Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Inception Mining is producing gold at its Clavo Rico operation in Honduras and is preparing to begin contract gold mining at its U.P. & Burlington project in the mountains of Idaho. Add in resource expansion and some exploration upside in Nevada and you have a story with lots of interesting angles.
Clavo Rico Mine, Honduras. Photo courtesy of Inception Mining Inc.
Management Q&A: View From the Top
The Gold Report: The Inception Mining Inc. (IMII:OTCQB) home page describes the company as diverse, agile and efficient. Why do you want readers to think about those specific words when they think about the company?
Trent D’Ambrosio: Diversification is critical in today’s metals markets. Inception Mining currently has a producing facility in Honduras, a development-stage project in Idaho, and plans also include expansion of our existing resources and increased exploration efforts in Nevada. Those actions, we believe, will allow us to remain agile. We have the ability to scale some of our projects up or down depending on commodity prices and market conditions. One asset, the U.P. & Burlington project in Idaho, is fully outsourced, which allows us to effectively manage overhead by actively working on the project as we see fit.
TGR: In which ways is Inception efficient?
TD: We started when the majority of junior mining companies were struggling, so we had to focus on being more streamlined and cost conscious. We did that by utilizing a manufacturing model and fine-tuning production and staying focused on our employee count to limit the burn rate. We’ve tried to use modern technology where possible and the most advanced mining and exploration techniques. That has made our operations quite efficient.
TGR: Are your general and administrative costs at the lower end of the scale?
TD: Very much so. We have a slim staff in the U.S., very modest operations and have limited salaries. We’ve tried to maintain a low overhead from top to bottom.
TGR: This market has been challenging for junior mining companies, even the best ones. What about Inception Mining makes it different?
TD: We have used that market to our advantage. When we launched our company, we didn’t have the luxury of high gold prices and easy access to capital that the majority of other juniors had years earlier. Those companies often had open checkbooks, so they could be aggressive. Sometimes that works, sometimes it doesn’t. We started when capital was more difficult to come by, so we had to be diligent and disciplined in our process and only pursue what we believed would be profitable ventures requiring lower capital investment. We’ve had to further adapt to this difficult and challenging market environment by remaining extremely flexible.
TGR: Tell us about CEO Michael Ahlin and yourself.
TD: Michael has a significant background in mining. He’s an engineer and has spent a great deal of time building mines, so he understands the importance of cost-effective management. He has an MBA and is as good as it gets when it comes to dealing with people, contracts and other types of difficult negotiations you have when you operate a resource company.
I’m on the other side of the equation. I have a lengthy background in financial services. I understand the importance of proper capitalization, expense management and how to align your company with the right partners. We make a complementary team and feel fortunate to be in our respective positions.
TGR: What sort of plans does Inception have for exploration and to possibly make deals?
TD: We are positioned very well for deal making, exploration is always on our mind, and we are very optimistic about the future. We plan on using the majority of excess cash flow for resource expansion and we are maintaining our very conservative attitude with our budget. But we will evaluate all opportunities and make the best possible decisions for the company’s continued success and growth.
TGR: Inception Mining’s flagship operation is Clavo Rico in southern Honduras. There are more established gold mining districts in Central America. Why Honduras?
TD: I believe that the lack of maturity or establishment as a leader in gold mining is one of our biggest advantages. However, it is important to remember that Honduras has produced resources for hundreds of years, specifically gold, and is working diligently to migrate as a player in the world economy. We have significant holdings with extensive potential and operate on only a very small percentage of our holding. We believe that the expansion potential is our most exciting attribute and represents a great opportunity for Inception Mining.
TGR: What’s your plan to further develop Clavo Rico?
TD: Honduras has adopted more progressive regulations and laws that are focused on maintaining and improving its acceptance in an expanding global economy. This will assist us during our development of the Clavo Rico project with plans to more than double production during the coming years. As mentioned, we have extensive holdings with very good geological data. We believe we’re working a rich and extensive gold deposit and with a production plan that forecasts the ability to produce gold for a long time to come. We are currently expanding our resource analysis, we have initiated additional drilling, and production expansion is under way.
TGR: What is the current production per quarter?
TD: Quarterly, Inception Mining produces approximately 2,000 ounces of gold; with plans in place we expect to significantly increase production in 2016. We’re running at about 35% of current capacity. The great part is we have been updating equipment and streamlining processing while increasing the current production rates with little down time. We will continue to expand production when the financial viability exists. If and when we choose to, we have the potential for underground expansion with access to additional deposits. We are in a unique position with numerous opportunities for expansion.
Clavo Rico Mine, Honduras. Photo courtesy of Inception Mining.
TGR: Is the revenue you’re generating from production going back into the operation?
TD: Absolutely. Inception’s primary objective is to accelerate production.
TGR: How long before you expect to be cash flow positive?
TD: We are cash flow positive today and hope to increase that over the next 12 months. Obviously, some outside influences could affect financial results but we anticipate positive cash flow in 2016.
TGR: When do you expect to release a maiden resource at Clavo Rico?
TD: There is significant data in place that has been accumulated over numerous years by different groups using various methods. We are aggressively expanding the data on the resource with plans to assemble it in a more digestible format later this year. The company is focused on ensuring that the data is compliant with NI 43-101 reporting standards. Based on the current data, we believe the resource could be significant but the data is not yet ready for release. However, we have a production history and have a good understanding of our mine life and ore body.
TGR: Would Inception be interested in joint ventures?
TD: Joint ventures are always exciting. We have no immediate plans but we will evaluate opportunities that arise.
TGR: Inception Mining is investing in reforestation and water treatment efforts near Clavo Rico. The company also built a trade school in El Corpus, Honduras. Tell us about your philosophy when it comes to sustainable development and community engagement.
TD: El Corpus is similar in some ways to U.S. mining towns around the turn of the 20th century when the entire town worked at the nearby mine. The mine is one of the largest employers in the area and a cornerstone of the local economy. We believe that the community is the mine, so we want to ensure that the mine gives back to the community. We are working with local government leadership to improve the community and make it more prosperous. We take the environmental obligations very seriously, and they are part of our day-to-day operation.
TGR: Tell us briefly about Inception’s other project.
TD: Our initial project is a group of patented claims in Idaho known as the U.P. & Burlington mine. The mine last operated in the early 1900s and had significant production. We have done extensive work to restore the operation to a production-ready status. Our most recent accomplishment is the completion of a bulk sample, and we have received some positive results. The mining operations are fully outsourced via contract mining and offsite contract milling, so our capital contributions are more easily managed when it is time to migrate to production; additionally, it should remain in a lower cost of production position when comparing it to our peers. This streamlines the management of the project and allows the company to remain very efficient and agile. It is a seasonal operation with significant snowfall. So when the snow melts, we could move in, complete our agreement and go right into production. We hope to see production from U.P. & Burlington in the summer and fall of 2016.
TGR: How does the contract mining work?
TD: We have an experienced mining contractor in place on a per-ton basis for extraction. Per our agreement, the underlying mining contractor utilizes its employees and its equipment, and shares in the regulator management for the project. We have an agreement for hauling to an offsite mill and have processed ore with the contractor on a per-ton basis. It is an excellent solution for the project because it streamlines the management process and allows the company to remain agile and efficient. It has assisted us in reducing capital expenditures on this project while allowing for ease of migration to the next stage of development.
TGR: What’s the one thing you want readers to remember about Inception Mining?
TD: We are a producing gold mining company that includes a development-stage asset, and we have significant exploration potential. We’ve executed and plan to continue to execute our business plan and plan to migrate to the next level.
TGR: Thank you for your time.
Trent D’Ambrosio is the founder, CFO and a director of Inception Mining Inc. From October 2011 through the present, D’Ambrosio has held the positions of interim chief executive officer and chief financial officer of Inception Resources LLC. and Inception Mining Inc. and is responsible for the overall strategic direction for the organization. D’Ambrosio’s professional record includes 25 years of management and financial services experience with companies ranging from Fortune 500 companies to start ups.
Source: Brian Sylvester of The Gold Report
DISCLOSURE:
1) Brian Sylvester conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report and The Life Sciences Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
2) Inception Mining Inc. paid Streetwise Reports to conduct, produce and distribute the interview.
3) Trent D’Ambrosio had final approval of the content and is wholly responsible for the validity of the statements. Opinions expressed are the opinions of Trent D’Ambrosio and not of Streetwise Reports or its officers.
4) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment in Inception Mining Inc.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.
6) This interview contains forward-looking information within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934 and is subject to the Safe Harbor created by those sections. This material contains statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. Such forward-looking statements by definition involve risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Inception Mining Inc. to be materially different from the statements made herein. There can be no assurance statements will prove to be accurate and actual results and future events could differ materially from anticipated in such statements. Inception Mining Inc. disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events except as required by applicable legislation.
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