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Q&A with Montan Mining Corp. (TSXv: MNY) (FSE: S5GM) – Gold Toll Miller in Peru

 -- Published: Thursday, 18 June 2015 | Print  | Disqus 

With Ian Graham, CEO and Director of Montan Mining Corp.


By Björn Junker of


June 18, 2015


Photo: Mr. Ian Graham, CEO and Director of Montan and Mr. Luis Zapata, Executive Chairman at the Mollehuaca Gold Processing Plant (Toll Mill) Site


1.    Montan Mining Corp. (TSXv: MNY) (FSE: S5GM) is a relatively new company focused on Peru. Can you please explain to our readers why you chose Peru?


Montan was specifically created to be in Peru because our management team has a track record of success, experience and roots there. Mr. Michel Robert, Montan Director and spearhead of our technical efforts was previously Senior Vice President of Pan American Silver Corp. (TSX: PAA) during the foundation and growth years of 1995 through 2001 where he was responsible for the management of operations in Latin America and oversaw the expansion of the company in Peru, Mexico and Bolivia. Mr. Robert knows how to build and operate mines and mills in Peru as well as build a mining company from the start. Mr. Luis Zapata, Montan’s Executive Chairman and Co-Founder is based in Peru and was formerly Head of Latin America Institutional Equity Sales at Canaccord Genuity. Mr. Zapata brings domestic financial capacity to the company as well as government, operational and community contacts.  


Photo: Mr. Luis Zapata, Executive Chairman of Montan Mining Corp. at the Eladium Gold Mine


2.    While the qualifying transaction for Montan was the acquisition of the Alicia Copper Project the primary focus of the company is the Mollehuaca Plant in the Peruvian region of Arequipa. Can you please give us some details on that deal? What exactly did you acquire and what will you have to pay?


Montan recently entered into an agreement to acquire two producing assets: the Mollehuaca Gold Processing Plant (Toll Mill) and the Eladium Gold Mine, as well as an exploration property Saulito, all located in the Arequipa region of southern Peru. The Mollehuaca Plant was recently expanded and has both a carbon-in-pulp (CIP) circuit as well as a flotation circuit with a total capacity of approximately 150 TPD. This will make us the second largest currently operating plant in Peru held by a TSX listed company. The assets are being acquired from a private company Goldsmith Resources SAC whom had spent more then US$4 million and four plus years advancing the assets to their current stage. We will acquire the assets for US$3.3 million staged over 15 months in a combination of equity and cash. The acquisition of an existing permitted, operating and producing gold ore processing facility saves Montan significant capital, time and resources by eliminating the construction and permitting process which building a new gold processing plant would entail.


3.    So, basically you bought / are buying a plant that you will use for toll-milling. What is the opportunity here and where will the ore to be processed come from?


Yes. The plant processes ore from various small-scale formalized gold mines/miners in the region and throughout Peru as well as from the wholly-owned Eladium Mine. It is a good margin / margin protected business – buying ore at a discount to the spot gold price, processing through the plant, and selling the gold or gold-in-carbon at market. The Peruvian government has been taking steps to formalize the small-scale mining space in country and mills so there is increasing need for formalized mills.


In terms of our ore purchasing strategy, Montan recently announced a key addition to our team: Mr. Jose Luis Garcia as VP Operations Peru. Mr. Garcia was previously the manager of minerals procurement for one of the largest Peruvian toll mill operators (annual sales of more than US$150M) and was key to the growth of that company. Without entering into operational details, it is fair to say that minerals procurement is the most important aspect of this business, in comparison with running a plant and its infrastructure which is basically a straightforward technical issue. The key to success is developing and maintaining relationships based on trust and respect. Like most businesses, this is a people business. We are focused on having the right people. Our mill is in a region of high concentration of gold mining activity and we are confident in our ability to source ore, as well as in our expanding team.


Photo: Ball Mill at the Mollehuaca Gold Processing Facility


4.    How are you planning to finance those ore purchases?


Montan is about to finance through an equity private placement – this will be sufficient for initial ore purchases and the beginning of ramp up. In the longer term, we are looking to build relationships with strategic partners that will be able to provide us with low cost credit for ore purchases. This is ongoing – we have been taking parties to site and receiving expressions of interest.


Photo: Feed shipment to the Mollehuaca Gold Processing Facility


5.    What are your next steps? Are you planning to expand the mills capacity? If so, in what time frame and to what capacity?


Our immediate goal is to increase production from its current 30 tpd to its as built capacity of 150 tpd. As we are doing that we will begin the process to upgrade our permits to 350 tpd. This will give us optionality moving forward. Operationally, our initial plan is to achieve steady throughput of 130 – 150 tpd of 0.8/oz Au material and then we will make the strategic decision to go to 350 tpd.


Photo: Mollehuaca Gold Processing Plant


6.    What kind of earnings / cashflows does management believe it will be able to achieve at Mollehuaca?


Cash flow and earnings is highly dependent on throughput (tpd) and feed grade. Based on steady state 140 tpd processing of 0.8oz Au material and assuming a $1150 gold price we should be able to deliver on US$7M+ of EBIDTA per year to begin with.


7.    Assuming all goes as planned and the plant is running at maximum capacity, generating earnings / free cashflow – what are your plans for Montan Mining longer term?


Initially we plan to ramp up to 140 tpd in order to show the market that our team is efficiently running the business. From there on we can expand the existing plant to 350 tpd. As the company becomes a significant cash flow generator we will be able to reward our shareholders through share price appreciation, protection from dilution, potential dividends or share-buy backs. We will also be able to grow the company further through M&A in a depressed market environment where additional accretive assets are cheap.


8.    Why would, in your personal opinion, now be a good time for investors to have a closer look at Montan? Can you give us some examples for how toll-milling companies in Peru have been performing recently?


Several reasons: our share structure is one of the best in the space – with no debt, our management team is experienced, capable, driven and focused – a mix between experience and young energy, our valuation is compelling versus peers and we have a clear cash flow focused business plan.


Comparables – TSX Listed Toll Mill Producers in Peru



Shares / FD


Market Cap.

Debt (~ $M)

Plant Cost (~ $M)

Plant Capacity (tpd)

In Production

Dynacor Gold Mines Inc. (TSX: DNG)

36 M / 38 M


$77.9 M


8 / 10

300 & 300 (1)


Inca One Gold Corp. (TSXv: IO)

68 M / 86 M


$14.3 M













Montan Mining Corp. (TSXv: MNY)

19 M / 21 M


$4.0 M






As at June 11th 2015

(1) Second plant in construction


As the chart below shows the Peruvian toll millers have out-performed all other major gold investment asset classes over the last 12 months – including Gold (Spot), Gold Seniors (HUI) and Gold Juniors (GDXJ).



More on Montan Mining Corp. 


Montan Mining Corp. (TSXv: MNY) (FSE: S5GM) is positioned for growth in Peru through the acquisition and development of advanced and/or cash flow mining opportunities. Montan is backed by an experienced and high-energy management team with diverse technical, market and finance expertise and strengths and is supported by committed and sophisticated investors focused on building value for the long term.


For more information on Montan Mining Corp. please visit their corporate website at or contact Jason Shepherd, Investor Relations at

Ph: 250.212.2122 or TF: 1.866.913.1910 or Email:


Forward-Looking Statements: Certain statements in this article are forward-looking statements within the meaning of applicable securities laws. Such forward-looking statements and information are subject to risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement. Specific risks included that we may not be able to finance our intended acquisition and we may not obtain regulatory approval. General risks include the reliance on available data and assumptions and judgments used in the interpretation of such data, the speculative and uncertain nature of exploration and development, exploration and development costs, capital requirements and the ability to obtain financing, volatility of global and local economic climates, share price volatility, estimate price volatility, changes in equity markets, increases in costs, exchange rate fluctuations and other risks involved in the mineral exploration and development industry. There can be no assurance that a forward-looking statement or information referenced herein will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements or information. Also, many of the factors are beyond our control. Accordingly, readers should not place undue reliance on forward-looking statements or information. We undertake no obligation to reissue or update any forward-looking statements or information except as required by law.

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