Jay Currie of MotherlodeTV.net – Newlox Gold: Unlocking the Value in Artisanal Tailings
Artisanal mining occurs all over the world. In some jurisdictions it is seen as a dangerous blight, however, in Costa Rica the government regulates and encourages the artisanal miners in its central gold belt.
The Costa Rican artisanal miners use low tech, low environmental impact, techniques to mine the rich ores of the region. Unfortunately, they have a long history of using mercury processes to extract the gold from the rock they excavate. This leads to tailings piles which are environmentally hazardous. It is also not very efficient, up to 60% of the gold remains in the rock in the tailings piles.
When Ryan Jackson, CEO of Newlox Gold Ventures (C.LUX) was a McGill undergraduate studying environmental science he had a secret, he was spending his summers as an intern at a mining company which worked in Latin America. Which meant he spent time walking through the jungle and, in the process, seeing artisanal mines and meeting the miners. “We saw tailings piles everywhere we went,” said Jackson in a telephone interview. “At one point we sent some tailings samples to the lab. They came back with higher grades than our mine plan.”
Which actually makes sense when you think about artisanal mining. Artisanal miners chase high grade. The mining itself is back-breakingly hard work and lower grade rock is just not worth mining. At the same time, the artisanal miners lack the technology to recover more than a fraction of the gold in the rock they mine which means that the tailings piles still contain high-grade ore with only a fraction of the gold extracted.
Jackson began to develop the concept of a low CAPEX waste remediation and gold recovery operation which would focus on the many artisanal mines in Costa Rica’s central gold belt.
“We realized that if we could design a remediation and recovery plant on a small scale we could clean up the tailings piles and have cash flow,” said Jackson. “It made economic sense because the costs of mining and crushing were already paid and the grade was very attractive.”
Working with mining engineers at UBC’s Norman B. Keevil Institute of Mining Engineering Newlox built a small scale tailings reprocessing plant. “Because it is small scale,” said Jackson, “the CAPEX is low and we can commission the plant in three or four months.”
The plant itself processes the material using a combination of gravity and floatation to extract the gold. Fully commissioned the first plant is designed to process 80 tonnes a day of material and, in a fully optimized configuration, recovers over 90% of the gold present in that material.
A low CAPEX and a quick road to free cash flow are important to Newlox’s potential success but even more important is establishing solid relationships with the artisanal miners themselves. Newlox knew that Costa Rica was a safe jurisdiction, and rated highly for economic and political freedom by the Fraser Institute. Artisanal miners in Costa Rica are encouraged by the government to form co-operatives and the gold trade in Costa Rica was well organized and regulated by the government. Newlox also had access to historical information which helped it locate over thirty tailings piles of varying sizes.
The key was to come up with a deal which was easy for the miners’ co-ops to monitor. “We went for a zero trust model,” said Jackson. “We buy the tailings and pay for tonnage. The miners just have to count the trucks. We assay when we buy. We’re looking for a minimum of 9 grams per ton. And we assay again at the plant.”
The first plant went into operation in early spring 2020 with an initial recovery rate of 75% which was later optimized to 90%. “We had to shut down because of COVID,” said Jackson, “but during the test phase we recovered enough gold to breakeven on an operational basis.”
Jackson expects the plant to recommence operations in the fall. “It is a very safe plant from a COVID perspective,” said Jackson. “It is open-air with a roof. We should be at full-scale operations within three months and cash flow positive within the first month.”
Newlox is already building its second plant and has plans for more. “We are moving to process all the tailings in the area,” said Jackson. But Newlox is not stopping at tailings.
“We’re building trust with the local miners,” said Jackson. “That trust opens up the possibility of processing the raw ore they are mining. We need to create incentives for the local miners. If we process their ore there will be less pollution. We’d have to pay more per ton but we’d have higher grades and higher tonnage.”
From an investor perspective, Newlox is attractively priced at around $0.15 with a market cap of 11.25 million dollars. Given the very quick and low CAPEX path to profitable gold production, Newlox is set to be re-rated as a producer rather than a developer.