Resource World Magazine

36 www.resourceworld.com j u n e / j u l y 2 0 1 5 miNiNg Aerial view of the Back Forty VMS project in the Upper Peninsula of Michigan, USA. Photo courtesy Aquila Resources Inc. all development options remain in play for aquila resources The current market environment remains extremely challenging for smaller companies trying to advance mine development projects. Aquila Resources Inc. [AQA-TSX; JM4A-FSE] has made a promis- ing mineral discovery and successfully outlined a large gold-zinc, deposit that also contains silver, copper, and lead. While the odds of defining an attractive resource are daunting, for those companies that reach that milestone, the next phase often proves even more difficult. For most juniors, the business plan depends on winning the interest of a larger mining company looking to buy a late stage project, or secure a joint venture arrangement that provides long term upside for shareholders. These are not normal times how- ever, and many good deposits are stalled as development capital has become very scarce even for established senior mining cor- porations. Aquila has chosen to move ahead on its own with the long term goal to build a mine. The flagship asset with the best prospects for develop- ment is the Back Forty Project. Located in the Upper Peninsula of Michigan, this large, wholly-owned property is attractive for a number of reasons. The deposit is a volcanogenic massive sulphide (VMS) formation, a prototypical geologic setting that is commonly associated with large metallic deposits. And large is the key word for development potential, such that economies of scale can be realized from high production over a long mine life. The total resource at the Back Forty currently stands in excess of 15 million tonnes in the measured and indicated categories, with a further 2.3 million tonnes inferred. The defined resources includes about a million ounces of gold and a billion pounds of zinc, along with lesser amounts of silver, copper, and lead. This puts the Back Forty well within the range worthy of development for significant output over a long term mine life. In 2014, Aquila released a Preliminary Economic Assessment for Back Forty, presenting favorable considerations for a proposed mine plan. One appealing aspect to the project is the potential for a lower cost starter pit to be developed, near surface, targeting a higher grade section of the deposit. This opens the door for devel- opment with a much lower CapEx, and thereafter generating cash flow to fund secondary development that would access other zones of the deposit. The study estimated a capital budget of $261 million to commence production with a proposed 16-year mine life. In order to raise funding to move forward, Aquila recently closed a transaction with Orion Mine Finance in an equity deal, issuing 29,923,077 units composed of full shares plus half warrants. Included in this transaction was a silver streaming arrangement, that committed delivery of 75% of the total silver production eventually mined at Back Forty locked in at a price of $4 per payable ounce. The terms of the silver agreement are very similar to what Silver Wheaton has negotiated with other project developers in past deals and given that silver is a by-product of gold and zinc production, this represents an opportunity to secure cash up front with much lower dilution in the share structure. In total, the transaction with Orion Mine Finance netted US $20.75 million. This critical funding will be used to continue exploration work, and the company also plans to advance through mine permitting. In addition, it enabled Aquila to buy back out- standing royalties on the Back Forty Project. Meanwhile, Aquila is also working to complete a feasibility study, a necessary step towards securing the bulk of development capital prior to com- mencing construction of a mine. Aquila has the advantage of a strong management team that is skilled not just in exploration as with many other juniors, but also in mine development and operations. This provides the com- pany with a full range of options going forward, as the company is not at the mercy of attracting a larger player in order to move the Back Forty Project along the development curve. The company secured its immediate funding objectives to carry out critical work through to a full feasibility study, one of the last hurdles remaining before mine development may commence. The tragic reality of this market is that many good companies have been stranded at the altar with attractive projects that lie dormant for the lack of a motivated partner. It is possible a deal with another mining company may yet be announced for Aquila Resources but this is one company that will remain active and focused on its quest to commence mining in Michigan. n

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