The Mining Show by Blytheweigh
Charlie: Hello and good morning. You are watching “The Mining Show” brought to you by Blytheweigh on Core Finance. I’m Charlie Gibson. Now as we know in the world of mining, sometimes it’s all about the eye of the tiger and you need all that strength, you need all that courage, you need all that power, as the Blake poem goes.
Well, sometimes it’s a minor subtle change from the eye of the tiger. Sometimes it’s the eye of the well. And if you’re from Turkey or you speak Turkish, then you’ll know that the translation of that is Pinargozu and one company that has exactly such a project which translates exactly as such, in fact, is Pasinex. And I’m joined by their Chief Executive now, Steve Williams. Steve, good morning. Thank you very much indeed for joining us.
Steve: Excellent Turkish, by the way. Good morning.
Charlie: Thank you very much. Well, you know, it is a little bit rusty so I apologize if I got the pronunciation slightly wrong. But, anyway, I hope it was close enough.
Steve: It was.
Charlie: Now you just had, you know… this is your main asset, isn’t it?
Charlie: Which is lead-zinc in, sort of, towards the south and the southeast corner of Turkey?
Steve: Southeast, yeah, part of Turkey. Just above where the Mediterranean Sea turns around and comes back.
Charlie: Absolutely, and you just had your third quarter results as an operating mine. And you were also in the right place at the right time because of the cost of zinc, in particular, is incredibly fashionable at the moment within, you know, the panoply of metal. So tell us about those third quarter results first of all.
Steve: It was our best quarter. We put the results out this week, beginning of the week and after getting our…it is a 50-50 joint venture. After getting our 50% from the joint venture, after paying taxes, after paying our corporate overheads, we still reported a $1.8 million Canadian profit in Canada, Q3. The profit coming from the JV was something of the order of about $5 million Canadian but, you know, after taking all these other things out, $1.8 million Canadian profit, nearly 2 cents earning per share. So we were very pleased. It was our best quarter ever so…
Charlie: So best quarter ever. The market reacted in a slightly strange way by the looks of your share price graphs. So how do you explain that?
Steve: With difficulty is the truth. I mean, I was obviously looking for a positive response. I think, unfortunately, some people were anticipating that and I think it was an opportunity to encourage, even though I didn’t anticipate that myself, encourage some selling. So I don’t know. That’s the market, unfortunately.
Charlie: All right, so at the business accounting sides of that is, you know, if you wanted to buy stock it might be available out there and you can get it at a relatively cheap price as well.
Steve: Right, exactly. It’s a good moment right now.
Charlie: Absolutely, because the shares are bouncing between 25 and 30 roughly. And you can pick them up now at more like 25 and ride it up to, you know, wherever you want.
Steve: Where we go next.
Charlie: Absolutely. But tell us the sort of the story because you’ve got the producing mine but there’s an awful lot of focus, isn’t there, on the exploration prospects as well?
Steve: Yes. Well, first of all, in terms of the producing mine, we did a lot of underground development last year, this year, and we’ve pretty much got the producing mine now to where we’re going to be for the rest of this year and going into next year. So we’ve sort of set it up for certainly the next 18 months of production. So that was a lot of work. So that’s sort of done now actually and that’s enabled us to get back to exactly where you were going which is the real big story is still the exploration upside.
And there’s two priorities for us. The first priority is to continue to find the roots of the system that we’re on. We’re still very early in. You know, we started… we found this deposit in 2013, 2014. So it’s not too long ago. So we’re still very early into it and these systems can run deep. So we’re optimistic about, you know, continuing to follow the roots and find a lot more tonnage. So that’s priority number one in terms of exploration. Priority number two, you know, geological logic says, you know, we’ve got this wonderful deposit.
Charlie: Actually, that’s an oxymoron, geological logic.
Steve: That’s a much longer conversation but it probably is. Anyhow, you got me going…
Charlie: All right, let’s say, “Geology suggests…”
Steve: Geology suggests, there you go, that they shouldn’t be isolated, that there should be more. These are structurally controlled systems. We’re in a highly faulted part of the earth, the Taurus Mountains, and there’s a lot of faults there. So the sort of mineralization systems that led to Pinargozu we think should lead to more in the vicinity. So that’s priority number two. We actually called the property right next door to Pinargozu. It’s a property called Akkaya which is…
Charlie: Whitestone I think, isn’t it, in Turkish?
Steve: Yes. Your Turkish is magnificent.
Charlie: Well, just dredging it out from somewhere.
Steve: Yes. And so we hold that property and that’s priority exploration target for us. So that’s…
Charlie: You got the roots, that’s priority one, and then you got other Pinargozus in the area.
Steve: That’s… exactly.
Charlie: And that’s priority number two.
Steve: I took a long time to say that, didn’t I? But yes, that’s it.
Charlie: No, but you said it very succinctly so it’s easy to summarize.
Steve: Right, right.
Charlie: So… but that sounds like a lot of drilling.
Steve: It is a lot of drilling.
Charlie: And is that expensive then?
Steve: Yeah, drilling. This mining and exploration is expensive. I mean, that’s the truth. We’ve been…
Charlie: So a couple of hundred dollars a meter, that sort of expense?
Steve: No, no, no. I mean, you know, we’ve just come through a tough downturn and, actually, exploration costs have similarly come down as a result of that, you know, just to stay competitive. So it’s a bit under a $100.
Charlie: Okay, right. Is that done by external contractors or do you do it in-house?
Steve: We mix it up. We’ve got some ourselves and some external contractors. So we mix it up. Anyhow… but we’ve been doing about a million dollars U.S. a year in drilling. As I said, our focus in the last 18 months has been the mine development and that’s… so that’s taken a lot of time, a lot of money, a lot of effort. But we’ve pretty much got that…it’s never done but we’ve got a large amount of that done.
So now what we’d like to do, we’d like to get back into the bigger picture, the exploration. And so I’d also be planning to try and step up the amount of mining we spent on exploration going into next year. We haven’t set that budget yet. We’ve actually got some budget meetings coming up on that in the next couple of weeks. But I’m hopeful that, well, at least double that in terms of exploration next year.
Charlie: So now the mine is running like a smooth machine over the next 18 months.
Steve: Right, right, right and, you know, as I look at the, you know, the financial performance next year, we’ll do at least 60,000 tons of production again. I think the Zinc price we’re forecasting, the Zinc price somewhere in $35, $40 U.S. per pound, around $3000 U.S. per ton. So I foresee, you know, another strong financial year coming up. So then we can look at that and say we have some confidence about that coming into next year. So it gives us some confidence to step the exploration up.
Charlie: So does that mean in 18 months’ time you have to sort of redevelop the mine and go slow on the exploration? Is it a sort of one on the other, you know? You develop the mine, get it running smoothly, do some exploration? Or is it…
Steve: No, no, no. That’s more about how we actually built this mine. I mean, we built this mine in tough times and, you know, we did it without debt. There’s no debt. We’ve got no debt. We pretty much bootstrapped it, really, you know. So we mine a bit, sell a bit, do a bit more development, do a bit of more drilling, mine a bit more, so on, and so on, so on and so on.
But it’s now come to a point where, you know, it’s very strong. Q3 financial results were very good and I expect them to continue. So it’s very strong. So we’re now in a position to get it into a more normal level. But we have to do a lot of mine development to sort of catch up. But I’m hoping now that we’re… I think we’re in a much more normal, more stable level. We’re not sort of in this mine a bit, develop a bit, mine a bit, develop…
Charlie: Right, okay. So you know you can develop ahead of the mine and the whole operation can proceed like a smooth machine.
Steve: Yes, yes, we can actually do mine planning and project planning and budgeting and it’s wonderful and, you know, and it’s come fast, really. But it was tough because we bootstrapped it.
Charlie: And then the cash flow that that kicks off, you can use for the exploration?
Charlie: Are there any thoughts as to a dividend at some point or…
Steve: Okay, so, you know, back on the bootstrapping, pretty much… not pretty much, all the cash was just going around. But we’re at now in a position now, you know, profitability coming out of the mine this year is strong. And so the partners, it’s Turkish partners and ourselves, we’ve had conversations and we agree that at a certain point, you know, the partners need to benefit from this. So I’m hopeful… again, we haven’t made these decisions yet, but we’re generating a lot of profit this year which profit eventually leads to cash. And so I’m hopeful and expecting that we’ll start to dividend some of that cash into the partners next year.
Charlie: And would that be…
Steve: As I said, we haven’t made that decision yet but that’s where we’re leaning.
Charlie: That’s the way the thinking is heading.
Steve: That’s the way the thinking… yes, yes.
Charlie: Okay. And you’re on the CSE in Canada. Would that be an opportune moment maybe to upgrade to one of the other exchanges or are you happy? Because it’s always seemed as a slightly junior exchange, isn’t it? The CSE.
Steve: Right, you know, that’s a bigger picture and our objective is to build… we’d like to build Pasinex into a mid-tier Zinc company. We’re looking at what next, where do we go next, how we do that. You know, this mine is going very well and making profit and so we see the opportunity of, you know, taking that stepping stone and stepping up. Part of that stepping up is, you know, looking at where we go next in terms of our, well, our listing. So, yes, we would definitely consider, you know, going to a…
Charlie: In the fullness of time or?
Steve: In the fullness of time. I think, you know, the way I’m looking at it at the moment, again, we haven’t made these decisions but we’re certainly talking, thinking, as you said. I think that, you know, next year could be a big strong year for us and, you know, hopefully, make some strong and right and bold moves that take us towards that vision of being a mid-tier Zinc player.
Charlie: And then you said you were at an exciting corner of the world geologically and you’re also in an exciting corner politically. Tell us a little bit… It would be remiss about me if I didn’t ask you about the political situation.
Steve: I mean, you know, sure. I mean, when you’re in the Middle East, politics at times can be challenging and then… I mean, I don’t need to explain that to you or anybody that’s watching. You know, all I can say is what we have to do is focus on our nicking. We have to focus on what we’re doing. We have to focus… we’re doing, you know, some good things. We employ 250 people from the local community. We’re profitable so we’re paying corporate taxes.
So we just have to focus on our game, doing it well and basically stay away from the politics. You know, be respectful, be correct with, you know, the officials, but just focus on our nicking. And I think that, that’s what we’re doing well, I think we get credit from the officials.
Charlie: Are you able to completely stay away from the politics? I ask because some of your material ends up in Iran, doesn’t it?
Charlie: And that, you know, that then brings in sort of other I suppose wider consideration, regional considerations. Is that a difficulty for you in any way?
Steve: Well, at the moment, no. But, I mean, you know, I would be remiss also if I sort of didn’t say that, could it be an issue? Perhaps, yeah. I mean, obviously, we’re conscious of that. This year, I don’t know, 70% of our product, approximately, don’t hold me exactly with that number, but approximately went to Iran. The Iranians are…they’ve got a big Zinc infrastructure in Iran and they were, you know, desperate for Zinc and Turkey’s right next door.
So they’re very competitive on pricing and so they ended up buying about a bit over 70% of our product this year. Obviously, we’re alert to, you know, tensions, and we’re alert to political postulations. And all I can say, it’s sane. I mean, we watch it. We take note and, you know, if that were to go the wrong way, then we’d obviously have to take that on board. Are there alternatives? Absolutely, yes, and we’re seeing, you know, Zinc is heart at the moment and the market is desperate for Zinc and we’re one of the people bringing Zinc on right at the moment, you know.
There isn’t a lot of new Zinc out there and we’re one of the sort of go-to places. So we’ve been approached by well over 40 groups wanting to buy our product and quite a number of groups here in Europe. And so we definitely have alternatives and we’re also seeing the alternatives are getting quite price competitive. So we watch the situation but, you know, I’m not too, too concerned. I think we do have alternatives if things were to go the wrong way.
Charlie: Excellent, Steve, all right. Well, I’m afraid that’s all we got time for but thank you very much indeed. Enjoyed having you here and tell us how things develop throughout the course of the next months and years. Keep us updated about that dividend. And, of course, keep us updated about that exploration as well and in the fullness of time, you know, about how you’re thinking about the exchange that you’re equated on.
And so, thank you very much indeed for joining us. Ladies and gentlemen, that was Steve Williams, the President and the Chief Executive of Pasinex which is mining on the Pinargozu project in Turkey. Pinargozu, as I said before, which translates as the eye of the well but almost the eye of the tiger in this particular case. As I said, I am afraid that’s all we got time for.
Well, this is me, Charlie Gibson, signing off for The Mining Show, brought to you on Core Finance by Blytheweigh. We’ll be bringing you more ideas, more thoughts, more mining opportunities, more investment ideas over the course of the next few days. So stay with us and until then, you have a very capital day.