BacTech Mining Corp (http://www.bactech.com) TSX-V symbol BM. Size of Cortez land position: 55% interest in 36 sq. mile tract. 1) Tonkin Springs: According to BacTech, in 2003 it acquired a 55% interest in "U.S. Gold's Tonkin Springs gold property [which] encompasses 36 square miles located on the prolific Cortez/Battle Mountain Gold Trend in Nevada. A gold resource of 1,400,000 ounces [measured and indicated] has been defined. In addition, facilities include a 2,000 ton per day mill with a bioleaching circuit and complete mine, mill and tailings infrastructure were included in the US$1.75 million purchase price." According to U.S. Gold, BacTech "is responsible to fund $12 million to recommence gold production from the existing 1.4 million ounce gold resource." BacTech's property is located immediately south of the Cortez Joint Venture area that hosts the Cortez Hills and ET Blue discoveries. BacTech's CEO, Ross Orr, believes that the Cortez Fault system runs down the spine of the Tonkin Springs property for 12 miles. Rifts can play an important role in gold formation, and the property sits in the middle of the intersection of the Northern Nevada Rift and Battle Mountain-Eureka Trend, as noted in the Klondex magnetic map midway through Part Five. No one has ever drilled down to the Lower Plate strata on this property, but instead all gold mining to date has been relatively shallow. Placer Dome's Cortez Hills discovery to the north ranges from 1,500 feet down to 2,500 feet. In some places the Lower Plate may undulate upwards to within 600 feet of the surface. BacTech will not know until it drills whether it will have to go down 600 feet or 2,000 feet or even further. Source: BacTech and Mineral Information Maps Projects outside of the Cortez Trend area: 2) China. BacTech has a right to back into bacterial oxidation projects proposed by a joint venture company. 3) Dizon Project, Philippines. BacTech is involved in a joint venture which is evaluating recovery of metal from the tailings at certain mines that can make use of bacterial oxidation technology. Active mines or facilities in Cortez: According to CEO Ross Orr in his May 5th Tom O'Brien interview, BacTech originally bought the Tonkin Springs property with the intention of using it for bioleach processing. The Tonkin Springs site is a former gold producer with a mill and tailings infrastructure on site. The mill closed down due to low gold prices in the late 1990's. BacTech originally considered hauling ore concentrate from places as far away as Canada to its Tonkin Springs facility with hopes of eventually processing around 300,000 ounces a year. If the Cortez Trend takes off, BacTech will likely get surprise business from neighbors. The company is now evaluating returning Tonkin Springs to production most likely at a reduced production rate from the original plan. This might start at about 30,000 ounces a year, and perhaps ramp to 40-50,000 ounces a year over eight years. The cash costs of production could possibly range in the low to mid $200's. The bioleaching process can be modularized and scale well, and the required plant and equipment is relatively less expensive than alternative oxidation processes for lower production volumes. Amount of proven resources in Cortez. 1.4 million ounces measured and indicated at Tonkin Springs property. Out of this 500,000 ounces are "proven and probable" @ $400 an ounce. This constitutes the total reserves in the company. Exposure to Cortez: 90% with balance of effort to locate new projects for future development in various countries around the world. Total production. None. BacTech intends to refurbish the bioleaching plant on its property. The production process is modular and should scale well if increasing business comes from Cortez Trend neighbors. Total Company revenues: $253,184 for the 12 months ended Sept 2003, but none for the nine months ended Sept 2004.. Please note the annual report and most recent unaudited financial statements for expense data. . Fully diluted shares: 63 million shares. Working capital: $1.25 million as of Dec 31, 2004. Outside ownership/largest shareholders. Largest shareholder is Sun Valley Gold, a private equity fund for 21%. Linx Resources, which bought its fund from Rothschild Australia, owns 10%. RAB Capital of London, UK, owns 6.6%. Veneroso Gold Fund owns 3.5%. Prudent Bear owns 3.5% plus $C3 million in BacTech debentures. Management has 7.7%. Management/Strategy: "Bacterial Technology" (BacTech) was originally founded in Australia to develop bacterial methods to leach gold from certain amenable ores types, typically the "refractory" sort. "Refractory" means ore that resists normal chemical treatment such as cyanide to leach out the gold. Refractory sulfide ores can be decomposed by bacteria that eat away on the sulfur. This cuts out a number of toxic production steps and is much more environmentally-friendly compared to competing full process cyanide leaching and roasting methods. BacTech has a strategic alliance with Mintek, the national metallurgical association of South Africa. According to Mr. Orr, Bactech and Gold Fields are the two global leaders in bioleaching technology. BacTech has successfully commissioned three gold bioleaching plants. Gold Fields operates four plants using its BIOX technology, to include the largest plant in the world in Ghana, and has many more plants on the drawing boards. The bacterial oxidation process has been commercially available for 15 years. Newmont Mining, incidentally, runs a large bioleaching process in northern Nevada, except that it uses an open air process for heap leach pads, whereas BacTech and Gold Fields bioleach inside tanks. Bioleaching might leach out 95% of gold in refractory ore compared to 98% in competing pressure oxidation processes, however, it has the financial advantage of requiring much less capital investment for plant and equipment, which can be modularized and can scale well. Therefore, in volumes under several hundred thousand ounces of gold a year, bioleaching is normally more cost effective than alternatives. BacTech's CEO told me that he is getting calls from major mining companies about structuring a joint venture exploration deal for the Tonkin Springs property. BacTech clearly faces many issues. One involves resolving whether to buy out or continue to joint venture with its 45% partner U.S. Gold Corp. Another issue involves whether or not to accept a joint venture deal from a major gold mining company or else try to find financing elsewhere. A third issue involves whether it wants to focus on gold exploration right now, or put it on the back burner and focus on developing bioleach plants around the world while its Cortez Trend neighbors hopefully prove up their properties and make the broader area better defined and more valuable. BacTech's 2003 annual report states that its corporate strategy focuses on obtaining ownership of mining operations that use its bacterial processes. In other words, rather than just collect licensing, royalty, or consulting fees to install and run bioleaching plants, the apparent "sweet spot" is to buy equity exposure in mining operations that would otherwise be worthless without BacTech's technology. This could be a great strategy to obtain substantial upside equity exposure at a very low cost. BacTech's current problem is that the company has a significant cash burn rate and relatively little working capital in a very capital intensive business. (Welcome to the junior mining company sector!). However, the company also has ownership of proven and probable ounces that provide some cushion to its stock price as a bargaining chip to do deals and raise more money. In Feb 2004 Raymond James of Canada gave BacTech a "Strong Buy" but later cut its rating after the stock had a run-up. In its April 2004 review, Veneroso Gold Associates felt BacTech shares were trading at a substantial discount to NPV based on the firm's Tonkin Springs resources alone. In his July 5, 2004 letter to shareholders, CEO Ross Orr reported that mining analyst John Kaiser also felt that BacTech was undervalued.
