was the First Nations, one in particular. We were doing well with the other three bands, but one of them was a bit recalcitrant and we didn't get a deal done before the application went in.
Thinking about this after the fact, we thought, "Okay, let's not just sit back and wait for a government change that'll get it back on the rails, let's see what we can do in the interim." We're looking at a strategy - in its early days, I have to emphasize - but we're engaged with a large environmental group with a view that we may be able to get them to work with the First Nations and ourselves to come up with a broader agreement on what every party might get out of this.
If we're successful at that, I would take it back to the government, along with our partners on this thing, and see if we can get that permit re-looked at. We're not sitting by, we have a plan we're working on, and we'll keep you posted on any developments in that area.
Gerardo Del Real: And I want to provide a bit of context. Abacus owns 20% of a project that has an after-tax net present value, at 5%, of $543 million. That's U.S. Abacus currently has a market cap of U.S. approximately $9 million. Again, I want to stress the fact that you still own the 20%, the permit decision obviously did not go your way, but you do have a plan in place and it sounds like something that you're working on Mike?
Mike McInnis: That's correct Gerardo. We have that 20%, it's carried, so there's no cost to us going forward. At such a time as the permit comes back, we expect a new government would approve it actually quite readily. In fact, before the election we'd already been given signals the permit was going to be given, so it was a bit of a bad change in the government, but at the end of the day we're going to see what we can do to get it back on the rails.
Gerardo Del Real: Well, that's excellent Mike. Let's talk about part two.
Part two is Willow, and Willow - just a bit of background - is a property that I've been familiar with since 2010. Almaden Minerals, which was then spun out into Almadex Minerals, had this as part of their exploration portfolio. And it was staked by Dr. Duane and Morgan Poliquin, the father/son team that ran Almaden at the time and now Almadex.
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You have an option to earn into 75% of Willow, and frankly you've done some of the better exploration work in defining the current target. Before we talk specifically about Willow, can you talk about where it's located?
Mike McInnis: Yeah, the Willow property is within what's called the Yerington District in Nevada, it's a historic porphyry copper mining district. They had a deposit mined by Anaconda in the 50s to 70s, and there are other known deposits in the district, one of which is on track now for a production decision. Well located within the United States. There seems to be a favorable government in the states right now to get these kinds of projects moving, so that's where we are there.
Gerardo Del Real: Excellent. Now, Willow, I visited the property last year if I'm not mistaken. I was frankly very impressed. And I'm not a geologist, I never pretend to be, but the alteration signatures, they were obvious even to a layman like myself. Can you talk a bit about the geology at Willow? And then I'd love to get into the work that you've done, the science that you've put in to defining the new drill target there.
Mike McInnis: Sure, no problem there. Just stepping back a wee bit... We, as a company and as a board, decided that we wanted to be in the copper space, we already had Ajax, and so we defined our corporate strategy as being a copper vehicle going forward.
When Ajax appeared to be heading towards production, we started looking for another copper project or two to augment and put it in the pipeline. We looked at many projects, over 100 by our count, and we found Willow.
I have a high respect for Morgan Poliquin's technical capabilities, and on the face of our meeting with Morgan, we went down and had a look at Willow. I was quite impressed. It had three things that I kind of look for when I do an evaluation of this sort. It's in another district, we know that the mechanisms that produce porphyry coppers were operated there because there's several deposits in that district.
The other thing that impresses, and I think you noted that when you walked on the property, was the size of the alteration footprint. I mean, it's 10 square kilometers. That to me, always suggests that a major mineralizing event has taken place when you get that size of an alteration footprint.
The last thing I kind of liked was that there's a number of wide-spaced drill holes that were drilled in the 70s when the original Yerington deposit was being mined. Although none of them have ore grade, many of them have lower-grade mineralization of a porphyry copper style, .08 to .2 copper. I like that when you see that much copper in an area, you know that there's been a lot of mineralizing going on. That again suggested to me that the size of the copper distribution suggested a very major mineralizing event. That's what drew us to the Willow property, as you've already pointed out. The challenge then when we took it on was to find the center of this mineralization that we were speculating on.
Mike McInnis: We can talk a little bit about the geology, what we did, why we did it, and the results if you'd like right now Gerardo?
Gerardo Del Real: I would love that Mike. It's long been postulated that there's a fifth porphyry in this Yerington camp, and all of the work that you've done thus far here in the past several years suggests that you very well have that fifth porphyry on the company's claim. So much so that you recently added to the land package, is that right Mike?
Mike McInnis: That's correct. All of our work that we did pointed to a target on the eastern side of the property, and we'll go through that with you to see how we got there. But once we saw that, it was clear that half the target was probably on claims held by a local individual in Yerington. We acquired all those claims so that we have now, complete control over where we think the target is.
Continue to the second part of this interview.
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.