There are a lot of business models for junior mining companies. Not all work all the time and when times are tight Bayhorse (V.BHS) CEO Graeme O’Neill wants “to deliver value to shareholders as quickly as I can.”
“We have to get out of the fund and spend cycle. Get production at a reasonable rate.” explained O’Neill. At the same time, O’Neill is a realist. “We got our barite mine permitted in 8 months; but the market crashed and no one cared.” (The mine was spun out to German interests and Bayhorse expects production to commence later this year. Bayhorse retained a 30% net profit arrangement with the new operator.)
The sale of the barite interest meant Bayhorse was positioned to act when it was presented with the Bayhorse silver mine opportunity in Eastern Oregon by American Cordilleran Mining Corp, (AMCOR).
“This is a silver mine in Eastern Oregon which was mined in the 1920’s and again in the 1980’s. We have a long standing business relationship with AMCOR and they bring us good quality projects.” said O’Neill. “We waited until the market improved before moving on this project. But we have samples which go as high as 150 kg/ton.”
O’Neill is a New Zealander and, though he’s lived in Canada since 1971, his Kiwi accent comes to the fore when he starts talking about the geology. “I have a rock on my desk which weighs 2kg and contains 8 ounces of silver and is 17% copper.”
“Bayhorse was drilled, underground, in 1984. We have all that information and we’re in touch with the geologist who did all the mapping and the underground work in the 1970s. He called us.”
“These are patented claims. Until the 1930’s any US citizen could stake a claim for 20 acres and, if they did the required work, the claim would become private ground. Right now, work we do on the property is subject to Oregon state law but we can remove 5000 cubic yards of material per year – 15,000 tons – which would be a bulk sample.”
“Back in the 1980s they mined 5700 tons which graded 15.0 ounces per ton. We have an historical resource of 460,000 tons – but it is not 43-101 compliant.” said O’Neill, “We just entered into an agreement with American Mining & Tunneling to make the underground workings safe. Re-pin the underground workings. Then we will resample underground to confirm grades. We have a 43-101 but we don’t have a resource estimate yet. We believe that confirming the grades will give us that estimate.”
Bayhorse’s plan is straightforward. If the grades are confirmed O’Neill believes there is a potential for 225,000+ ounces of silver in the 15,000 ton sample. “Not all that expensive to mine. We have processing facilities within 200-300 miles so we could be toll milling the material.”
Timing on the Oregon property is to try and begin removing material by the end of 2014.
At the same time as Bayhorse is working on its potential silver mine, another business opportunity arose: medical marijuana. April 4, 2014, Bayhorse announced that it had retained the service of two consultants who provide services to the medical and recreational marijuana business in Colorado and Washington.
“We don’t want to get into the grow business.” explained O’Neill, “We want to explore the business opportunities which surround the business. We think there is the opportunity to be to the marijuana industry what the sutlers were to the Gold Rushes.” (Sutlers supplied the gold miners food and clothing and other supplies – the most famous sutler was Levi Strauss who invented blue jeans for the 49ers.)
“The marijuana business is heavily regulated. In Washington every five pounds of marijuana has to be tested. As a mineral exploration company we are used to operating in a highly regulated environment. We deal with labs and permits.”
For Bayhorse the marijuana business is all about buildings, grow systems, dealing with regulations, testing and, in some cases, sourcing the “seed” capital required to get the businesses going.
O’Neill himself brings a wealth of experience to the business, “I was actually a municipal inspector in North Vancouver in the 90’s_. I saw a lot of grow ops and the associated problems. For growing, marijuana is finicky. What a grower wants to do is turn a crop around every six weeks. We hope to provide the expertise and support to make that happen.”
While many juniors have been criticized for diving into the marijuana business without really having anything to actually contribute, O’Neill sees Bayhorse’s participation as a logical extension of its skill set.
“We’re not desperate. We’ve created two spinoff companies over the last few years for our shareholders and we’re looking forward to potential profits from the Barite Mine before the end of 2014. Legal marijuana is a brand new, highly regulated, business opportunity with a brand new business model.”
At time of writing Bayhorse traded at $0.135 with 19.3 million shares outstanding and a market cap of $2.6 million.