How Investors and Mining Companies Benefit from Stockpile Projects

Stockpile projects can finance future exploration

Stockpile mining projects can cover all types of metals and minerals. For instance, production at Energy Resources of Australia's (ASX:ERA,OTC Pink:EGRAF) Ranger uranium mine was done entirely with stockpiled ores from 2012 onward, when mining operations ceased. Although the mine has ceased production, until recently it was one of the top suppliers of the global energy market.

Situated 64 kilometers southeast of Phoenix, Arizona, the Cactus project is a brownfields copper mining operation wholly owned by Arizona Sonoran Copper Company (TSX:ASCU,OTCQX:ASCUF). Existing stockpiles will play a major part in onsite production, which has a targeted start date of 2024. In April 2022, Arizona Sonoran announced a strategic partnership with Rio Tinto (NYSE:RIO,ASX:RIO,LSE:RIO), part of which involved a strategic investment of up to C$30.5 million.

The build up of a stockpile requires careful treatment to ensure the right grade is correctly modeled and that the right value of the stockpile is reported on balance sheets. When calculated properly, companies like CMX Gold & Silver (CSE:CXC) can leverage revenue from stockpile resources to help finance further exploration and production.

CMX Gold & Silver is a junior silver and gold mining company that is currently working to reactivate the high-grade Clayton silver project in Idaho's Bayhorse mining district, situated in Custer County. The property, which is 100 percent owned by the company, covers roughly 276 hectares and contains extensive mineral stockpiles.

First discovered in 1877, the Clayton silver mine was historically one of the largest silver producers in the state. Records indicate that by the time mining operations ceased in 1986, the mine produced roughly 7 million ounces of silver, 86.8 million pounds of lead, 28.2 million pounds of zinc, 1.7 million pounds of copper and 1,454 ounces of gold. According to these same records, the mine may still contain over 227,000 metric tons (MT) of ore that has yet to be mined.

CMX estimates that the mine may contain many times more resources that have yet to be proven. Previous owners and operators engaged in very little exploration or development, which means there is significant potential for confirming and adding more mineral resources underground. Estimates for the mineral content of this stockpile range from 500,000 MT to 1,000,000 MT. Once this is achieved, the company will operate a mill with double to triple the capacity of the project's former mill, further increasing the potential value of the mine's resources.

The takeaway

A company operating a stockpile mining project is positioned to generate cash flow by producing resources from a stockpile. Since the costly step of mining has already taken place, the company can focus on assessing the value of the resource as well as establishing a market for its future product. Investors can benefit when a company processes stockpile resources with a quick, low-cost mining operation.

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