Allied Nevada Gold's CEO Hosts Exploration Update Conference (Transcript)

Dec. 6.12 | About: Allied Nevada (ANV)

Allied Nevada Gold Corp. (NYSEMKT:ANV)

Exploration Update Conference Call

December 6, 2012; 11:00 a.m. ET


Scott Caldwell - President & Chief Executive Officer

David Flint - Vice President of Exploration


Sam Crittenden - RBC Capital Markets

John Hill - Cambrian Capital


Good morning ladies and gentlemen and thank you for standing by. Welcome to the Allied Nevada Exploration Update Conference Call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. Instructions will be provided at that time. (Operator Instructions).

I will now turn the conference over to our host Tracey Thom, Vice President, Investor Relations. Please go ahead.

Tracey Thom

Thank you very much and good morning everyone. We appreciate everyone for joining us this morning. On the call today Scott Caldwell, President and CEO and David Flint, Vice President of Exploration will discuss recently released 2012 exploration results for Hycroft, the Hasbrouck Project and Wildcat. We also have a presentation available on our website. If you go to the front page, you will see a link from there that will take you right to the presentation.

Before we begin please note that certain statements we’ll make on this call may contain forward-looking information. For additional information I refer the listeners to slide two, for the cautionary statements or to read cautionary statements associated with our press releases and on our website for more information that we maybe discussing.

I’ll now turn the call over to Scott Caldwell.

Scott Caldwell

Thank you Tracey and good morning to everybody. Thanks in advance for spending part of your morning with us. Dave and Don will discuss several of our exploration projects that are in our portfolio. We are only going to talk to three today, the three programs that we drilled or the three projects that we drilled on, which would be Hycroft, Hasbrouck/Three Hills and Wildcat, but on top of that we have close to 100 other exploration packages spread throughout the State of Nevada and we are just doing minimal work on that, so we don’t intend to talk about it today.

We are excited about the results and particularly what we are seeing in Hasbrouck/Three Hills, as well as Hycroft. Wildcat looks like its big and low grade and maybe we can connect some high grade there, but I’ll turn it over to Dave Flint right now and Dave will kick it off and then hand it off to Don I believe.

Dave Flint

Good morning ladies and gentlemen. As Scott mentioned, we explored three of our properties during the year, discovering gold mineralization on each. Please turn to slide three.

At Hycroft this year’s drilling was directed towards engineering support, reserve infill, resource expansion and regional exploration. The holes that were completed before October 1 had been included to the database for the year-end resource model update. Holes drilled later for which the results of two are shown on the slide will be included to the database for the next resource model run.

This infill program has really given us some fairly attractive results and it really is providing good confirmation that the grays in the resource model are those that we will expect as we develop the deposit.

Turning to slide four, this is the plant view of the Hycroft mine area. The tan shade is the current reserved pit and the red box is approximately the area shown on slide five.

Slide five shows the Allied drill holes in the Brimstone Vortex area. There’s a lot of information on here. The green colors are the rotary holes that were completed during the year and the red colors are the core holes completed during the year. You can see that the density of drilling is quite high for most of the resource area, although it is limited by access in some specific regions. We were able to infill many of the gaps during the third quarter of the year.

There’s two cross section lines shown on the slide. Slide six is the section for the southern most line. Slide six, the cross section shows the results for two holes drilled on the Southwest margin of the reserved pit, which is the gray ribbon on the slide, and although the gold grades are relatively modest for these two holes, you can see they have very quite attractive silver grades and I anticipate that these two holes will expand the resource in this area. The tan area is approximately the area of mineralization in this particular cross section.

Slide seven is the northern cross section. It goes through the Brimstone deposit and the infill hole number 4395, intersected a broad interval of very attractive gold and silver grades, including the nine meter interval averaging 18.6 g/t gold and 21 g/t silver. This hole will infill or resource at the bottom of the pit and potentially drive the pit deeper and out to the west. Again, the gray ribbon is the current reserve pit and the tan shade, the extent of mineralization in the cross section.

Slide eight is a 3D rendering of the reserved pit, generally looking north. Inferred mineralization is shown in the pink blocks. During the year we infilled a portion of the inferred blocks in the Brimstone and east central area. An infill of the Silver Camel and the Devil’s Corral blocks will be initiated next year.

Converting these inferred blocks within the reserve pit will have the effect of either reducing the reserve strip ratio as those inferred blocks are currently treated as waste or increasing the overall reserve grade, if this conversion would allow us to raise the overall cut off grade.

Slide nine shows the Hycroft regional exploration targets. During the year we did initial testing of the pond and Blowout targets. Results from that program are still under review and drilling will be conducted on some of the other targets during 2013.

Slide 10 please. We conducted a modest drill program on the Hasbrouck property during the year. Slide 11 shows a regional view of the Hasbrouck property. It’s composed of two deposits, the Hasbrouck mountain property to the south and the Three Hills property to the north. Gold mineralization has been intersected in new zones for each of the deposits during the year.

Slide 12 shows the results of drilling at the Hasbrouck deposit. We have intersected mineralization on the Silver King Trend, which is located just north of Hasbrouck Mountain. That zone the mineralization is shown in the red stipple pattern, with the drill holes and the intercepts shown in red. Although the newly discovered mineralization is of average grade, the zone is located just outside of the pit design for the Hasbrouck PEA earlier this year.

Slide 13 shows some of the drilling completed to test targets peripheral to the Three Hills resource. This program was Allied’s first exploration drilling of the project and the goals were to test known targets that are regional to the current resource. That resource is shown in the tan area on the slide. Hole 15 is intersected 66 meters grading 3.33 g/t gold, including 11 meters at 18.5 g/t.

Clearly that is quite interesting to us. That mineralization, that hole was drilled in the pediment to the east of the deposit and as we can see in line in slide 14, it shows very good potential to extend both the tonnage and the potential grade of the deposit.

Three Hills mineralization is located primarily at the basal portion of the Siebert Formation and in the upper portion of the Fraction Tuff. It’s probably also related to high angle faulting and we are currently assessing the details of the geologic model in the hole 15 area and will be designing a follow up drill program to be implemented next year.

Slide 15 please. We also conducted initial Allied drilling of the Wildcat property. The goals of the program were to confirm the current resource, confirm the presence of high grade mineralization on the property and to expand the resource.

Slide 16 is a plan view of the Wildcat property. The extent of the current resource is shown in the pink color and the green areas show the resource expansion potential of the property. The property is really quite large and a number of individual targets are present on it. The current resource stands at 1.1 million ounces of gold and is historically very high graded mineralization, averaging about an ounce per tone as been mined.

Slide 17 is an oblique air photo of Wildcat looking from west to east. The resource area again is outlined in red and the expansion area is in green. I’ll provide an overview of the geology in mineralization of Wildcat starting from the Hero/Tag zone on the right and working to the north.

Slide 18 is a plan view of the Main Hill Hero/Tag zone. A volcanic package shown in blue, out crops at the higher elevations on the property, these volcanic rocks hold much of the current both minable resource.

The volcanics are underlined by a Granodiorite rock type, which is shown in green. The Granodiorite holds the non-high grade gold veins and also has potential for both minable mineralization. We drilled a number of holes, short holes in this area during the year, primarily to understand they are both minable and to try to document the orientation of the high grade veins.

Results include a 25 meter road cut averaging 2.21 ounces per tone gold, 29 meter set of channels that average 3.7 g/t gold. A high grade gold intersection of 5 meters averaging 9.44 g/t, another long intersection, 44.5 meters averaging 0.5 g/t and then four holes on the northern portion of the slide that intersected volcanic hosted mineralization that averages at least 1 g/t gold equivalent. Those holes really provide us confidence in the current resource which is primarily in that rock type.

Slide 19 is a cross section through the Hero/Tag zone. There is a lot of information on this slide that I will provide the highlights to you. Both minable Granodiorite hosted mineralization, which is the green rock type occurs proximal to the Rhyolite bodies, which was shown in the pinkish color that intrude the package.

The simple portion of the Granodiorite is that we’ve identified both minable potential mineralization and the lined areas show the potential for expanding that type of mineralization. Some of the results that were shown in the plan view are also put in cross session context on this slide.

Slide 20 gives a bit of detail on the high grade vein mineralization that occurs within the zone. That mineralization is interpreted to occur along faults that presumably acted as hydrothermal feeders to the system. There’s really some quite attractive grades over restricted widths that have been intersected during the year. We’ve identified this mineralization in at least three veins with the results for the Hero Vein shown on the slide.

Slide 21, shows the results of the drilling further north in the Main Hill portion of the Wildcat property. Here a series of holes that have been drilled internal to the resource and to step out from the Main Hill to the north and to the North West to the Money Zone.

The intercepts are for two of those holes are shown in this slide. These holes will certainly expand the tonnage potential of the deposit and have provided some important information understanding with the Volcanic Stratigraphy and the relation of it to mineralization.

At Wildcat many of the targets remain open and there is potential remains, both for expansion of the volcanic hosted, both minable resources within the Granodiorite, both minable and of high grades.

We will be spending the first quarter of next year updating the drill hole databases, the geologic models and the resource models. From there that will allows us to then put together the details for the plans for the next round of drilling. I’m very encouraged by the results on all of the properties and expansion potential remains on a number of individual targets on each of them that can be explored in the future.

Scott Caldwell

Thank you, Dave. This is Caldwell again and with that we will turn it over to questions-and-answers and sure between Dave and Don we can answer any questions you might have about the three projects.

Question-and-Answer Session


(Operator Instructions). And we have a question from Sam Crittenden from RBC Capital Markets. Please go ahead.

Sam Crittenden - RBC Capital Markets

Good morning everyone. Just wondering if could remind us of the timing of the resource updates for Hasbrouck and Wildcat and if you are planning to do an updated PEA for Hasbrouck and/or a PEA for Wildcat.

Scott Caldwell

How are you doing Sam? This is Caldwell. We will have an updated PEA on Hasbrouck in Q2 of next year. So Q2 of 2013 and we will have an updated 43-101 with a resource, but there won’t be an economic analysis on Wildcat and that will also be in Q2 of 2013.

Sam Crittenden - RBC Capital Markets

And what you’re seeing so far at Wildcat, does this change your thinking on what’s going to be the second mine for you guys? I mean is there a case where Wildcat would potentially be brought forward in the pipeline and ahead of Hasbrouck.

Scott Caldwell

Caldwell again. I mean we debate that in-house. I think not. I think our next project will be Hasbrouck, Hasbrouck/Three Hills where we mine concurrently. A couple of things, primarily it’s ease of permitting and just ease of development. Hasbrouck is low, it’s kind of in the banana belt of Nevada, bone dry, no trees, that kind of stuff, so it can go a lot faster and be a lower capital cost to develop.

Sam Crittenden - RBC Capital Markets

And then for Three Hills, I mean are you still waiting to see a certain size of resource there to get more comfortable with moving ahead with that project? Is there sort of a threshold resource you need for that deposit?

Scott Caldwell

No, we think we are there. We will obviously continue to follow up on this, the drilling that we did this year, but we intend to develop it concurrently with Hasbrouck and you would truck to build one leach pad or one processing facility.

Our current thinking is a Merrill Crow plant and you would truck the ore - it’s about 5 miles or say 10 kilometers from Hasbrouck to Three Hills and so you would truck the ore from one spot to the other. Right now the critical mass or the larger tonnage is at Hasbrouck, so you’d go Three Hills to Hasbrouck, so we are debating with that. The PEA will also look a possibly a second leach pad up near Three Hills and then just transport loaded precip or carbon to the other plant.

Sam Crittenden - RBC Capital Markets

Okay, and then one last one. For the Hycroft resource update, are you expecting a significant change or is it more sort of infill and confirmatory?

Scott Caldwell

It’s more infill and confirmatory. I mean, the program was primarily -- these last holes that Dave just talked about actually are not in the resource estimate. They were drilled or the assays, the results from the holes got back after we shut off the drilling for the current resource update, so that it really is going to be conformational that it was a successful program.

We anticipate the strip ratio going down slightly and that was our target, was to infill material inside the current feasibility pit that is treated as waste, that we thought had a chance to be ore.

Sam Crittenden - RBC Capital Markets

Okay, great. I appreciate the update. Thanks guys.


Our next question comes from the line of John Hill from Cambrian Capital. Please go ahead.

John hill - Cambrian Capital

Hey guys. Thanks for hosting an informative call. Just a quick question on Hasbrouck, which we’ve sort of watched, sort of moved to the process for a couple of years and thanks for your detail on that with the last round of questions from Sam. Would you say the overall level of enthusiasm for Hasbrouck is the same as it was a year ago or is it higher of lower?

Scott Caldwell

Basically our internal enthusiasm, you have to tell me what your enthusiasm is or isn’t John, but our enthusiasm is actually higher and we are particularly intrigued by the Three Hills area and we like the metallurgy of that. We get very, very good recovery as oxide, and very good recovery as the heap leach and we are excited about this potential on this high grade zone, one hole does not anything make.

But we want to get a follow up on that, take a look at it and see what we are going to do and we’ll start of that hopefully early next year, on drilling on the Three Hills, but we are really excited because of the metallurgy on it. It has higher recovery and faster than Hasbrouck to the tune of about 20% higher gold recovery, it’s in the low 70s and it comes out within 30 days or right around 30 days. So it’s got some really good leach kinetics and so that’s why we are excited about it.

John Hill - Cambrian Capital

Great, great, and is this still a type of project that you feel can be expedited by the redeployment of portions of the Hycroft fleet and avoid the very lengthy feasibility study process.

Scott Caldwell

Yes. What we are looking at, we intend to begin the EIS process next year. We are doing base line work as we speak and we hope to have the permit within two years to begin development and yes, we will still plan on deploying our smaller equipment that’s being phased out at Hycroft, i.e. the 200 tonne trucks, the 55,000 shovels, etcetera and shipping that down there. We think we can get this in production for around $100 million by transferring surplus equipment from Hycroft through Hasbrouck, right, so we don’t have to buy a mining fleet essentially.

John Hill - Cambrian Capital

Yes, great, thanks for that. And then just last back on Hycroft is the cross sections showing the intercepts behind the range fault, which is just sort of interesting. Is that potentially economically impactful?

Scott Caldwell

Yes it is. The deposit still is open based on our drilling to the west and the southwest and as we cross over the range fault, particularly to the south, we continue to intersect mineralization there and a portion of that surface is oxidized, so that it can actually fit into our near term heap leach plan.

We’ve jumped a bit further to the west, which is the where the pond exploration target is located. That drilling intersected very interesting alteration in minerals and sulfide mineralization although the assays were relatively low grade, but that does open up a further corridor for us to explore and probably expand the resource along.

John Hill - Cambrian Capital

Great, thanks guys. And I guess in closing, anything Scott on the current state of the operations, things on the ground as we sit here today.

Scott Caldwell

No, things continue to look pretty good. As our press release, late November we think we are on target to have a strong quarter and I mean things are looking pretty good. We’ll see how the rest of the year plays out, but mining lots on tones, putting lots of gold out there and pumping lots of water. So hopefully we have a good quarter.

John Hill - Cambrian Capital

All right great. Thanks guys.


(Operator Instructions). And we have no further questions at this point.

Scott Caldwell

This is Caldwell again. In conclusion, first, thank you for spending part of your morning with that. We are excited about the programs, intend to as I was saying a few minutes ago continue to push forward as Hasbrouck, Three Hills, GEA, get a resource out on Wildcat, revised recourse out in Q2 and really see what this drilling, in particular in the Brimstone area, Brimstone to the west means on a overall resource as Don continues to infill it over the next 12 months or so. Anyway, thanks again and we’ll be talking soon.


Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.

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