Pan American Goldfields Ltd
(OTCQB:MXOM)
Chairman: Neil Maedel
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Juan Costello: Good day from Wall Street. This is Juan Costello, Senior Analyst and the Wall Street Reporter and joining us today is Neil Maedel, the Chairman for Pan American Goldfields Limited. The company trades on the OTCQB and their ticker symbol is MXOM. Thanks for joining us today there Neil Maedel.
Neil Maedel: You’re very welcome Juan, it’s great to be here.
Juan Costello: Great. Now starting off, give us a brief history and overview there of the company for some of our listeners that are new to your story.
Neil Maedel: Okay, sure. And first thing that I want to emphasize is our strategy. We only took over this company three years ago in late 2009 early 2010. And the reason we took it over was because it already had a gold and silver resource that we felt should be eventually develop into about a 100,000 ounce per year operation. So what we were doing, when the company – you know we looked at a company and had a market cap, and it still does over $15 million and yet that operation our estimates would spin of about net cash flow of about $80 million a year. So clearly the incentive was there to take over the company and develop that resource.
And we wanted to start, one thing that attracted us also was that we probably could go into production relatively quickly and that’s what’s happened with the pilot operation in production right now that is doing above 1,200 ounces gold equivalent per month and that – the cash flow from that is essentially funding the expansion development in the mining into that big operation and right now we’re doing a preliminary economic assessment which should be done in about six weeks and then from that we’ll go to feasibility.
Juan Costello: Right. So in terms of the main project the Cieneguita Mine Pilot project talk about the recent development agreement there with Minera Rio Tinto.
Neil Maedel: Okay.
Juan Costello: And what that means for the feasibility and the cash flow.
Neil Maedel: Okay. So what Cieneguita mine, I should back up with that, it’s located in Mexico Sierra Madres, so it’s really it’s actually, the Chihuahua State is I think it goes right up to the American border and it’s a great mining area. We’ve got gold corps come in operation about 12 miles from us. So this resource we have is about a million point one ounces of gold equivalent probably will grow bit as we develop it and we’re already making some inroads in our infill drilling and expanding resources. So we’re pretty happy with that. This latest chapter in the company is where we are negotiating to restructure the deal that we had inherited with MRT to something that was more practical for both sides for MRT and for us. And MRT’s interest was that they’re undertaking the pilot operation, so there is essentially contract mining and in a significant way, you know, it’s next year should make some around a million dollars a quarter and if we can expand as much as we think we can and probably a fair bit more than that.
So the deal we made with MRT just specifically focuses on this, this start-up pilot production where next year we’ll get 35% of the net cash flow and in comparison to the 20% we were getting originally. This year we had been retract, we increased it since March to 29% and the reason I wanted do that is because they’d like to keep mining we have the ability to force them off the project at the end of this year, but we didn’t want to do that either because of you know as long it’s an operation, we don’t need to finance and it sort of provides cash flow for us to grow the project and also to acquire and develop other projects. So it was in both our interest to keep producing.
In terms of the 35% the most recent contract mining deal I saw go through was go gold deal with absolute resources and they are only thing absolute 12% net profits interest with about 30,000 a month payment and that’s on a three quarter of a million ounce deposit. So in comparison I think we got a really good deal, it’s a short-term thing that’s only for the next year and half, two years and by that time, we’ll be going into the major builds that’s 100,000 an ounce per year operation.
Juan Costello: Good. And so talk about some of the current trends right now in the sector and how well positioned the company is to capitalize on them.
Neil Maedel: Well I think the thing that differentiates us from everybody else or just about everybody else, is the fact that we have cash flow and for a start-up, there is a micro cap expiration stock to actually be in production and cash flowing a significant amount and if you think about it, $4 million a year is, if when you look at our share price tag now $0.16, that’s like 25 million share financing, well we don’t want to dilute like that and a lot of people lot of companies have forced to dilute. So we’re being able to avoid financing by virtue of the cash flow we’re receiving is a big, big factor.
Now the second and important factor of course is the project, it’s expandable and the growth rate, the potential growth rate for this is about 10 times of current production. And so that’s pretty significant production growth profile and that should allow for a dramatic improvement in the share prices we execute. Then of course it’s, the last two important factors are management and money. And clearly we’ve got the management for it, we got Andrey Koniuhov. He’s probably discovered more gold than anybody in the industry plus 40 million ounces now and for [Indiscernible] [0:06:56] we’ve got George Young who was the founder of IRC, just bought out by real gold [phonetic] [0:07:02] for three quarters of billion and he was co-founder of MAG Silver. And Gary Parkison, who’s one of the probably, among the most respected mine developers in the region. And he’s also working in the Metates major disseminating gold project in Mexico. So we have the management and lastly, we have the money so with the cash flow from [Indiscernible] [0:07:27].
In terms of the actual trend, there isn’t that many deposits out there that are likely to be economic and if you look at the actual trend for the gold industry, there just isn’t not being that many new big projects in the pipeline, not that we are a big project but that affects the actual growth in supply and so that that’s our one reason we’re bullish in gold price is just a fact that there has been no major new discoveries like for instance, in the ‘90s we had, early ‘90s we had Hemlo or actually that would be the mid ‘80s. We had Hemlo, in the early 90s, we had Eskay Creek and a bunch of other big discoveries and also we had Bellenden’s got their Argentina gold taken over, there’s Arequipa you know all these different big discoveries and we haven’t had really anything of that magnitude. So there is just no new big projects, big low cost high ounce multi-million ounce deposits. There is just not many coming on stream, so there’s every reason to be bullish, and that’s the major trend that we are looking when we took over this company was make sure that we had something with cash flow, made sure we had actually had some gold resource to develop and so that’s why we are in such an interesting situation.
Juan Costello: Certainly. And what are some of the gold’s and milestones that you and the team are hoping will accomplish here with the course of the next year?
Neil Maedel: Well, the next big catalyst is going to probably occur in November and that will be the completion of the scoping study of preliminary economic assessment, it’s being done by MFree which is I think they’ve done more than half of the new mine developments in Mexico over the last 20 years so it’s you know this is good as it gets in terms having an engineering firm quarter backing your preliminary economic assessment, when that comes out November we are looking out for feasibility that should take about 18 months to complete and then we would be looking at, if we hadn’t be acquired by then we would be looking at developing you know the big operation.
Juan Costello: Now sir…
Neil Maedel: A second milestone to look for and that won’t be until early 2013. If you look at our board and you see that we got advisory of the board, the head of the geology department and probably the most expert body in Central Asia on places like Magnolia and Kazakhstan and we Audrey Koniuhov from Polyus and some very major players in the area in that region. On our board, we are working very hard to make an acquisition in that area and that’s something to look forward in the early 2013.
Juan Costello: Great. And so, as far investors and the financial committee there are concerned, Neil Maedel do you believe that the company story and your message and outsider are completely understood and appreciated by them, and if not, what do you wish investors better understood about the company or the sector?
Neil Maedel: The thing is, hurdle to get over right now and we’re in the process of doing that is moving to an exchange where investors can trade us and recognize that we are fully reporting and we basically comply with everything that TSX would comply to and so I think that’s probably the main hurdle, we’re relatively unknown which is reflected in the share price and the fact that we are trading about a quarter the TSX evaluation for the gold resource. So we are I think it’s a matter of time we’re you know we’re in the lucky situation we don’t have to go out and bring us money, we have cash flow so we just put our head down and execute between the PEA and relisting on other markets, we’ll see the recognition come in share price I’m sure will hire with that.
Juan Costello: And what do you feel makes the company unique from some of the other players in the sector?
Neil Maedel: Well certainly with the cash flow, we have established resource there is a few out there that have great resources that are developing as well but we have an established resource and we have the cash flow or income to develop it so we don’t have to dilute the company share capital by issuing more shares to raise money, we wont be doing that really we have net free cash flow coming in every month and we budget accordingly.
Juan Costello: Great and once again joining us today is Neil Maedel Maedel the chairman for Pan American Goldfields Limited. The company trades on the OTCQB their ticker symbol is MXOM and before we conclude here Neil Maedel to recap some of your key points why do you believe investors should consider the company as a good investment opportunity today?
Neil Maedel: Well I think they should look at from the same perceptive we did that it’s another $15 million market capitalization and yet if you do you know our projects on a hundred thousand ounce per year operation you know with are very credible board buying us is a sorry hundred thousand ounces with a $500 cost and that would spin out more than $80 million a year, that the company at current metals prices so you know if could acquire an assert and develop it where you go from a $15 million evaluation this thing producing $80 million a year it’s going to be doing it’s going to be worth a lot…The cash flow is spun out it will be $80 million, so that’s more than five times it’s current valuation so I would suggest that fully built out, you’re going to see probably a multiple of that in terms of the stock performance.
Juan Costello: Well, we certainly look forward to continuing the track your company’s growth and report on your upcoming progress and we like to thank you for taking the time to join us today Neil Maedel and update our investor audience on Pan American Goldfields.
Neil Maedel: You’re very welcome it’s been great talking to you.