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Metanor has been undergoing development ramp-up at its newly refurbished Bachelor Gold Mine and Mill in mining friendly Quebec. Bachelor is a very rich underground mine with grades upwards of 26 g/t gold with an average grade of 7.38 g/t gold (fully diluted using long hole). Recent and ongoing development work should result in a series of production growth months over the next year for MTO. The stabilization of production at ~3,000 oz per month sets the stage for a cash flow positive scenario and a push to closer to 4,000 oz per month this Q4, and then a push for 4,000 - 5,000 oz Gold per month target (at 800 TPD) for possibly as early as the end of this year. forward looking, once commercial production status is attained at Bachelor, it is managements stated plan to increase the mill capacity by ~50% at low capex and target 80,000 - 90,000 oz Gold/year in 2015.
The team Metanor has assembled is making exceptional progress and this 2013 will reveal itself as a breakthrough year for MTO after years of readying the mill and mine for its reopening. There has been a sector-wide pullback in mining equities over the last couple years and the timing appears ideal for investors to establish a long position in MTO.V now. The production accomplishments now beginning to bear fruit will position MTO.V as an improved quality of equity that will attract a larger audience for its shares and should translate to a rise in share price as the reality of its accomplishments are appreciated.
Taking a mine into production is a non linear step-up function fraught with development challenges, but nothing a skilled technical team can’t solve. The ramp-up process is analogous to climbing Mount Everest; go up as high as you can and then come back and acclimatize before you push to the next level. The total production at Bachelor since reopening in July 2012 is 17,451 ounces of gold. Near the beginning of 2013 Metanor demonstrated an increasing pattern of production with two step-ups that resulted in 3017 ounces of gold produced in February (compared to 2236 oz in January and 1718 oz in December). However, the development work performed in March, April and May (necessary to open multiple access points/workstations) generated a large amount of lower-grade gold-bearing ore that needed to be processed through the mill with a lack of other workstations open to blend and maintain a high-grade (ironically temporarily exacerbating the very issue the development creating this ore is meant to cure). Now the new opening of access points appear to be resulting in production stability with 3,215 oz gold produced in June, July is expected to be similar and additional improvements in production expected going forward from there.
Bachelor is a very rich underground mine with grades upwards of 26 g/t gold with an average grade of 7.38 g/t gold (fully diluted using long hole). Metanor mined from between only 1 and 2 stopes for the first half of 2013 and only recently opened a third access point. MTO is currently developing the access to the ore on other levels, including level 13 where drifting is moving toward the west, where management has recently discovered an enlargement of the Main Vein. These new areas will enable the company to deliver a steady grade and flow of ore to the mill and achieve greater and sustained daily tonnages.
Metanor is working toward commercial production and is in effect crossing the chasm from development to higher-grade stope production, however the fact is MTO is still in development ramp-up mode sitting at ~50% development ore and 50% stope ore. This results in a fluctuation of production that currently translates to close to 3000 oz gold per month, however when the stopes become the main focus the monthly production numbers will rise significantly (4000 – 5000 oz per month) and commercial production should be declared.
MTO is leveraged to the price of gold, able to sell 80% of its Bachelor Mine sourced gold at spot prices with the balance sold to Sandstorm as per gold participation agreement. Fully permitted and sufficiently staffed with professional mining personnel able to handle the ramp-up, MTO presents investors with an exceptional opportunity as the first new gold miner in Quebec's Plan Nord. Operational highlights of this new low-cost gold producer include;
• Low geopolitical risk.
• Low hydro-electric costs, not affected by oil prices.
• Targeting 60,000 oz per year production at 800TPD, >96% recoveries.
• Cash cost are TBD, once MTO is at speed cash costs will drop, it appears MTO is comfortable targeting $700 - $800 direct cash cost (a ~US$464/oz gold pre-feasibility estimate from Stantec was made prior to a sector-wide rise in costs).
• Identified zones should lead to resource growth and extension of mine life closer to 10+ years; Industrial Alliance analyst calculated (non 43-101) 700,000 oz Gold achievable based on deep hole intercepts and extrapolation of data. NOTE: The April 29, 2013 press release "Metanor Intersects 7.47 g/T over 19.3 M" and May 29, 2013 release "Metanor Intersects 8.49 g/T Over 15.24 m, and 14.17 g/T Over 5.64 m at its Bachelor Project" revealed a new deformation shift gold discovery readily accessible off levels 12, 13, and 14 and we speculate it may add another 200,000+ ounces Gold on top of the aforementioned 700,000 oz figure.
Metanor's infrastructure is valued (estimated replacement value) at ~CDN$200M. The intrinsic value of Metanor’s known resources (~1.6M oz gold in all categories on all its properties) and infrastructure are several times the company’s current market capitalization. With MTO now entering steady-state gold production and cash flow positive status, this should result in improved market awareness and appreciation for the Company; the reality of the infrastructure and resource value, cash flow growth, and clear ability to add ounces should translate to share price appreciation.
Metanor has two projects of significance (Bachelor and Barry) that together many believe will take MTO.V to near mid-tier producer status (between 150,000 oz - 200,000 oz Gold per annum) within a few years. The time to pay attention is now while MTO is trading at a fraction of its infrastructure value and closing in on its gold production target. MTO has only $17 million in long-term debt ($7M from the government and $10M on a convertible debenture with a buyback provision) at very manageable terms. This summer MTO received ~$2.4 million from the Quebec government (for mining tax credits that were on Metanor’s receivables and are now in cash) – as of mid-August 2013, the new funds together with the cash on hand and gold bars in transit, liquidity stands at ~$5 million. MTO appears to now be approaching 'cash flow positive' operational status, possesses large organic resource growth potential, and is sitting geographically as the only mill located within 200 km in a gold rich district -- MTO with ~267 million shares outstanding (~290M fully diluted, however we note most warrants are deep out-of-the-money and will expire unexercised) provides an ideal vehicle for investors seeking exposure to precious metals.