Discovery acquires 100%-ownership
of Max Mill for fraction of replacement value, targets pouring first
Gold bar in Q3-2016
WillaMAX project presents an exceptional risk-reward scenario.
is the marrying together of two assets; its now 100%-owned Max Mill with its
flagship Willa Gold Property.
WillaMAX is a turnkey gold mine & mill operation with
robust economics in
PEA as a low cost producer.
Inc. is fully
(replacement value) in assets were
acquired for <5 cents on the dollar.
DVN.V is also
a loss-carry-forward windfall on the
books of ~$50 million, the impact should
generate >$15 million in tax credits,
valuable for when Gold begins pouring
starting in Summer-2016.
Large Gold resource
growth expansion potential.
Valuation Commentary:Discovery Ventures Inc.
(TSX-V: DVN) (OTCQX: DTVMF) (Frankfurt: 0DV)
this Q4-2015 acquired 100% ownership of the Max Mill & Mine
located in the Revelstoke mining division of British Columbia,
Canada, and is aiming to pour its first Gold dore bar before the end
of the summer-2016. Ore for the mill will be mined from its high-grade
Willa Gold Project located ~135 km south. By combining these
two assets, the Max Mill and the Willa deposit (collectively
referred to as 'The WillaMAX Project'), together
form a turnkey operation that positions DVN.V to be cash
flowing within 9 months following the receipt of its initial 10,000
tonne bulk permit (On November 5, 2015 DVN.V announced it has been
the bulk sample permit).
Discovery acquired 100%-ownership of the Max Mill for
a fraction of replacement value along with acquiring a
loss-carry-forward windfall on the books of ~$50 million. The
Company is fully
till its commencement of operations, at which time it is expected to
generate sustained cash flow pouring Gold.
The 2012-Preliminary Economic Assessment ('PEA') revealed robust
economics with cash costs of US$680/oz Gold, even lower with Cu & Ag
credits. An updated PEA is in the
process of being commissioned. DVN.V is expected to cash flow between
$20M to $30M per year for the first 4 years.
intrinsic value of the DVN.V relative to its current market
of ~$15 million (~80M shares outstanding X ~19 cents)
appears disproportionate and presents exceptional opportunity for
investors establishing a long position; shares of DVN.V are poised
for upside revaluation as the inherent value and accomplishments are
appreciated by the market, and apt to respond in multiples as gold
retrenches and strengthens. Contrast the current market cap to the
following list of known intrinsic assets a) the Max Mill by itself
has a replacement value of
~65+ million, b) the WillaMAX Gold Project is worth $54 million (as per PEA),
the moly resource under the MAX Mill is worth $40 million (as per PEA).
Discovery Ventures' new CEO, Dan Omeniuk, has
struck three phenomenal deals for shareholders since coming onboard
in mid-2015. Deals like this are rare (almost unheard of) and the
combination is a serious 'company-maker':
The mill is a
perfect fit for DVN.V, it was built in 2008,
is a modern facility with a replacement value of ~$65 million, and can process over 1500 Tonnes Per Day ('TPD'). Discovery Ventures is facilitating the
transaction by acquiring 42 Metals Inc. which holds all the assets;
the mill, the dormant moly mine beneath, it comes with a tax loss
carry forward of $50 million, has a $750,000 registered bond with
the ministry, it also comes with all the equipment, rolling stock,
and it still has a 43 million tonne resource of molybdenum (one of
the highest grading in BC) which was defined by Newmont and Esso.
Discovery previously owned 35% of 42 Metals inc. which it had paid
$3M for when the facility was called the Roca Mine & Mill, now 42
Metals will become a wholly-owned subsidiary of Discovery. The mill
and mine operated from 2008 to late-2011 at which time it was put on
care and maintenance due to low moly prices. Although DVN.V will be
processing ore from its Willa Gold-Copper-Silver Project through the
mill, the molybdenum deposit is a stellar asset to hold in abeyance
for when moly prices come back. To give perspective of the
exceptional latent value; back in 2008 Roca Mines was trading at a
~$half-billion market cap at ~$4/share while producing molybdenum,
they spent ~$125 million building the mine and mill, permitting, and
getting everything up and running. The MAX Mill & Mine & tailings
pond are already permitted, it only requires an amendment changing
the type of mineral. Comparing the fact that a little over a year
ago Klondex Mines paid an aggregate purchase price of ~CDN$110
million to Newmont for its mill (of smaller capacity and further from
its deposit that DVN.V's MAX Mill), Discovery has made pulled off
phenomenal deal paying <1/20th the price.
Figure 2. DVN.V's Willa Gold
Mine Project mine plan, located ~135km S. of the MAX Mill
2) DVN.V negotiated 100% interest in the
high-grade Willa Gold Property and in the process
managed to get old consideration terms dropped, including the
elimination of $3,050,00 of cash payments out the door and the
elimination of 7 million share dilution (see related September 17,
2015 release entitled "Discovery
Ventures Inc. Acquires 100% Interest in the Willa property"). A
nominal one time payment of $130,000 was negotiated to pay for the
balance which the Company owed.
The Willa is a turnkey gold mine, everything is
built and ready to go; the deposit is un-mined to date, however
past operators developed the deposit right up to the point is was to
be opened for exploitation in the 1980's when a planned mill was
under construction ~200 km away -- unfortunately for them
(fortunately for DVN.V) that mill construction was stopped due to
Gold dropping to $200/oz. The deposit sits on a mountainside and a railed ramp
has been built down into the resource, there are 2,575 meters of tunnels developed. The Willa is
an epithermal deposit, its wide, and has an average grade between 6
& 7 g/T Gold, ~12 g/T silver, and almost 1% copper. Over $18 million
has been spent on the Willa since the 1980s, the exploration has
been carried out by BP Minerals and Rio Algom to a very high
standard, seeing 596 drill holes totaling 57,250 m of core drilling.
The 43-101 mineral resource estimate published
in 2012 identifies close to 1 million tonnes blocked out (based on a
3.5 g/T Au cut-off);
Indicated mineral resources of 748,000 tonnes grading 6.67 g/T
gold, 0.85% copper, and 12.54 g/T silver &
Large resource growth potential: The
Willa deposit is situated on a mountainside, and it is
believed the entire side of the mountain is ripe with high-grade
gold-laden material. DVN's neighbour has this summer-2015 affirmed
that the Discovery's resource expansion model is sound with the
announcement that it drilled-off stellar intercepts near the
property line, only about ~600 m from Discovery's Willa deposit,
including 16.9 m of 13.58 g/t Gold, including 10.9 m of 20.61 g/t
Gold, and 11 m of 20.66 g/t Gold. The Willa deposit itself is open
with one of the last holes drilled on the property encountering 105
m of almost 7 g/T gold, also grades tend to increase with depth
(e.g. >15g/t Au). DVN.V can continue to drill and
quickly expand the deposit from underground with some straight-shot
drill holes, some step-outs, and drill some of the inferred sections
by 50 m intervals. There is no shortage of gold, and the plan
is to use the cash flow from the WilliMAX operation add resources
and mine-life non-dilutively. There are also several stranded gold
deposits ranging between ~100K to 1 million ounces gold within a 150
km radius of Discovery's MAX mill that DVN.V could target.
3) The new CEO brought a financing to
Discovery of $7 million to take WillaMAX through to production.
DVN.V is capitalized to complete the acquisitions and prep both the
MAX Mill and Willa Gold Mine for the initial planned 10,000 tonne
bulk sample at which time DVN.V becomes a cash flow funded growth
story. The $7 million financing is essentially a line of credit from
the Dan Omeniuk; $2 million of it is convertible into shares and $5
million is at a line of credit rate. Of the $7 million, ~$2.5M will
go towards prepping & operating the Willa Mine, and $4M will be put
into the Max Mill -- the biggest expense will be the installation of a dory bar
plant over the next six months.
'The WillaMAX' - Willa
Gold Mine and MAX Mill
The Willa Mine is connected to the MAX Mill via
135 km of road, almost entirely along provincial highway.
Salient details from the 2012-PEA:
(based on 4.25-year mine life, operating at 500
TPD, using US$1,200/Au, US$3.00 Cu, US$20/Ag, no inferred
resources were used in this PEA)
Total revenue: CDN$164 million
CAPEX: CDN$12.8 million
OPEX: CDN$82.8 million
NPV (10% discount) after tax: CDN$54,958,000
after tax: 412%
Cash costs of US$680/oz gold
All in Costs of US$781/oz gold
growth potential: Discovery will start slow as engineers tweak
equipment to capture the highest percentage of grade back, capturing
all of the minerals possible in the gravity circuits, and ramp-up
from there. In year-1 DVN.V should generate 20,000+ ounces gold and
aim to take the operation to another level. Shareholders have to
keep a big window of opportunity open; by year-5 it is possible that
DVN.V could be producing 30,000 - 50,000 ounces gold and gold equivalent
assuming the Company expands the resource and/or takes on other
sources and takes advantage of the fact the mill can operate up to
1,500 TPD. The ball mills are currently installed to do up to 1,500
TPD, however the MAX mill actually has enough floatation cells in
the mill to handle 2,500 TPD. Also in the future, the possibility
exists for DVN.V to juxtapose Willa Au-Cu-Ag ore with the moly ore from
beneath the mill should molybdenum prices come back, the PEA on the
moly alone yields a Net Present Value (@10% discount) of $40M when
using $15/lb Mo.
The bottom line: DVN.V should be able to
generate comparable quality numbers in the new PEA being
commissioned, and in the first 4 years of operation, with the $50
loss carry forward, the Company should nail those numbers and put a
lot of money in the treasury. Discovery
is also protected to the downside by forex gains from US to CDN, if
pouring gold today it would receive ~$350/oz price differential
for gold in Canadian dollars over US dollars.
Discovery Ventures Inc.
2,000,000 @ 0.18 &
3,991,999 @ 0.25
22,247,580 @ 0.35
Planned Total and
Fully Diluted Shares
Below is expanded
insight on Discovery and its key assets.
Discovery's WillaMax is
located in a stable mining-friendly jurisdiction, has excellent
infrastructure, and has a local population workforce within short
Figure 4. Location Map
- British Columbia, Canada is
a stable, mining friendly region and is ranked as a top-tier
jurisdiction by the Fraser Institute. The Willa Gold Mine Project
is located in one of the most highly mineralized regions for base and
precious metals in southeastern British Columbia. The Willa deposit is
located 8 km south of Silverton on Red Mountain, named because of the
extensive red soils resulting from weathering of sulphide minerals in
the local bedrock. Ore from Willa will be loaded into
trucks and transported along highway 6 right to the Max Mill.
Note: Discovery has no
issues, the mill is already permitted, and in 2009 when Discovery's MAX
Facility was processing moly it won the 2009 B.C. Mining &
Recent news releases regarding accomplishments and
Figure 6. (above) Willa
Gold Mine Project resource model, with inset images of both portals and
past drilling - never previously mined, turnkey ready.
View a short embedded video showing the Willa gold
deposit in 3D and overview of the WillaMAX operation:
Large resource growth expansion potential:
Discovery's neighbor's recent results affirm
belief that the entire mountainside hosts multiple
Figure 7a. (above) partial claim map of
discovery's Willa (in white) & location of neighbor (seen to the left) - The Willa deposit is ideally situated on a
mountainside, and it is believed the entire side of the mountain is ripe
with high-grade gold-laden material. DVN's neighbor has this
summer-2015 affirmed that the Discovery's resource expansion model is
sound with the announcement (on August 18th, 2015) that it drilled-off
stellar intercepts near the property line, only about ~600 m from
Discovery's Willa deposit, including 16.9 m of 13.58 g/t Gold, including
10.9 m of 20.61 g/t Gold, and 11 m of 20.66 g/t Gold.
Figure 7b. (above) underground view -- The neighbor's
project is called the "LH Property" and the its claims were part of a
recent qualifying transaction -- DVN.V can look forward to continued
news flow that proves up Discovery's model.
The Willa deposit itself is open
with one of the last holes drilled on the property encountering 105 m of
almost 7 g/T gold, also grades tend to increase with depth (e.g. >15g/t
Au). DVN.V can continue to drill and quickly expand the deposit from
underground with some straight-shot drill holes, some step-outs, and
drill some of the inferred sections by 50 m intervals.
MAX Molybdenum Mine Project Summary
Although the molybdenum mine is not the focus of
Discovery's attention currently (the Mill above the moly is), this moly
resource is an exceptionally valuable holding asset that can be put back
into production when the commodity price improves. PEA on the moly alone yields a Net Present Value (@10% discount) of $40M when
using $15/lb Mo.
Figure 8. Max Mill
- above moly mine
Total mined to date = 430,000 T at 0.5% Mo (mine
diluted head grade)
Figure 9. Max Molybdenum
Mine design - from
Preliminary Assessment Report
spent on mine development & expansion.
$15m (1980s) exploration
by Newmont and Esso.
Phase 1 production late
2007, stalled by sustained low prices late 2011.
Phase 2 (1,000 tpd)
Expansion and Development 90% completed.
The Consolidated Willa + MAX Project includes;
model estimate based on initial 4.5 years.
trucking, processing 748,826 Tonnes.
Production of 105,000 oz Au, 238,000 oz Ag, 6.1MT Cu.
1) Copper Concentrate (Budget costs Trafigura),
2) Gold (sold direct),
concentrate (sold or stored),
Base Case Revenue $164M (@ $1200Au)
CAPEX $11.8M (includes MAX Acquisition)*
* It appears DVN.V is actually paying less than was
anticipated in the PEA.
Estimate = $680/ oz Au
WillaMAX NPV10 =
$55M (*Base Case $1200Au)
Molybdenum NPV10 = $40M (@ $15/lb Mo)
price improves (NPV10 = $83M @ $1500Au)
price increase will trigger production
Willa material to MAX delivers robust economics:
Figure 10. (above) Max Mill Facility
Figure 11. (above) Ball at Max Mill
Figure 12. (above) Max Mill - Metallurgical bulk
samples confirmed recoveries between (Au) 80-84 % and (Cu) 90-94% at a
concentrate grade of 20-24% copper. Testing has indicated that a
pyrite/gold concentrate is viable and should increase gold recoveries
and project economics.
Technical Leadership and Management Skip to top
Dan Omeniuk, CEO, Chairman, Director
Dan is the president of Trappers Transport, a North
American Leader is providing temperature controlled
transportation services. Dan is the founder of Trappers
Transport and has led this company from a being a small
business to an industry leader over the last 30 years.
Dans company recently agreed to a $7M credit facility
to advance to the WillaMax Project.
Akash Patel, President, Director
Mr. Patel has worked in the investment industry for over
6 years with junior companies from inception and
incorporation to final listing. Having acted as CEO and
director of several public companies, and as the head of
his own consulting firm, Mr. Patel specializes in the
assistance of initial public offerings as well as all
regulatory filings. Mr. Patel has received a bachelor in
accounting from the British Columbia Institute of
Technology with a major in accounting and minor in
finance. He also has over 10 years of corporate tax
experience and has been an active board member and
contributed to the start up of Makena Resources Inc (CAJ)
and WestKam Gold Corp (WKG). Currently, Mr. Patel is
still on the Board of Directors for WestKam Gold Corp.
Walter Marting, Director
Walter A. Marting, Jr. has spent a large part of his
career both as a senior executive for a Fortune 500
mining company and starting and running his own junior
gold mining company. Mr. Marting joined Amax Inc. as an
underground mine Production Supervisor at Amax's Climax
Molybdenum property in Climax, Colorado. Mr. Marting
spent two years working underground and in Climax's open
pit operation before moving to the Company's
headquarters in Greenwich, CT. In 1982 Mr. Marting was
named Vice President --- Finance for Amax Europe in
Paris, France. Mr. Marting helped build Amax's global
mining presence from its Paris headquarters and had
financial oversight of the company's European and
African exploration and development and ore processing
activities. He left Amax in 1984 to start his own mining
company that undertook the re-opening and operation of
the famed 16-1 Mine in Allegheny, CA.
Kenneth C Phillippe, B. Comm, CA., Chief
Mr. Phillippe is a Chartered Accountant licensed to
practice in British Columbia. He received a Bachelor of
Commerce degree from the University of British Columbia
in 1976 and obtained his professional accounting
designation in 1981, after articling with the firm of
Thorne Riddell (now KPMG). In 1982 he established a
private accounting practice. From 2000 to 2005, Mr.
Phillippe served in various positions including
director, officer and chair of the audit committee of
MDX Medical Inc., a Vancouver-based medical device
company. In 2006 he accepted the position of Chief
Financial Officer of Columbia Goldfields Ltd., a junior
gold mining company that reported under the U.S.
Exchange Act. In addition, Mr. Phillippe served at times
as the Secretary, Treasurer, Chief Financial Officer and
Principal Accounting Officer of Amazon Goldsands Ltd.
from 2006 to 2010 and of Constitution Mining Corp. from
2007 to 2010, both of which companies report under the
U.S. Exchange Act. Since 2006 Mr. Phillippe has been
Chief Financial Officer of Exchequer Resource Corp. From
2006 to August 2010 Mr. Phillippe was a director and the
Chief Officer of Bold Ventures Inc., the latter of which
achieved a listing on the Toronto Venture Exchange in
October 2007. In 2009 Mr. Phillippe was appointed Chief
Financial Officer of Advanced Proteome Therapeutics
Neil Hill Morgan, Director
Mr. Morgan has over 30 years of business experience
encompassing a wide range of corporate experience in
sales, management and ownership of many successful
Robert Robson, Process Metallurgist
Mr. Robson is a process metallurgist with over 30 years
of experience in the mineral processing industry. His
experience includes lab, pilot plant, mill and process
supervision as an employee and consultant. His
specialties are copper, gold and sulphide flotation,
tungsten oxide flotation, gold cyanide heap leaching,
and environmental compliance. During his career, he was
a process and mill superintendent for 15 years and
process metallurgist for 5 years. His responsibilities
and duties covered all aspects of metal recoveries and
supervision of all mill and assay lab employees. He was
also responsible for environmental compliance at three
mines in Canada, which included monitoring, waste water
treatment and government reporting. Mr. Robson has
worked in Canada, the USA and Mexico for copper, gold
and tungsten flotation. Mr. Robson holds a Diploma of
Mining Technology from BCIT and specialized in the
extractive metallurgy aspects of this program.
Note: This article is not intended to be a complete overview of
Discovery Ventures Inc. or a complete listing of Discovery's projects. Mining MarketWatch urges the reader to contact the subject company and has
identified the following sources for information:
For more information
contact Discovery Ventures' head office at:
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Content found herein is not investment advice
This is a journalistic article and the author is not a registered securities
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advice to buy or sell securities, but rather journalistic opinion only.
Technical mining terms used by the writer may be used/expressed in simplified layman
terms and should not be relied upon as appropriate for making investment
decisions unless the reader contacts the company directly for independent