Funny, I got it just fine ... perhaps they've fixed something on their site in the meantime?
Antyay, here's the report:
PACIFIC INTERNATIONAL SECURITIES
INC.
by Wendell Zerb, B.Sc., P. Geol
wzerb@pi-securities.com
(604) 664-2693
Mining
Research
Corner Bay Minerals Inc. (T-BAY) - Speculative Buy
Alamo Dorado Property Exam
October 30, 2000
Price: $1.60
Target: $4.30
Daily Volume: 12,000
Shares Outstanding (FD): 13.4 million
Market Capitalization: $22 million
Float: 7 million
President: Peter Mordaunt
On October 17-18, 2000 we toured Corner Bay Miner-
al's Alamo Dorado Project in Sonora Mexico. The Alamo
Dorado is a silver/gold deposit with a potentially mine-
able resource in excess of 125 million ounces of silver
equivalent. Corner Bay has evaluated the deposit in three
separate RC drilling campaigns. In addition, the com-
pany has completed four large-diameter core holes for
bulk metallurgical work. A total of 71 holes were drilled
for a total of 18,984 metres. Preliminary column leach
metallurgical work and mine planning as part of a pre
feasibility program suggest the Alamo Dorado has the
potential to be viable silver/gold heap leach mining op-
eration. Overall we were impressed with the project and
the work completed to date by the company, and its
consultants. As part of the due diligence tour we had the
opportunity to meet with key representatives of the com-
pany's two main consultants, Mintec Inc. and METCON
Research Inc. We were impressed with the abilities of
both companies and are satisfied the work performed
to date has been conducted in a prudent, professional
manner.
The Alamo Dorado project was accessed via paved road
from Ciudad Obregon, which connected to the prop-
erty, by about 60 km of gravel road from the small town
of Alamos. The nearest international Airport is located
in Hermosillo, in the central part of the state, where
local connections can be made to Ciudad Obregon to
the south. Total travel time by vehicle from Ciudad
Obregon to the property was about 3.5 hours. The min-
eral property, controlled by Minera Corner Bay S. A. de
C.V.a wholly owned subsidiary of Corner Bay Minerals,
consists of 2 mining concessions covering a total area of
5,375 hectares.
The Alamo Dorado deposit itself lies on the top of a
steep, north trending ridge, which is elevated about 250
metres above the valley floor. The deposit occurs within
a package of metamorphosed sediments and intercalated
felsicvolcanicrocksranging fromCretaceoustoPaleozoic
in age. These metamorphosed (schists) rocks occur as
roof pendantswithinalarge barrengranodioritetoquartz
monzonite batholith. Host schists are intensely altered;
especially intense is the hematitic alteration, which is
pervasive. Mineralization is associated with quartz-
sericite and quartz, which we observed at one outcrop
Business: Mineral exploration/development
on the steep eastern slope. The structural influence in
the area is complex. Evidence in outcrop shows good
ground preparation of the host schists with a number of
fractures and microfractures filled with a variety of quartz
and a black greasy mineral described as chlorargyrite,
the dominant silver mineral at Alamo Dorado. A low
angle detachment zone paralleling the dip angle of the
deposit is currently thought to be associated with the
mineralizing event(s).
Overall infrastructure is excellent, and we foresee no se-
rious problems in locating a mining operation in the area.
Initial mine permitting will begin in early 2001; the com-
pany does not anticipate any project sensitive obstacles.
There are two hydroelectric facilities in the area, with
excess power available (according to BAY management)
to tie into the project. The company recently submitted
an inquiry for a proposal to extend a local power grid
approximately 5 km to the project. There are three dif-
ferent ejidos with surface rights in the area. Under Mexi-
can mining law there are different methods of acquiring
long-term access to the ejidos land rights. Although deal-
ing with surface rights in Mexico can be difficult, the
company expects surface rights issues will be negotiable
and non obstructive to the advancement of the project.
Discussion with BAY's consultants
To further our understanding of the work completed to
date and the plans for additional studies we met with
representatives of BAY's two main consultants. John
Thornton, VP of Mintec Inc. and Joseph Keane, Presi-
dent of METCON Research Inc.
Mintec has been responsible for providing the resource
estimations and preliminary mine planning at Alamo
Dorado. Principals at Mintec are pioneers in the mining
software field, and are responsible for developing
Medsystem, a mining software system used worldwide.
Our main concern addressed by John Thornton was the
confidence in the current resource estimation. John is
satisfied that his statistical studies show excellent corre-
lation of data. Evidence (correlation of holes, core an-
gles, mineral boundaries) suggested drill hole intersec-
tions (E to W) are representative of the mineralized body.
Joseph Keane, President of METCON Research Inc. re-
viewed the column leach metallurgical work completed
to date on Alamo Dorado. METCON have a long list of
professional references including Phelps Dodge,
Kennecott, and Coeur d'Alene Mines. METCON were
the main metallurgical consultants for Coeur d'Alene's
Rochester Mine, an operation (silver/gold) similar in many
respects to the proposed operation at BAY's Alamo
Dorado. In general Mr. Keane described the Alamo
Dorado column leach work as indicating good leach char-
acteristics, better than those achievable at Rochester. Mr.
Keane believes the results achieved in the current open
cycle leach tests on Alamo Dorado "ores" should be
within 2% of what recoveries the actual heap will achieve.
The three key factors in achieving the estimated recover-
ies (65-70% silver, 75% gold) are agglomeration, crush
size, and cyanide consumption. Tests performed to date
suggest that to achieve good recoveries a small crush size
for Alamo Dorado "ores" is critical. Current testing sug-
gests a crush of 80 % passing 1/4 " is required. Other
heap leach operations including Rochester use a similar
crush size. Tests to date show by agglomerating at these
crush sizes allows good fluid percolation and should aid
in the stability of the heaps. Also critical in order to achieve
good recoveries from the heaps, will be controlling the
cyanide consumption. Alamo Dorado "ores" contain
enough potential cyanide consuming metals (mostly cop-
per) that efforts must be made to control them. Mr. Keane
recommends completing a Lock Cycle leach test, which
will help determine the extent of the cyanide consump-
tion. Once the details of the consumption are known he
believes itss a matter of managing the heaps (for example
adding zinc dust) to control the cyanide consumption.
The majority of operations that have encountered cya-
nide consumption problems are those where the appro-
priate laboratory tests followed by effective mitigation at
the start of the operation to reduce the cyanide consump-
tion, were not implemented.
Conclusion
Corner Bay Minerals is a TSE listed mineral exploration
company that has an option to earn 100% interest in a
silver/gold property in Sonora, Mexico, the Alamo Dorado.
In our base case valuation of Alamo Dorado we estimate
a project IRR of 55%, and NPV (7.5% discount) of C$89.6
million. Assuming BAY advances Alamo Dorado to pro-
duction this translates to a NPV value per share for BAY
of C$4.27 (based on 21 million shares outstanding). Given
the attractive fundamentals of the project, we believe BAY
could be the target for acquisition of several mid sized
gold or silver producers. The difficulty given the current
state of the gold and silver markets is the value a mid size
producer can offer Corner Bay shareholders. There are
currently only a hand full of mid size producers those
operations are cash flow positive, which effectively would
dilute the value of Alamo Dorado should the asset change
hands. Furthermore, there are very few mid size produc-
ers that have cash to offer, and fewer that will part with
it. This leaves Corner Bay most likely moving forward
with developing the project. Should a fundamental shift
in metal prices (particularly silver) or a renewed interest
in mining stocks occur, the options for Corner Bay would
improve considerably. We are maintaining our current
Speculative Buy recommendation on Corner Bay with a
12-month target of $4.30.n
Recommendation: Speculative Buy |
