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Soho Resources Releases Positive PEA, $182MM Net Cash Flow

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Soho Resources Potential $182MM Cash Flow at Tahuehueto in Mexico, Seeks
Near Term Production RITV: With me today is Ralph Shearing the
President, CEO and founder of Soho Resources. Soho has just put out its
Preliminary Economic Assessment (PEA) on the Tahuehueto Project in
Durango, Mexico. Thanks for being here today Ralph.Ralph Shearing: I
really appreciate the opportunity, Doug. It's great to be here and tell
the story of our company.RITV: Well the preliminary economic assessment
you've just put out is quite remarkable for the first time out of the
gate here. Let's talk a bit about the numbers for the project. The PEA
updated some of the tonnages and looked at new information for recovery
rates and so on; what did they come out with?RS: Well it's a milestone
for the company to get this out. What it has outlined for our project is
that originally we had thought this would be an underground mine, due to
the steep nature of the topography. The economic assessment has clearly
shown that it can be open pit on portions of the deposit.RITV: So give me
an example. The open pit aspect, for example, roughly what are the
numbers on the operating cost for that as opposed to the underground?RS:
If we add them all together the average cost of underground mining and
surface mining on this project will be about $35 per tonne, so obviously
the open pit mining costs are lower, and the underground are higher.
Traditionally underground mining is probably in the neighborhood of $50
per tonne for mined and milled. So the open pit reduces that down on
average to $30 to $35 per tonne. So it's quite good.RITV: Right and being
an open pit deposit changes a lot to do with the economics, which the
report told you.RS: Of course. For the economic numbers or the net
present values, it's about $109.6 million. Internal rate of return is
about 31% which is a good rate of return. The payback period is 2.2
years, which will payback all the costs of building the mine in that
amount of time, based on the current plan. The capital cost is about
$89.1 million and that is for building the mill, the infrastructure,
bringing in the power, the tailings ponds. It does not include buying the
mining equipment because the plan is to hire contractors to supply all of
the mining equipment. So that's a capital cost we won't need to put into
the cost at this point in time. That gets put into the operating
cost.RITV: And actually all those numbers are available to investors if
they go and look at your profile in our RIQ calculators at
resourceintelligence.net. You can see not only all your resource data,
but also your operating and capital cost included in there. So you get a
very good idea of what that's worth at today's metal prices as
well.Ralph, you mentioned the $109.6 million net present value
discounted, and that was calculated not at today's metal prices, but at
something else. Can you explain that?RS: It's a three year rolling
average price. So it takes into account the price of the metals over the
past three years and that's the figure we use.RITV: And we've seen some
huge changes in metal prices. What are the prices they used?RS: I think
it's around $900+ dollars. I can quote them if you give me a moment here.
$965 per ounce of gold, $15.38 for silver, $2.92/lb for copper, 95 cents
for lead and 88 cents for zinc.RITV: Wow. We'll put the new numbers that
we are seeing today for example, on screen so people can compare and
investors can always go to your profile at resourceintelligence.net,
check out your profile and look at how your value changes with the
changes in prices.RS: Well at current prices it becomes so much better.
The difference between the current and the rolling average is great. So
if the prices remain good by the time it takes us to build the mill, then
we'll be paying this thing back a lot faster and the economics will be a
lot better.RITV: Good. Let's talk about that evaluation that Snowden's
given you. That was just for a small portion of your project, wasn't
it?RS: Correct. It's just for the resource that we have outlined to date
and the upside potential on the project is huge. In my opinion maybe we
found one fifth and maybe even less of the resource that will ultimately
be discovered and mined on this project.RITV: Right. You've got some
optics that we can have a look at to better demonstrate how the resource
works.RS: Sure, I love speaking to pictures. It helps me out. So here are
our pictures of the project. We're looking from the southern boundary of
the project up to the north. Right away you can see that it's a very
rugged topography. The ruggedness is a hindrance to exploration, but it
is a definite help to underground mining. The hindrance to exploration is
that it's a little more difficult to build your access roads. However you
can see that all along this structure are access roads, drill sites, so
we have been successful and are able to build roads throughout the
project. Even though it's very steep, there's enough material there to
build your roads to get to the access you need. Of course you have to
blast in few areas, but generally speaking it's doable and not too
difficult.RITV: And also the PEA that just came out changed radically the
structure of the mine which is that instead of just being an underground
this could also be open pit.RS: That's correct; it could be an open pit
mine particularly up in this El Creston zone. This area is designed in
the current preliminary economic assessment to be open pit mine for
probably 80% of it and underground the parts are a little bit too deep
for open pit. So we get back to the structures, our red structures here
are the resource structures, the only area where we've included or we've
drilled in order to put the drilling results into the resource. So there
is this Cinco de Mayo. We call this the Catorce zone up to Perdido. This
El Creston is a structure extension fracture between two structures, that
is one of our most well mineralized zones. That's the area of the open
pit. We've done a small amount of drilling here. We've also done drilling
over here in the Santiago zone and this structure goes right over to the
other side. So from here to here it's about 2.4 km and again we haven't
found the downward extension or the limits of the ore body so far and
they're open along strike as well. More importantly, this is only one and
a bit of structures; we have many more structures throughout the area
that are mineralized. We've looked at them, we've sampled some of them,
we know they are mineralized. The exploration side, upside potential of
the project is enormous. We have drilled six holes in this text glamour;
two of these holes have hit good mineralization to the north. So, the
point really is that this resource we have is the tip of the iceberg of
the project.RITV: Right. Let's talk about that then. What does the tip of
the iceberg look like so far? When you add up the gold ounces, since this
is 40% gold and add on to that the rest of the metals, you're looking at
something like 1.7 million ounces of gold total.RS: On a gold equivalent
basis, which is a difficult number to attribute to a base metal and gold
mine, it's primarily gold -” 40% of our value is in the gold. Now the
regulators and exchange don't like us talking too much about gold
equivalents for all metals until you're much further along, but your
numbers are correct.RITV: So, what do you have then, if you separate them
out? How many ounces of gold and so on are you looking at?RS: In the
resource we have about 665,000 ounces of gold. With gold and silver,
we're allowed to talk gold and silver, quick gold equivalence we have
about 830,000 ounces of gold equivalent, just gold and silver and then
the base metals would add to that, to get the figure you mentioned
before.RITV: What about the grades then? If you average out the grades
which I did earlier, it takes you to about 5 plus grams per tonne
gold.RS: On a gold equivalent basis, yes.The average grade is still
around 2 grams per tonne gold over the life of the mine. But it has been
designed to go after the higher grade areas first in order to pay back
capital more quickly and I think in the first couple of years our grades
are probably even closer to three and half to four grams gold only, plus
the base metals on top of that.RITV: Your Preliminary economic assessment
was completed by Snowden. What were the suggestions that they made at the
end of the report? What was their response to the project?RS: The Snowden
mining consultants, the Vancouver office, did the report. They liked the
project; obviously they came out with a good economic assessment.
Recommendations for future work are to do slope stability in the Cinco de
Mayo area which I was explaining before. To do all the environmental
work, to have another look at geology and the configuration of the model
we have outlined so far, and maybe do some more work on models, see
whether we can improve the model geologically speaking which would allow
them to have better control grade control etc. and less delusion when
they're putting the numbers together. They want us to move it quickly
into the pre feasibility stage where you do all your environmental work,
your permitting, cost, more detailed cost estimates of what its going to
take to build the mine.RITV: How long is it going to take you to get
toward a position where you'll be seeing cash flow?RS: To build the mine
on here, I would estimate two to three years, if everything comes
together nicely and we have access to the capital to do the work
necessary to get there.RITV: So what are you going to do to get there?RS:
We're going to market the company. We really haven't marketed over the
past couple of years so we now have the PEA itself which will allow us to
market it much more effectively. Next steps are really to raise the money
that will carry us through the feasibility into production and we are
confident we can get there. We do have a large Chinese shareholder
interest in the company, approximately 43% of our company is owned by 6
individual private investors out of mainland China. So they gave us a
good contact into the Chinese marketplace, as well as the mining space in
China and we already have numerous companies following us, waiting for
this preliminary economic assessment, so we're expecting some good things
to come out of China.RITV: There's another aspect of the size of the
project that I wanted to bring up. Now you've accomplished this goal of
proving a resource, proving that it's economical you have a choice to
make I guess. Do you continue exploring or do you move into
development?RS: Well, it's a very good question. I would say that it
would be best for us first off to raise money. We need to raise money to
be able do both. I think if we can move forward on the feasibility stage
of this pre-feasibility, into feasibility, at the same time as exploring
new structures, we can increase the resource dramatically as well as push
it towards the mine decision.RITV: So your plan is to do exploration and
move this toward the development phase. How are you going do that in
terms of cash flow?RS: Well, we have to raise money, so what we would be
doing is raising a certain amount of money at current or slightly above
prices, depending on how our marketing goes over the next several weeks
and then as we continue to develop both this project, maybe do some
exploration and work on the items that need to be done for the
feasibility. We will do more marketing and we should be able to get our
stock price reflecting the true value of the project and allow us to
access more capital.RITV: And being founder of the company, you've taken
this from its infancy really, to a turning point in the company's
life.RS: Yeah, it's a very big milestone for me to be able to deliver
this Preliminary Economic Assessment to our shareholders. It's a good
feeling, but I know there's a lot more hard work to be done and I'm very
confident of making it.RITV: Well thanks for coming in and sharing that
with us today, we really appreciate having you hereRS: I really
appreciate talking with you.RITV: Best of luck. Disclosure: No Positions


Related Articles -
soho resources, v soh, 182mm, cash flow, tahuehueto, doug, ralph
shearing, pea,




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posted:11/17/2011
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