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4/14/17

Arizona Mining (AZ.to): So much for "clean concentrates"

The devil is in the details. For the last year, we've listened as Arizona Mining (AZ.to) has insisted that its Hermosa Zn/Pb/Ag project would produce what it auto-denominates a "clean concentrate" for smelters. Even when Global Mining Observer pointed out its dirty little Manganese secret, set to screw up the Zn conc, they denied everything and continued with its marketing spiel on how its conc would be "clean" and rather than address the project's fatal flaw weaknesses decided to try and kill the messenger and tried to dig up dirt on the people who dared to point out a few basic truths about its overhyped and overexpensive stock price. 

But reality bites. Come the day that a third party needs to sign off on the idea, i.e. the 43-101 compliant PEA compiled by AMC and filed to SEDAR last night, we get the following (and IKN does a bit of highlighting for you) from page 182 of the PEA:

19.2 Concentrate terms

19.2.1 Zinc concentrates
The project is expected to produce approximately 235,000 dmt zinc concentrates on average annually. Based on indicated grades, the zinc concentrates should be suitable for most zinc smelters; however, elevated levels of manganese may result in the imposition of minor penalties for AMI.

19.2.1.1 Commercial terms
For the purposes of project evaluation, the following terms were used in derivation of the zinc concentrate NSRs (all figures in US dollars).
Payable metals:
  • Zinc: 85% of the Zn content, subject to a minimum deduction of 8 units
  • Silver: Deduct 3.0 ozs/dmt and pay for 70% of the balance of Ag content
  • Treatment charge: US$210.00/dmt ($190.51/dst)
  • Penalties: All inclusive, US$12.60/dmt (Mn - 0.50% free; US$1.50 per dmt for every 0.10% above 0.50%)

19.2.2 Lead concentrates
The project is expected to produce approximately 189,000 dmt lead concentrates on average annually. Based on the expected analysis, the concentrates can be considered ‘clean’, high grade with valuable levels of payable silver and no deleterious elements which might affect their marketability.

You see that? Cool, huh? Suddenly, and even at this early PEA stage when Everything Is Awesome (will we ever see a PFS or is the spymaster Warke going to try and flog it first?), AMC are only willing to call the Pb conc "clean", as when it comes to the Zn conc we only get "suitable" and that guff about minor penalties again (and repent at thy leisure on that one, true believers). Oh to have been a fly on the wall when AMC refused to sign off on "clean Zn concs".

And that's just one thing that stands out about the difference between the AZ.to promotions to date and the PEA we finally got to see yesterday (ConfCall Monday, I hope GMO calls in). Others include the way they've decided to build the dry stack tailings on top of the Central deposit (in other words, kiss that goodbye forever) or the way they're so land constrained they've had to jam the whole above ground into postage stamp dimensions.