By Doug Hadfield, resourceINTELLIGENCE TV
Eric Fier is a compulsive list maker. Each meeting he chairs is carefully orchestrated with an agenda listing who is attending, what will be discussed, when and by whom. Each detail is carefully scrutinized – breaks, meals, introductions and handouts. Even time slots for comments and questions are judiciously peppered throughout.
“I think the team in Mexico really likes me,” Fier quipped to me at the company’s kick-off meeting to launch construction of its Santa Elena Silver-Gold Mine in northern Mexico. “And they like me even better when I leave.”
Click here to watch Eric being interviewed by resourceINTELLIGENCE TV’s Doug Hadfield.
Eric is the Chief Operating Officer for SilverCrest Mines (TSX.V: SVL). His bailiwick is no less than the construction of the company’s new Santa Elena mine in northern Mexico. The completed mine will process 2,500 tonnes per day over a mine life of eight years producing 35,000 to 45,000 ounces of gold and 600,000 to 1 million ounces of silver per year . The construction and mining schedules have been planned with extraordinary detail and regard for timing and cost optimization. Eric believes in the “best bang for the buck” approach.
In 2008, when I first visited the mine site at Santa Elena, I discovered a company that had in two years acquired, explored, defined and made a production decision on a 100+ year-old previous producer. Consider that about one in 10,000 exploration projects actually becomes a mine (Source: The Ontario Mineral Industry Cluster OMICC.com). In that respect, not only is it amazing that SilverCrest has progressed so quickly, but also that they have progressed to this stage at all.
Mine building requires a collection of traits that few possess. The most important are the dogged tenacity and foresight necessary to whittle down to just one a list of tens of thousands of projects. That one project must have the merits required by a particular juncture in time. This means more than foresight; it’s a kind of clairvoyance, a present understanding of future market fundamentals.
Thus, another essential trait of the mine builder is good timing. Eric’s detailed schedules are the backbone of his sense of timing and foresight. Like so many railway ties that hold railway tracks together, each bulleted point in a schedule ensures the plan progresses on schedule and within budget. I saw this first hand during a site visit to Hermosillo (where the company’s Mexico offices are located) and Banamichi (where the mine is being constructed).
Banamichi is one of those little towns in Mexico that seem to exist out of time with few of the trappings of modernity. On route to the mine, our cavalcade of pickups aroused warm smiles and welcoming waves from local townspeople. SilverCrest has brought with it a steady flow of business to the tranquil town, a strong working relationship and the promise of something else: an industry that Banamichi can call its own.
Mining is one of the oldest modern professions in Mexico. The very purpose of the Conquistadors’ 16th century voyage to Mexico was – apart from acquiring new lands and converting natives to Christianity – to seek rich new sources of gold and silver. Once the Conquistadors had subdued the Aztecs, they fervently mined what they could: Within two years, mines in Mexico had doubled the global supply of silver.
Today mining in Mexico is less a task of making new discoveries than it is determining which past producing mines has enough gold and silver in its veins, tailings and mine workings to economically revisit with 20th century processing plants like the Merrill Crowe and the carbon-in-leach (NASDAQ:CIL). Santa Elena has proved to be such a past producer.
For over 100 years, the land that comprises Santa Elena has been held by a family of cattle ranchers and prospectors. SilverCrest purchased the land for $4 million in scheduled payments which has now been paid and 100% ownership passed to SilverCrest.
If the company mines its existing reserves and resources, it will recover more than 400,000 ounces of gold and over 15 million ounces of silver. Although the mine is not huge, the economics are excellent. At $1,000/ounce gold and $20 silver the Pre-tax Cash Flow is $193 million. At $900/oz gold and $17 silver the Pre-tax Cash Flow is $156.9 million. The mine’s start-up capital costs are as cheap as chips – $20 million.
One geologist from Hermosillo told me that one of the more lucrative professions in Mexico is prospecting and staking unstaked deposits.
“Eets very good business in May-hi-co,” he explained, “to travel the country and find and – how do you say it in English, to stack the claims?”
I wracked my brain for a few seconds. “You mean stake the claims?” I asked.
“Si, it’s a very good business here in May-hi-co.”
SilverCrest Mines exists on the other end of the staking equation. With an alumni of geos, metallurgists and prospectors that hails largely from the El Dorado Gold class of 1997, SilverCrest acquired and fast tracked Santa Elena between 2006 and 2009. Along the way, the management team “wowed” Macquarie Bank, Sandstorm Resources and Sonoran Resources, acquiring pre-construction and construction capital in favourable agreements and negligible dilution of 45 million shares outstanding.
The list of SVL employees from Banamichi (6 km from the mine) and capital city Hermosillo grows as the project nears its first pour of dore – the silver and gold blend bars the company will produce and send under armed guard to a refinery. Presently, the company employs a total of 5 at its offices in Hermosillo and another 40 at the mine in Banamichi. That includes contract employees involved in excavation and construction. SilverCrest anticipates about 100 construction hires after Christmas when work is in full swing.
As the team grows, so do Eric’s lists. His penchant for total commitment to schedules and plans has won him the respect of those involved in the mine. Although he has a background as a mine engineer, metallurgist and geologist many also laud his abilities as a public speaker. Eric is both unabashed and articulate before his audience.
Others, such as SVL’s Operations Manager and Chief Metallurgist Salvador Aguayo Salinas PhD told me that it was Eric’s commitment to the local community and the environment that inspired him most to join the project. Salvador left a career at the University of Sonora to head up the company’s operations in Mexico.
Cecile Munoz, who is the VP of Sonoran Resources – the company SilverCrest contracted to build the mine at Santa Elena – attributed Eric’s professionalism to the enthusiasm of the other key players on the project. “Mines build communities,” she told me. “Some mines have had a negative impact on the communities they are near. In this case, you have a dedicated, professional and responsible management team. That creates so many opportunities for a community like this one. It’s jobs, but it’s also more than jobs. This mine will bring opportunities to improve infrastructure here. Tourism. Even small things like laundry services will be required, so it’s not just direct employment we’re talking about.”
“It’s an incredibly complex process,” SVL’s VP of Finance told me of the process of mine building. “We may joke a little about Eric’s schedules, but they’re really what make the project tick as well as it does.”
The rapport among the team players – both Sonoran Resources and SVL – is palpable. President of Sonoran Resources, Jesse Muñoz told me that he and his colleagues have built over forty mines. This is a project he regards as one of the best.
“It’s really special to work with a team like this,” Muñoz said. “I’ve known Eric and Scott (Drever, President and CEO of SVL) for a long time and I know their level of commitment.”
Muñoz told me that Sonoran Resources is fortunate in that his expertise is a commodity in high demand. He’s a Merrill-Crowe specialist – Merrill-Crowe plants are used for processing gold and silver ore. With precious metals prices commanding historic highs, Muñoz told me, “We are blessed in that we can choose who we work with. We chose SilverCrest because the Santa Elena project has a lot going for it. It’s straightforward metallurgically, located right beside a town, well supported by the community, has high metal grades and excellent infrastructure. It’s the kind of project that mine builders covet because there’s so little risk involved.”
At the end of the kick-off meeting in Banamichi, which was attended by thirty key players involved in the construction of the mine, Eric outlined the schedule for the day. What followed was an exhausting programme of speakers, a mine visit and a barbecue to celebrate the kick-off. With that celebration, I realized, SilverCrest has proved that only by superior leadership and planning can an undertaking of this kind be successful. It brings to mind something T. Boone Pickens wrote in his book, The First Billion is the Hardest: “A fool with a plan can outsmart a genius without a plan any day.”
Disclosure: No Positions