Rio Silver President and CEO Chris Verrico joined the Investing News Network at the Vancouver Resource Investment Conference to discuss exploring and developing the company’s Peruvian properties.
Rio Silver (TSXV:RYO) President and CEO Chris Verrico joined the Investing News Network at the Vancouver Resource Investment Conference to discuss his company’s progress exploring and developing its Peruvian properties.
Rio Silver recently acquired the Palta Dorada gold-silver-copper property as a means of generating revenue to fund its flagship Niñobamba project. The company has signed a memorandum of understanding with Peruvian Metals to jointly explore the property by initially conducting sampling and mapping along with a bulk sampling campaign that is expected to process the material at Peruvian Metals’ 80 percent owned Aguila Norte processing plant.
According to Verrico, Rio Silver intends to leverage the revenue generated through its Palta Dorada property in order to fund the continued exploration of the company’s flagship Niñobamba project. Verrico believes the Palta Dorada property will pay for itself, allowing the company to continue to advance it while funding additional drill programs at Niñobamba. Peruvian Metals has an opportunity to earn 50 percent on the Palta Dorada project once it commits an additional US$250,000 to the project.
Below is a transcript of our interview with Rio Silver President and CEO Chris Verrico. It has been edited for clarity and brevity.
INN: The name of your company is Rio Silver. What’s your symbol and what market are you trading on?
CV: RYO, and we are on the TSX Venture.
INN: Tell us a little bit about the company.
CV: We’re in silver-gold, gold-silver. A majority of our projects are in Peru and they’re almost all half and half, one way or the other. The company has been around a little over 10 years and sort of suffered through the last market but has a very unique and valuable asset in Peru, which is why the company survived and now is regrouping and going out.
INN: So, what’s the state of that property right now? Where are you at?
CV: We’re at a state of drill readiness. It’s a big high sulfidation gold, silver, zinc epithermal mineralized deposit. It started back in 2000 when AngloGold (NYSE:AU) made a pass through Peru on a very quick pass. They actually stopped on our Niñobamba project and drilled a hole but they were looking for low-hanging fruit and went on to stake three million hectares of property in Colombia, so they were in a rush. They immediately farmed it out to Bear Creek Mining (TSXV:BCM,OTCQX:BCEKF) who picked up the slack as a way to move things forward. They worked at it for some time with medium results; they drilled a few holes but they also had other projects that were their primary concerns, so Niñobamba didn’t quite make it during the 2000 pass.
It’s a big caldera there, a big collapsed caldera. We had AngloGold and Bear Creek on one side and Southern Copper (NYSE:SCCO), which had owned that property for a long time, on the other side. Newmont (NYSE:NEM,TSX:NGT) came along to do an earn-in on the other half of Niñobamba, spent US$7 million and had to prove to Southern Copper that it wasn’t a base metals project — it was actually a precious metals project.
They did a limited amount of drilling. They drilled 12 or 13 holes and then backed it up with a lot of metallurgical work and process engineering to be sure that the mineral was recoverable and amenable to processing. It was worthy of a major push forward and at the time a report was issued that described this thing as being a profitable mid-size mine. They identified a potential 575,000 ounces of gold and 6,000,000 ounces of silver, and they said it would make a robust mid-size mine but the real opportunity was to find a much bigger deposit.
INN: Because that was what they were looking for.
CV: Absolutely, that was back in 2010. Then things went a little bit quiet, but in the meantime, we managed to get a toll. AngloGold gave us a note they were pulling out of the area and we managed to grab that first property. We got in there in 2009 and in 2010 got a toll in the basin through a deal with the Anglo property. We acquired all of the Anglo property and we did a US$1 million program, including trenching, field mapping and sampling, to get the property drill-ready.
The markets went quiet, time went on and in 2016 Newmont made a mistake and dropped the key pieces of property. We grabbed it and were able to go back and negotiate a deal with them for the rest of the property. We got all the data, US$7 million of data. Since then, because things were so quiet, we managed to systematically drop the properties, notice them and managed to get out of our royalty commitments because we weren’t able to capitalize on them. Now we hold the properties royalty-free. And it’s never been in one common holding.
INN: So you amassed it over time, and it has wound up being a terrific opportunity.
CV: We think it is arguably one of the best underdeveloped high sulfidation epithermal systems in Peru today.
INN: Okay, where are we at today?
CV: Well, it’s been very difficult. We have a sister company. I took over this company about a year ago from a guy named Jeff Reeder who had two companies in Peru. He needed to separate the two. He’s a big shareholder and our qualified person for all of the stuff we do down there. Jeff has Peruvian Metals. Peruvian Metals has a functioning sulfide toll mill in northern Peru. That’s been in their business plan for about five or six years. It’s in commercial production now and it’s cashflow positive. It’s been a long time getting there. Everybody in this room talked about that years ago, and Jeff was the guy who did it.
We knew the advent of having that plant running was going to create a lot of deal flow and sure enough, it did. Jeff came to me last fall and said, “Listen, it’s got a high-grade sheeted vein set 180 kilometers from the plant.” We knew about it, we looked at the property a year ago and he wanted a lot of money but he was desperate, he wanted a little bit of cash and wanted to do other mining things. He said, “Put a quarter million on the table and you can have it.” So I said: “Jeff, give me a month.”
He rallied his board and they didn’t want to dilute Peruvian Metals, so they said, “Chris would you be interested in that project?” I said, “Absolutely.” I went to my family and friends, raised the money and we closed the deal. Now we have an intact high-grade vein system. It’s not going to be take-over-the-world-huge, but it could run for years. It’s a close to the coast high-grade gold, silver, copper, vein set and I bought it, we own it outright, real silver owns it outright.
We have now have access to Peruvian Metals’ mill and they’re going to earn 50 percent by spending the next quarter million. I spent a quarter million on the project and they will spend the next quarter of a million in capital expense to get that thing online. It’s only going to cost about 50 grand to get one heading going, then we’ll augment that and augment that and we’ll slowly, slowly get that thing up to a steady-state of production. I can’t say it will be, there’s no feasibility. But we’re hoping for 500 to 1,000 tonnes potentially over time with much work.
INN: So, you’re going to build this out, you’re not looking for acquisition by a major.
CV: It’s going to pay for itself. We have this vein mapped over 830 meters. We know it’s there, but we don’t know what the depth is. These are mesothermal veins and they have prominent depths with very prominent wall rock and a very prominent structure with dual-cost mining underground. We have over 800 meters, it’s just 60 to 70 centimeters wide. Peruvians just drive on it, we know more about this vein system than most Peruvians do when they start these projects.
They drive on the vein and they liberate what is above and below to become a resource, so it’s a way of generating a resource and paying for it as they go. Because Peruvian Metals is doing the earn-in, all the revenue from that will come into our coffers from the small sampling activity. That revenue is going to help us get Niñobamba, our flagship, drill-ready. That’s our business plan.
INN: What’s your need for financing at the moment?
CV: We’re not in desperate need for any amount of money; we’re doing a very small financing now that we should be receiving soon. I can’t say cash flow because there’s no feasibility, but we believe we’ll be cash flow positive in a couple of months.
That money goes directly to our social license at Niñobamba. We’ve had a drill permit before, but we’ve got to go back in the community. We sent a sociologist in there with a pickup truck and a driver and she gets to know the locals. We’ll earn our license back, they’ll want things done but everything is achievable. It’s mostly about generating a level of trust. That’s how you do things in Peru.
INN: What’s the investment opportunity?
CV: Well, our market cap is US$2 million and we’re at five cents. We had a very tough tax law selling season and we’re only just telling this story now. We’ve battled dilution with our little commercial venture project and we’re doing a small financing so hopefully we won’t have to come back to the markets until we’re absolutely drill-ready at Niñobamba at higher levels and higher prices. So, we think we have a good chance of getting there and creating a lot of value.
This interview is sponsored by Rio Silver (TSXV:RYO). This interview provides information which was sourced by the Investing News Network (INN) and approved by Rio Silver in order to help investors learn more about the company. Rio Silver is a client of INN. The company’s campaign fees pay for INN to create and update this interview.
INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.
The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Rio Silver and seek advice from a qualified investment advisor.
This interview may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, receipt of property titles, etc. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The issuer relies upon litigation protection for forward-looking statements. Investing in companies comes with uncertainties as market values can fluctuate.