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Arizona Mining (TSX:AZ) owns the Hermosa Project which hosts two globally significant deposits ‒the Taylor and Central deposits near Tucson, Arizona. The Taylor Deposit shares with Vale’s (NYSE:VALE) prolific Voisey’s Bay the distinction of being one of only two of the world’s most significant base metal deposit discoveries in the Americas in the last 30 years.
Taylor is one of the world’s top 15 largest zinc-lead deposits and ranks as one of the highest grade for similar sized zinc-lead-silver deposits. A recently-completed Preliminary Economic Assessment (PEA) and updated mineral resource estimate upgrades total resources to 72.5 Mtons (65 percent) in the Measured and Indicated category, compared to 27 percent in the Indicated category shown in the previous resource estimate completed in October 2016.The large resource at Taylor and the company’s commitment to fast-tracking the project offers shareholders excellent exposure to improving zinc fundamentals at a time when very few options are available in this space. Zinc inventories are at their lowest level since 2009 at the same time that mine production is down, leading analysts, including those at Scotiabank and RBC Capital, to forecast an inventory deficit for the next five years, resulting in expected higher prices by 2019.
Arizona Mining is focused on aggressively advancing the Taylor Deposit to become a significant producer of zinc and lead concentrates (silver reports to both concentrates). Metallurgical studies have shown that the mineralization is capable of producing high-grade lead and zinc concentrates, which are in high demand from smelters.
In May 2017 Arizona Mining closed a CAD$110 million private placement financing with South32, a Perth-based diversified mining company with operations in Australia, South Africa and South America. In return for its investment, South32 now owns about 15 percent of Arizona Mining’s outstanding shares.
“Arizona Mining is now fully funded to complete its plans over the next year including advancing the Taylor Deposit to the feasibility and permitting stage and conducting an aggressive drilling campaign to expand the size and potentially the grade of the deposit,” said Jim Gowans, Arizona Mining’s President and CEO. Management expects to complete the Feasibility Study in the first half of 2018 with first production anticipated for late 2020.
The world-class resource at Taylor and the company’s commitment to fast-tracking the project offers shareholders excellent exposure to improving zinc fundamentals at a time when very few options are available in the equity market. Zinc inventories have been decreasing steadily, indicating stronger demand, and recent closures of large producing mines such as Lisheen, Century, Brunswick and Perseverance, and reduced production forecasts from mines like Red Dog, point to an overall deficit in supply through 2020 of about 10% of world supply.
Lack of past investment has resulted in few new large-scale mines expected to come on-line to offset these recent closures.
The Central Deposit at the Hermosa Project also provides significant un-realized value for Arizona Mining shareholders. The manto oxide type deposit is a large silver-manganese-zinc measured, indicated and inferred resource grading approximately 2.6 ounces per ton silver.
Arizona Mining’s top-tier management team makes the company a standout amongst its junior peers. James Gowans, President and CEO, has decades of experience in C-level positions for leading mining companies such Barrick Gold (TSX:ABX), DeBeers Canada, Cominco, PT Inco Indonesia, and Placer Dome. Gowans has been responsible for building and operating six world-class mines including two of the world’s largest lead-zinc mines, Polaris and Red Dog. The company’s COO, Don Taylor, led the discovery team at Hermosa. Taylor is an internationally successful geologist with more than 30 years’ experience moving projects from exploration to mine development with companies such as BHP (NYSE:BHP), Westmont and Doe Run. Director Johnny Pappas is a leader in the field of environmental management and permitting, and was recently instrumental in directing the federal and state permitting of the Haile mine, the first gold mine permitted east of the Mississippi in the last 20 years.
- First class exposure to improving zinc fundamentals.
- One of the world’s premier undeveloped zinc-lead-silver deposits at the Hermosa Project in southern Arizona.
- Large, high-quality Taylor discovery ranks among the highest grade of similar-size global resources; 2017 Measured and Indicated resource of 72.453 million tons, at a grade of 10.5 percent zinc-equivalent, and 38.6 million tonnes in the Inferred category, at 11.6 percent zinc-equivalent.
- Simple flotation processing of ore with recoveries of high grade concentrates.
- Substantial exploration potential on extensive land package; resource remains open in several directions.
- Recent CAD$110 million financing, carrying the Taylor Deposit through to feasibility and permitting stages.
- Completed Feasibility Study slated for H1 2018.
- Experienced management team with considerable mine building and operating expertise.
- Tight share structure with good liquidity; management and the Board hold 40 percent of shares, of which Arizona Mining Chairman Richard Warke holds the majority.
Key Property: Hermosa Project
The Hermosa Project encompasses 450 acres of patented mining claims and 19,015 acres of unpatented mining claims in Arizona’s Santa Cruz County, about 80 kilometers southeast of Tucson and 13 kilometers north of the US border with Mexico.
Hermosa is surrounded by excellent infrastructure including the Arizona State Highway 82 (less than 10 miles from the project) and Interstate 19, as well as access to the power grid and natural gas.
The recently discovered Taylor Deposit is a carbonate replacement deposit located down-dip and below the Central Deposit (a manto oxide deposit).
In April 2017 Arizona Mining released a PEA and updated mineral resource estimate based on its 2016-2017 exploration program.
“We have a much greater degree of confidence in the updated resource given that it is now grade shell-constrained and is based on a much closer average drill spacing of approximately 150 feet, an improved specific gravity model and significantly stricter parameters for the resource interpolation,” said COO Don Taylor.
The deposit now contains a Measured and Indicated resource of 72.5 million tons, at a grade of 10.5 percent zinc-equivalent. The Inferred category shows 38.6 million tonnes at 11.6 percent zinc-equivalent. The resource is based on a 96-hole drill program totalling 109,189 metres. According to Arizona Mining, all the holes intersected sulfide vein or strata-bound carbonate replacement sulfide mineralization.
The PEA envisions mining the Taylor sulfide deposit using underground methods, with initial production starting in 2020 and ramping up to 10,000 tonnes per day in 2023. The lead-zinc ores would be processed through a standard crushing and grinding circuit followed by flotation, thus producing separate lead and zinc concentrates. Prior to production, the estimated $457 million in needed capital includes $99 million for the processing plant, $84 million for the shaft, $61 million for site infrastructure, $32 million for mining equipment and a $63 million contingency.
The current resource at the Taylor deposit only represents a portion of the property’s mineralized potential. Seven drill rigs are conducting exploration drilling on Arizona Mining’s land package. Potential targets include:
- Upgrading the 38.6 million tonnes of Inferred resources, which would add about 11 years of mine life.
- Ongoing work in the Taylor Deeps Zone, which has recently intersected higher grade zinc, lead and silver at much shallower elevations. The zone is open in all directions. Recent drill results include:
- 122 feet assaying 12.9% combined Zn/Pb and 10.7 opt silver
Including a 27 foot interval assaying 33.1% combined Zn/Pb and 41.2 opt silver
- 61 feet assaying 30.3% combined Zn/Pb and 9.8 opt Ag
- 100.5 feet assaying 4.2% combined Zn/Pb and 2.9 opt Ag
Including a 29 foot interval assaying 12.2% combined Zn/Pb and 6.3 opt Ag
- 122 feet assaying 12.9% combined Zn/Pb and 10.7 opt silver
- The volcanic-hosted Trench Vein System, up to a mile in strike length, 1,000 to 3,000 feet deep, with widths up to 50 feet. Recent drill results include:
- 6 feet assaying 5.3% zinc; 28.1% lead; and 18.5 opt silver
- 86 feet assaying 14.5% zinc; 8.7% lead; and 7.2 opt silver
- Outlying targets that drill holes have identified as additional sulfide mineralization.
Excellent high grade recoveries
Metallurgical testing done in March 2017 showed increased recoveries for zinc, lead and silver than previously. Locked cycle tests done by SGS Lakefield returned zinc recoveries of 92.7 percent and lead recoveries of 95.4 percent, compared to 85.5 percent and 92.9 percent, respectively. The testing also revealed that silver is expected to be payable in both the lead and zinc concentrates.
Permitting expecting in H1 2017
Arizona Mining has initiated permitting the mine with the State of Arizonaand expects to have key permits to break ground in the fall of 2017. The company notes the mine will have a small environmental footprint, due to its plan to return at least 45% of tailings underground for cement backfill, and the use of dry stack tailings, which maximize water recovery. A feasibility study, expected in H1 2018, will focus on upgrading the current resource to proven and probable reserves, along with additional geotechnical and hydrology work.
Richard W. Warke—Executive Chairman, Founder
Richard Warke has more than 25 years of experience in corporate finance and marketing in the global resource industry, and has been involved in raising over $1 billion dollars in equity for resource companies. Although his endeavors have primarily involved mineral resource operations, he has also been involved with oil and gas, forestry, technology and manufacturing operations. He was also the founder and Chairman of Ventana Gold Corp which was sold for C$1.533 billion and Augusta Resource Corporation which was sold for C$666 million. Warke is currently the Executive Chairman of NewCastle Gold Ltd.
James Gowans—President and CEO, Director
James Gowans has more than 30 years of experience in mineral exploration, feasibility studies, construction and operations, including at the Red Dog and Polaris mines. He was formerly Co-President and EVP & COO of Barrick Gold. Prior roles include Managing Director of Debswana Diamond Company (Pty) Ltd., President & CEO of De Beers Canada Inc., COO & SVP of International Nickel Indonesia tbk PT, and EVP at Placer Dome. He is a Professional Engineer and received a Bachelor of Applied Science degree in mineral engineering from UBC and attended the Banff School of Advanced Management.
Donald R. Taylor—COO and Director
Don Taylor has 30 years of successful mineral exploration experience in base and precious metals, taking projects from exploration to mine development. He was previously VP, Exploration at Doe Run Resources and BHP Minerals. He is a Licensed Professional Geologist in several states and a QP as defined by NI 43-101. Mr. Taylor is the 2017 winner of the SME’s Ben F. Dickerson award. Mr. Taylor has a Bachelor of Science degree in Geology from Southeast Missouri State University and a MSc from University of Missouri at Rolla.
Johnny Pappas—Director, Environmental and Permitting
Johnny Pappas has a distinguished career in the field of environmental management and permitting. He recently held the position of Director of Environmental Affairs for Romarco Minerals Inc., where he was instrumental in directing the federal and state permitting of the Haile Gold Mine; the first gold mine permitted east of the Mississippi in the last 20 years. He was previously Environmental Manager of the Climax Mine and Permit Coordinator for Barrick’s Cortez Gold Mine. He has also held Senior Environmental Engineer positions with Pacificorp, Plateau Mining and Santa Fe Pacific Gold. Pappas holds a B.Sc. degree in Geology and Business Administration.
Paul J. Ireland—Chief Financial Officer
Paul Ireland is a Chartered Accountant with extensive financial experience in mining and forestry. He is also CFO of NewCastle Gold. and is a Chartered Accountant. Prior CFO roles include Ventana Gold Corp., Diavik Diamond Mines Inc. and Western Forest Products Inc. Mr. Ireland has successfully negotiated significant debt re-financings and raised new equity capital.
Gregory F. Lucero—Vice President, Community and Government Affairs
Gregory Lucero has more than 20 years of management experience in the public and private sector, as well as an extensive background in the executive government working for local, state, and federal elected officials. Prior to Arizona Mining, Mr. Lucero was the County Manager for Santa Cruz County in Arizona, where he also served as the chief lobbyist at the state legislature and US Congress. He holds a Bachelor of Arts in Political Science from the University of Arizona.
Purni Parikh—Vice President, Corporate Secretary
Purni Parikh has more than 25 years of experience in business administration including with public companies in the areas of communications, investor relations and legal administration. Ms. Parikh is President of Augustagroup and Vice President, Corporate Secretary for Plata Latina Minerals and Newcastle Gold Ltd. She was also Vice President, Corporate Secretary for Augusta Resource Corporation prior to its acquisition.
Susan Muir—Vice President, Investor Relations and Corporate Communications
Susan Muir is an experienced investor relations executive, and was most recently Vice President, Investor Communications at Barrick Gold Corporation, following a series of increasingly senior roles since 2007. Prior to Barrick, Susan has 25 years’ experience analyzing and covering large and small cap precious metals equities, respectively.
John Boehner served as the 53rd Speaker of the United States House of Representatives from 2011 to 2015. A member of the Republican Party, Boehner was the U.S. Representative from Ohio’s 8th congressional district, serving from 1991 to 2015. He previously served as the House Minority Leader from 2007 until 2011, and House Majority Leader from 2006 until 2007. Following his career in government service, Mr. Boehner joined Squire Patton Boggs, a global law and public policy firm. He earned a Bachelor of Arts in business administration from Xavier University.
William Mulrow is a Senior Advisor at the Blackstone Group, an alternative asset manager. Previously, he was a Director of Global Capital Markets at Citigroup, Inc., a Managing Director of Paladin Capital Group, a Senior Vice President and Head of New Product Development at Gabelli Asset Management (now GAMCO Investors), a Managing Director in Corporate Finance for Rothschild Inc., and a Managing Director and Head of Public Finance Banking for Donaldson, Lufkin and Jenrette Securities Corporation. He is a graduate of the Kennedy School of Government at Harvard University and of Yale College where he graduated Cum Laude and was a Rhodes Scholar finalist.
Poonam Puri, Professor of Law and formerly Associate Dean at Osgoode Hall Law School and affiliated scholar to Davies Ward Phillips & Vineberg LLP, is one of Canada’s most respected scholars and commentators on issues of corporate governance, corporate law, securities law and financial regulation. Professor Puri is a member of the Board of Directors of the Greater Toronto Airports Authority and also sits on the Board of Directors of Toronto’s Women’s College Hospital. She has a Bachelor of Laws (LLB) degree from the University of Toronto, a Master of Laws (LLM) degree from Harvard Law School and is a member of the Institute of Corporate Directors.
Don Taylor has 30 years of successful mineral exploration experience on more than five continents in base and precious metals, taking projects from exploration to mine development. He was previously VP, Exploration at Doe Run Resources and BHP Minerals, has a Bachelor of Science degree in Geology from Southeast Missouri State University and a MSc from University of Missouri at Rolla. He is a Licensed Professional Geologist in several states and a QP as defined by NI 43-101.
Donald R. Siemens—Director
Donald Siemens is an independent financial advisor specializing in corporate finance, cross-border transactions and mergers and acquisitions; previously, Partner-in-Charge of Thorne Ernst & Whinney’s (now KPMG) Vancouver office Financial Advisory Services group; over 30 years of experience as a Chartered Accountant; currently Director and Audit Committee Chair for Atlantic Gold Corporation, Eros Resources Corp, Epicore BioNetworks Inc. and Hansa Resources Limited. Donald obtained his Chartered Accountant designation in 1973.
Robert P. Wares—Director
Robert Wares is a professional geologist with more than 30 years’ experience in mineral exploration and research. Currently, he is President and CEO of NioGold Mining Corporation, Chief Geologist for Osisko Gold Royalties Ltd. and director of several public mining companies. Wares was formerly the Executive VP, COO and Founding Director of Osisko. Wares holds a Bachelor’s Degree (Honours) in Geology and an Honorary Doctorate in Sciences from McGill University.