Mining Investment
Based on small to medium scale mining
resources.
Preamble.
The agglomeration of various medium and small scale minable resources into one corporate
entity could rival the profitability and growth potential of most investment opportunities
currently on the market today.
By agglomerating these resources it would provide them with the capitalization and technical
expertise not usually associated with this sector, and then gives the mines the opportunity to
become well planned and run businesses whose combined income makes for a very attractive
corporate entity.
This document serves to show how this would be bought about and the potential in profitability
and asset growth that would occur over a relatively small period.
Capital repayments on individual mines are around 20 months from inception, and good
profitability reached at the end of the 24 month period.
Asset value at the end of the 24 month period shows that even with low average gold values
and reef widths, value of the proven in-situ ore is generally plus 10 times the initial capital
investment.
The Resources.
Numerous resources in the small to medium category exist. These have been found or proven
by artisanal mining activities or corporate exploration and drilling activities, but simply do not
qualify for investment consideration due to their size not being within the parameters of
tonnage and ounces required by mining investment or exploration companies.
Many of these resources have already been mined by the artisanal mining community on a very
small haphazard mining bases, however due to low skill levels, lack of technological input and
virtually no effective capitalization, these resources are only mined to the easily accessed
surface outcrops and then abandoned or held for speculation once depth and underground
water becomes a problem, even though good grades and tonnages still exist in the resources
below.
For the purposes of this report the parameters of small and medium size are as follows.


Small. A minable resource that can provide once developed, a profitable tonnage to a
processing plant at a rate of 24 tons per day for a minimum of 3 years, excluding
development time, usually around 15 months.
Medium. A minable resource that can provide once developed, a profitable tonnage to
a processing plant at a rate of 100 tons per day for a minimum of 3 years, excluding
development time usually 15 months.
As the required parameters of ore and tonnage are so low for this proposed company, it opens
up a vast quantity of mines which exist in mining areas, but do not conform to the required
parameters of your usual mining companies.
Most of these properties will probably be held in speculation by small scale artisanal style
miners, however, as the choice of properties will certainly outstrip the requirements of the
company it is expected that acquiring good properties through purchase or tribute at a very
favorable cost or deal will not be a problem.
To explain, a tribute deal would be where a mine owner hands over the mining rights of a
certain property for a share of profits usually around 5 to 10%.
The Company.
What is proposed is that a company be established that consists of a centrally situated base
which has the administrative and technical infrastructure required to source, investigate,
quantify and acquire suitable mining properties within the companies set out parameters.
This base will then supply the planning, technical expertise, management and finance to put the
acquired resources into full production according to a laid out schedule and plan.
The eventual target for the company will be to have the centrally situated base directing the
operations of 7 individual self contained mines, of various sizes and grades, under the umbrella
of the one company.
Central
company base
Mine One
Mine Two
Mine Three
Mine four
Mine Five
Mine Six
Mine Seven
Type A
Type B
Type A
Type C
Type B
Type D
Type A
Mine Types given in the example are hypothetical as these will depend on the resources found
and decided upon during the period of investigation. However for the purposes of this report
the structure of the above chart will be used, as it is fairly representative of what would be
expected.
Initially at the start of the company once the base company has been established there is a
period of 4 months for investigation and acquisition for the first mine and four months for the
same on the second mine. However subsequent mines will probably fall within the 8 months
investigation period and the start of establishment of mines 3 to 7 will probably be within this
same period or soon after. However for the purpose of the report they will be shown in startup
intervals of one month per mine hereafter.
As can be seen there are a different array of mine types in the portfolio. The different types of
mines are brought about by different conditions and ore types.
For example your type “A Mine” is your typical steep dipping narrow reef resource, with a strike
of plus 400 meters. The reef will almost certainly be a hard quartz reef.
Mine type “D” is a surface tailings deposited with a 200,000 ton resource.
There are many other potential types of resources not in the above plan that may be chanced
upon during the investigation period and would be equally if not more profitable.
These could be surface oxide zones that would be open casted and heap leached, or alluvial
deposits that could be simply scrubbed and concentrated, the list and potential types is almost
endless.
It is however important that all the types of resources will be considered through their
potential profitability and asset value once developed. What is important is that the proposed
company has the experience, expertise and knowledge to exploit any type of profitable
resource that falls within the companies criteria.
Capitalization.
Initial capitalization of the company will need to be established. The following spread sheet “36
month cash flow projection” shows the gradual consumption and replacement of capital as the
company is capitalized and grows, the monthly figures represent the cumulative total to date
cash consumed or gained at the end of that particular month, these figures represent the
working growth model of the company and mines, however does not take into account the
purchase of properties. The policy of the company will be Low purchase capital so that
capitalization can be concentrated on the development of mines. This can be achieved by
looking at the more virgin resources on offer where purchase costs will be low and potential
good, rather than semi established properties where the better reserves have already been
removed and owners will be looking for high prices, however the key to the success of the
company is flexibility and the ability to see each and every property for its worth to the
company. The initial proposal to fully finance the company is US$11,000,000.oo (11 million
dollars) for a 60% stake in the company. The balance 40% of the company will be held by Mr A
Matuska whom will bring in the expertise, management and knowledge to make the company
the success that is shown in the figures.
As financial risks do exist in the Zimbabwean banking and financial sector it is proposed, and
certainly advised that only capital needed, be transferred to the country and companies
account on an as and when needed basis.
The full capitalization will be held in an agreed overseas company account and mechanisms of
transfer and control will need to be agreed upon.
Capitalization of the company and mines will need to follow a phased program.
Phase one.
Establishment and registration of the company, establishing its directorship, share holding, and
ensuring compliance with all corporate and indigenization requirements. It will be important to
contract a reputable legal firm to ensure all criteria have been adhered to and fully compliant
with the Zimbabwe investment authority.
Phase two.
Establishing a base of operations with the administrative facilities, offices and required
infrastructure. As the operations will be mining, yard space and storage is important as
equipment in transit may be large. It is suggested that a house with a reasonable yard and
storage space would best serve the companies interest converted to offices. This kind of set up
would also facilitate accommodation for overseas visiting directors and probably final
processing of gold.
Phase Three.
Research, investigation and acquisition of mining properties. Capitalization here mainly includes
the acquisition of suitable vehicles, traveling expenses, mapping, survey and equipment,
sampling and evaluation. Purchase capital will obviously depend on the potential of the
operation being purchased.
Phase Four.
Mining program implementation, consisting of mine design, mine development, plant design
and production implementation. This would all happen according to the financial plan and
budgets, both financial and physical, set out in the mining programs of various mine types
according to spread sheets attached.
Mr A Matuska
Mr A Matuska is a career miner, having started his mining career on the deep level South
African mines as a Learner Mine Official.
Returning to Zimbabwe in the mid 1980’s where he took up a position at Dalny Mine in Chakari.
From then except for brief spell small working he remained in corporate mining steadily
climbing the corporate ladder to underground manager and then mine manager in the early
1990’s until 2005.
During this period worked for Lonrho PLC, Ran Mine part of the Globe and Phoenix group,
Dunrobin Mine, Zambia, as part of the Reunion Group Zimbabwe, Maranatha Ferro Chrome and
then Busitema Mining in Uganda.
In 2005 Mr Matuska managed to secure private sector finance through equity to set up a
mining operation in Tanzania called “MinEXtech”.
Initial capitalization was just under $200,000.oo. Mr Matuska sold his stake in the holding
company of MinEXtech “ACMR” in October 2010. Without any further capitalization, through
self financing the company had grown to having an income of +$600,000.00 per month and
gold reserve assets in excess of $12,000,000.oo (12 million Dollars) consisting of three running
mines.
Mr Matuska is also the author of the book “Practical Mining and Gold Processing” released in
Zimbabwe in 2010 and set for international release in August 2012.
On selling out in Tanzania Mr Matuska returned to Zimbabwe, Harare, and set up a gold assay
and processing facility in Kwe Kwe called “Pangolin Analytical” as a prerequisite to be able to
do all assays and testing for this proposed company in its set up stage.
Conclusion.
It is not known that a corporate company has ever been established with the sole purpose of
only looking at the small scale mining sector as a viable investment opportunity. Traditionally
this sector has always been the territory of individual miners and small companies, however
even experienced individual miners have always lacked the facilities, technology and
capitalization that a corporate structure could provide to take the small mines to the next level
of profitability. As a result even the richer, successful small mines never get to anywhere near
their potential profitability, with haphazard and expensive mining sequences being the order of
the day. The reason for this is never quite having enough capital and knowledge to get the
operation to the next level, as income is generally used up in running costs, and never becomes
available for capital investment into the property. This also generally see’s the premature
closure of mines with still good potential.
The potential income and return on investment shown in the calculations are staggering, yet
the grades, reef widths, gold price and tonnages are all well within achievable targets, in fact
grades and reef widths have been pushed to the bottom limits, even though it is known that
many of the potential resources know have far higher grades.
The cost figures in the models are real, taken from working operations of a similar size, and
years of experience in knowing exactly what would be required to set these mines up.
This model shows the potential profitability that can be achieved when using a corporate
structure to provide and implement the correct capitalization, planning and technological
knowhow into this small to medium mining sector.
What is also shown and evident in this structure of many small mines versus one big mine, is
that capital investment is low and can be subsidized by another operation without effecting the
overall profitability of the company itself.
For example if a Mine “Type B” where expanded to a type a mine “Type A”, as an individual
operation, capital would need to be found for this and production losses during this transition
would result in company losses occurring during that period. However in this corporate
structure the expansion would be financed by the other operations without really having a
major impact on the income and profit of the company as a whole, except in a positive way
when it comes on stream again.
Long Term Company Future.
As has can be seen in the mining models, and the definition of terms for “Small” and “Medium”
mines, the companies profile is built on mines with a life of 3 years, and underground
development reserves pushed to at least one year ahead of production.
As it is known and seen, most of these mines will push down to a further depth than is in the
model with a corresponding increase in life. However mines that don’t achieve this will
generally give a minimum of 1 years warning that resources are being depleted.
This gives the company a minimum of 1 year to source, develop and put into production a
replacement mine.
As the mines where constructed in a modular form, much of the equipment from the depleting
mine can be transferred to the new mine, reducing significantly the capital to set up the
replacement mine and securing a long term future for the group as a whole.