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Bayhorse Silver (BHS: TSX-V) has announced a Silver Convertible Debenture financing with proceeds going to reopen our Bayhorse Silver Mine and starting a bulk sample program. By doing this we intend to avoid diluting the Company's shares, and at the same time make the financing attractive for those participants who wish to take advantage of a low silver price, and who want the option of locking in these low silver prices now, for future delivery. (see news release BHS2015-21)
How soon can we start and how will we pay back the Debenture
We expect to begin producing the bulk sample within the first 60 days of commencement of operations. We intend to establish a sinking fund with proceeds from sale of the silver in the bulk sample to repay the Debenture.
The Bayhorse Silver mine is a past producer.
The Company has completed rehabilitation of the portal to the intermediate level that was partially mined in 1984. There is a historical known mineralized zone at the mine approximately 840 feet in length, 85 feet in width, and 22 feet thick, estimated to contain 160,000 tons of silver bearing mineralization at a reported grade of 17-20 ounces per ton silver at a 7.5 ounce per ton cut off. (Herdrick 1981)
The Company advises that a qualified person has not done sufficient work to verify the historical estimates nor classify the historical estimates as current mineral resources or mineral reserves and the Company is not treating the historical estimates as current mineral resources or mineral reserves.
Can we rely on these numbers
Past sampling that can be relied upon has identified grades as high as 69 oz/t (2,146 g/t). The Company has confidence in this sampling as it was conducted by the principal of Cordex Mining, Dr. A. Wallace, P. Geo., and the Company has acquired the data directly from Cordex. Dr. Wallace, of Reno, NV. is a respected exploration and mining geologist who has been honored as a member of the Mining and Exploration Hall of Fame. Other sampling prior to Cordex has identified grades of up to 260 oz/t Ag and in 2014 we sampled a bonanza grade of 4,835 oz/ton silver)
When did the mine last operate?
A short mining program was undertaken in 1984 by Silver King Mines, however, work ceased when the price of silver fell below $5.00 oz and the mine has remained closed until now. The average grade that Silver King mined was 16.7 oz/ton and the highest reported grade mined from the 1984 program was approximately 70 tons at 691 oz/t silver (Ag).
Is there anything that can be mined immediately?
Prior to closing the mine in 1984, Silver King blocked out 1,890 tons ready to mine, (mine plan map). Of the approximately 6,000 tons they mined during the short perio in 1984, Silver King reported 23% graded between 20 to 100 oz/t Ag, 71% graded between 6 - 20 oz/t, and the balance graded 6 oz/t or less. The Company initially plans to focus on the high grade mineralization that we believe we can be upgraded for direct shipping An indicative proposal has been received from Global Metal Tech of Spokane, WA to process that material.
Is it currently permitted and how much can be mined in a year?
The Bayhorse Silver Mine is permitted to remove 5,000 cubic yards (approx. 15,000 tons) from the property each year without further permitting There is reported to be a historic, non National Instrument 43-101 compliant estimated resource of 160,000 tons averaging 17-20 oz Ag per ton using a 7.5 oz/t cut off. (see NI43-101 report on website). Mineralization is open along strike to the west.
The Company advises that a qualified person has not done sufficient work to verify the historical estimates nor classify the historical estimates as current mineral resources or mineral reserves and the Company is not treating the historical estimates as current mineral resources or mineral reserves.
15,000 tons is not a lot.
No it is not, but the Company has conducted dense media separation (DMS) testing on approximately 500lbs of highly weathered low grade material (averaging approximately 5.28 opt Ag or 164 g/t Ag) from the historic waste pile on site, and found we were able to upgrade the silver content by up to 8 times and of course at the same time reducing the volume of the rock by 8 times. So by mining fresh mineralized material at 17 - 20 oz/ton and upgrading it by a factor of 8, then we have potential material for shipping of between 136 - 160 oz/ton. At US$16.50 per ounce the gross value is US$2,244 - US$2,640 per ton and at that grade we do not have to ship a substantial volume to get good cash flow.
What is Dense Media Separation?
Dense Media Separation is a process that uses the difference in specific gravity between mineralization and waste rock to remove the waste and upgrade the mineralized material. A gravity separation can also be achieved to remove waste. These are a simple processes, very cost effective and doe not require permitting, unlike a chemical processing or flotation plant.
How long will it take to reopen the mine and what work has been conducted to date?
We have conducted approximately $500,000 of engineering and geological work at the site and have restored and re-timbered the mine portal and conducted a rock bolting program to ensure a safe working environment.
We have engaged American Mining and Tunneling (AMT) to complete the adit safety work to allow bulk sampling and mining. AMT is an experienced mining contractor currently working on a substantial underground program on the Midas gold mine in Nevada. The work will take approximately 17 - 20 days and cost approximately US$170,000, after which we should be able to commence mining the bulk sample.
There is no need for any infrastructure at this time as all material mined under the bulk sample will be either be direct shipped to Global Metal Tech or stored for future processing.
Bulk Sampling/Mining
An operating budget of $250,000 is planned to commence the initial bulk sampling of approximately 2,500 tons and for mine working capital. While we use the term "bulk sampling" we will actually be able to conduct continuous exploratory mining. We are permitted to ship, per year, a maximum of 5,000 cu/yds (15,000 tons) of material per year from the mine site.
As we propose to use dense media separation of the bulk sample on site we can reduce the volume of material by as much as 80% with a commensurate increase in grade We anticipate shipping only direct shipping material and not exceed the maximum of 5,000 cu/yds permitted. As an example, assuming 600 tons of ore is mined per week, at 17 - 20 opt Ag, once subjected to DMS, should reduce to approximately 75 tons of direct shipping ore at 136 opt Ag, containing 10,200 - 12,000 ounces a week. In 12 months, that is only approximately 3,900 tons of very high grade rock and up to 530,000 ounces of silver.
By doing this the Company can quickly generate substantial cash flow and minimize future financings and dilution.
How realistic are our prospects?
We have conducted a substantial amount of work to date, and while this will only be a small mine, we do not have to spend a significant sum to get it up and running, so the prospects are very favorable. Because of the minimal amount of time required to complete the safety work and access the historic resource, there is minimal time risk.
Many companies wish they could generate cash flow to reduce dilution. We have that opportunity at a minimum cost, and with cash flow can grow the Company without going to the markets for dilutive financings and we expect our share price to grow as well.
Caution Regarding Forward-Looking Statements - All statements herein, other than statements of historical fact, including, without limitation, plans for and intentions with respect to the Company's capitalization, preparation of technical reports, proposed work programs, budgets and proposed expenditures, permitting, construction and production timing are forward looking statements. While the Company believes such statements are reasonable, no assurance can be given that any expectations will prove to be correct and the forward-looking statements are not guarantees of future results or performance and that actual results may differ materially from those in the forward-looking statements. Readers should not place undue reliance upon forward-looking statements and the Company undertakes no obligation to re-issue or update any forward-looking statements as a result of new information or events after the date hereof or as may be required by law. All forward-looking statements and information herein are qualified by this cautionary statement,
Thanks for your continued support
Sincerely,
Alan Jones
Looking good! I am in for the long haul or buy out, whhichever way it goes it is going to be good. With out a doubt one of the best stocks on the Venture.
Thanks.... I am quite pleased to be invested in BHS. It has a lot going for it with a very small float.
I did a quick calculation using the figures that Alan provided, (who must be BHS's investor relations guy), and if they hit oil and it sounds like everything points to a strong possibility, this stock should head towards $4 based on BHS's 25% share would be about $12 million a year.
And they still have revenue they can generate from their 80% share in the silver mine which should have a minimum of 3 million oz so far, revenue from their 30% share in the barite mine and still have 3 excellent prospective gold mine properties.
The thing that I really really like with BHS is the very low fully diluted float of 30 million or so which will have a great chance of not ballooning up like most junior stocks as they often get dilluted all to hell to raise cash for exploration and drilling.
I can't see the share price going anywhere but up from here. With it also so heavily owned by insiders it won't take much to drive the SP upward in a hurry
February 20, 2015
Dear Shareholders and Investors
We are advancing our two main projects as fast as we can even with the uncertainty in the markets.
To ensure we can finance our upcoming obligations, we have recently closed a $110,000 private placement and have closed $170,000 of a $250,000 flow though financing, of which Graeme O'Neill, the President & CEO, is participating in approximately 25% of the total. The balance of the financing has been spoken for an we expect to close it before the end of this month.
On the oil front, we do not believe that many investors have yet grasped the significance of Saturn Minerals announcement that it has identified a new closed structure on the Bannock Creek property last week, so let us do some math.
The newly identified, 480 acre closed structure, has a reported potential for up to 38 million barrels of oil. This structure is in addition to the earlier announced 1,920 acre structure and both structures are close proximity to each other. If the 480 acre structure has the potential for 38 million barrels, the math for both structures becomes quite exciting. The ultimate potential is world class. These two structures cover approximately 4 square miles, or 1.9% of the 123,000 acre Bannock Creek Property. With two structures already found, what lies under the remaining 98.1% of the property?
Saturn decided to change the drill program from the first identified 1,920 acre structure to the newly identified structure, hence the delay in drilling, and is presently permitting the first well on this new prospect. Once drilling commences, the results should come very quickly. Any positive results should be very beneficial to the Bayhorse share price.
There are an allowable permitted maximum of 8 wells per square mile so we could see as many as 32 wells developed in these two structures alone. At an average of between 125 - 140 barrels a day per well (assuming all wells hit, and based on estimates in the recently filed technical report on Little Swan), and assuming all wells are completed and producing, the daily production could be as high as 4,000 barrels a day of light sweet crude.
The estimated production cost is C$20 - $30 a barrel. As light sweet crude is currently quoted in US$ at approximately US$50 a barrel, the potential gross daily revenue could be as high as US$200,000 or C$255,800. Subtract estimated daily cost (C$120,000) from estimated daily gross revenue (C$255,800) and the math says there should be a potential gross margin of C$135,800. Per Day. No wonder that we consider the Farm-In Agreement with Saturn to be in our shareholder's best interest
Tundra Oil & Gas, a Richardson wholly owned subsidiary operating to the south-east across the border in Manitoba, has been producing +/- 26,000 barrels a day at, we understand, approximately C$15 barrel and the Tyvan pool has been producing since 1999 at approximately C$20 barrel. It is worth noting that the Bannck Creek and Little Swan properties are similar in geology and economics to the Tundra lands and Tyvan, as previously reported.
The current seismic on Little Swan is showing similar structures to Bannock Creek, and the new round of seismic, currently underway, should enhance our understanding of these structures. The same math that works at Bannock, is applicable at Little Swan.
We have filed an updated NI- 43-101 report on the Bayhorse Silver mine, that incorporates the information developed this past year, and also includes relevant information on the historic resource of approximately 160,000 tons at between 17 and 20 oz ton Ag. This report can be viewed on our website at technical-reports
Alan Jones
If the numbers are legitimate and my math is correct that is already about 3,000,000 oz of silver. That is a pretty nice number
Nice article Dolittle. Perhaps the best one and most informative one I have seen yet and I've been around since 20 cents. And i plan on sticking this out as undoubtedly this is going much higher and it should begin climbing shortly when the preliminary RE comes out. I'm expecting a minimum of 3 million ounces. And that is just for starters :o)
good luck everyone.
bn