When putting together the business plan for a new company, incorporating lessons from the leaders in your industry is always a good idea. David Stein worked as a mining analyst beginning in the early 2000s and was among the first to initiate coverage on marquee names such as First Majestic and Fortuna Silver. When he decided to establish an exploration company of his own, he understood the models that tended to position small companies to become billion-dollar players.
Focusing on high-grade silver projects with the potential for near-term production, Kuya Silver (CSE:KUYA), where Stein is Chief Executive Officer, is active in Peru and Canada, two of the world’s most prolific jurisdictions for precious metals production. With a healthy treasury, a balanced approach to its projects and a strong silver market, the company is ready to begin putting its plan into action. Stein shared his strategy of silver production and ongoing exploration with Public Entrepreneur in mid-February.
Kuya is obviously silver-focused. Before we get into your two projects and the outlook for each, tell us why you chose silver.
It really comes down to finding an exceptional project and it just happened to be a silver project. I found the Bethania Mine opportunity in 2017, and while my background is in all sorts of different minerals, precious metals are the main ones.
As I started looking more into the silver mining industry, I noticed there was a huge opportunity because many of the intermediate and large silver players from 10 or 15 years ago had diversified away from silver and more into gold. Now there is this sort of a void in the industry where if you want to invest in a primary silver mining company there are very few options. The opportunity to have this exceptional project and be able to get into production quickly made it all the more exciting.
Your plans for Bethania call for putting a local mine back into production and at the same time doing exploration to help with mine planning and resource expansion. How did you come across Bethania, and can you talk about the thinking behind this two-part plan?
In terms of how I found it, I went out on my own after being in the industry on the investment side for 15 or 16 years and was looking for projects, mostly privately owned opportunities. During the bear market I had focused on private equity as a niche within the mining sector. Bethania was one of the projects that came up.
In terms of the business plan – restarting the mine, putting our own plant there and increasing production – that evolved over the course of negotiations with the former owners. Initially, they were really looking for someone to put a little money in for a minority interest and help them with some financial issues. It didn’t interest me as a minority investment, but if we could take control, there was a chance to do something special. I saw the potential to get enough silver production from this mine to make it into a meaningful public company one day.
I was a sell-side equities analyst in the early 2000s and one of the first analysts to cover some of the important silver companies. To me, this opportunity reminded me a lot of those: start with a high-grade silver mine with low capex that you could put into production quickly and easily. Then, by bringing better access to capital through the public markets, you could grow production, reduce costs, do more exploration – all those good things we plan to do.
If you look at the genesis of First Majestic or go back even further to the first projects that Pan American acquired in Peru, these very big and successful multi-billion-dollar companies all started with a single high-grade silver project. That was the beginning of the journey.
Peru has a long history of mining. What is the plan for community support and sharing the benefits with the people who live in the region where Bethania is located?
Peru is a very diverse country with different communities and types of environment. We are in the high Andes in central Peru, so we are in an area that is very accustomed to mining. As a recently producing mine, there is already acceptance of Bethania and a culture within the local community to support it. The community that has jurisdiction over the mining area is Poroche, and we are still in the process of working out what the people want to see over the longer term. The community has been very helpful, and I think they believe in the benefits of having more activity in the area and would prefer that the mine be operating.
One noteworthy aspect of our relationship is that we were able to receive our environmental impact assessment approval for the new plant and tailings storage. In order to do that you essentially have to get approval from your local community before you submit your paperwork to the government. There are site visits and other aspects of a legislated process. So, you work with the local community and essentially earn its support before permits can be granted. I think that demonstrates we are on a strong footing.
Your other project is located in northeastern Ontario. It has some very nice silver numbers and some cobalt in the mix as well. What is your plan there?
There are two parts to that deal. There is a part where we are buying a section outright, which is the Kerr Project. It represents about 10% of the First Cobalt land package and is the most advanced part. It is where most of the historical drilling is. We have most of the data, and most of the high-grade silver hits are in that area. We see that as the part we can potentially get into production first. The other 90% goes into a joint venture.
This means there are two strategies. With the Kerr Project, we are looking to follow up on historical high-grade silver intersections and look for extensions of some of the known mines. There have been more than 70 million ounces produced in the area we are buying. We would like to find potentially some new veins and get them into production, at a similar scale to what we are doing in Peru.
And that is the link for us from Peru to Ontario, that the history of the Cobalt Camp is this super high-grade mineralization mined at a small tonnage. We want to produce a lot of silver but not necessarily go through a lot of rock. And we feel we can do that in the Kerr area.
With the joint venture, the opportunity is to find another collection of veins. If you look at the whole camp, the 400 million or 500 million ounces produced historically from this part of northeastern Ontario is in clusters of 50 million to 100 million-plus ounces of silver. With the joint venture we want to find a new cluster.
Do you have any closing thoughts, perhaps something we’ve missed or a statement that encapsulates how investors should think about Kuya Silver?
I would highlight that we are very focused on restarting production and becoming a profitable silver mining company in Peru. But we also feel that we have exceptional exploration potential with our property there. In 2021 and beyond you’ll essentially see us on two parallel tracks: one will be mine development and getting into production, and the other will be drilling and working to find the resource that underlies production for another decade or more. And we think we can do that in the next year or two.
This story was featured in the Public Entrepreneur magazine.
Learn more about Kuya Silver