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Auxico Resources Canada Inc (CNSX:AUAG) Ultrasound Technology Extracts Gold, Coltan in Colombia

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Auxico Resources Canada Inc (CNSX:AUAG) (FRA:A0H) is an acquisition, exploration, and development company with operations in Mexico and Colombia. CEO Pierre Gauthier discusses how Colombia’s changing political environment has made previously off-limits areas of natural resources available to commercialization in the country. Gauthier explains that Auxico has developed a technology to mine gold without the use of cyanide or mercury, a chemical banned by the Minamata Convention. The company’s technology uses ultrasound assisted extraction to break up particles and speed up extraction without the use of harmful chemicals. Auxico’s technology can be used by artisanal miners, who mine 20 percent of the world’s gold. Auxico has signed an agreement with the Bolivar government, a department of Colombia, to use this technology for gold mining. In addition, Auxico has made a deal with the Bolivar government to organize commercial exploitation of coltan, a key component in cellphone production, in the region. Using the company’s ultrasound assisted extraction process, Auxico will upgrade the value of the ore by making it less radioactive.

Transcript:

Narrator: Auxico Resources Canada Inc is a Montreal-based, mining exploration company founded in 2014. Auxico is engaged in the acquisition, exploration, and development of mineral properties in Mexico and Colombia. Auxico Resources Canada Inc is listed on the Canadian Securities Exchange under the symbol AUAG.

Ed Milewski:  Joining me today we have Pierre Gauthier, CEO of Auxico Resources. Now, you’re based in Montreal, correct?

Pierre Gauthier:   Correct.

Ed Milewski:  And you’ve been on Bay Street for a long time.

Pierre Gauthier:   Absolutely.

Ed Milewski:  Like, we’re a couple of warriors, correct?

Pierre Gauthier:   Absolutely, yes.

Ed Milewski:  And as your ticker would say, AUAG, now, it’s got to have something to do with gold and silver.

Pierre Gauthier:   Absolutely.

Ed Milewski:  Periodic symbols for gold and silver.

Pierre Gauthier:   Absolutely.

Ed Milewski:  Now, you started off in Mexico.

Pierre Gauthier:   Yep.

Ed Milewski:  Now, but I understand there’s been some developments, and you’ve been sort of focusing on Colombia?

Pierre Gauthier:   Absolutely.

Ed Milewski:  Let’s talk about Colombia.

Pierre Gauthier:   All right, all right.

Ed Milewski:  Okay.

Pierre Gauthier:   So when you go to a new country like that, you have to go there with a competitive edge or else you shouldn’t be there. And it happens that –

Ed Milewski:  So how did you – did somebody say…?

Pierre Gauthier:   No, my legal assistant in my office is Colombian, her name is Pina Da Costa, and her husband is Colombian. And as I got to know him, he was the assistant of two past Presidents of –

Ed Milewski:  This is totally random?

Pierre Gauthier:   Yeah, it’s random. They’re in my office. I meet the husband, and he’s been the assistant to the past two presidents. He worked for Pricewaterhouse for ten years in Colombia, and he knows everybody.

Ed Milewski:  Is he a financial guy? Pricewaterhouse?

Pierre Gauthier:   He’s a financial guy, absolutely.

Ed Milewski:  So he, and he knows top –

Pierre Gauthier:   Yeah, he knows everybody. So he invited me to go to Colombia for a week. I stayed at a hotel room, had eight meetings a day, and realized he knew everybody.

Ed Milewski:  Come on.

Pierre Gauthier:   Absolutely. So that –

Ed Milewski:  Right under your nose.

Pierre Gauthier:   Yeah, right there. So all of a sudden, with that one week, we decided to go there because of the access to properties, people, governments, legislation, everything.

Ed Milewski:  And the rules changed in Colombia from, say, seven, eight, ten years ago.

Pierre Gauthier:   Yeah, very good point, absolutely, because –

Ed Milewski:  The political situation’s a lot –

Pierre Gauthier:   Yeah, here’s what’s changed, is that there was a war there for 42 years with the FARC.

Ed Milewski:  Yes.

Pierre Gauthier:   And that war ended about a year ago, a year and a half ago. And with that settlement, you had about a third of the country that was off-limits in terms of natural resources. So here we have this treasure chest of minerals that’s had no activity for 42 years.

Ed Milewski:  That’s true, yeah.

Pierre Gauthier:   So, in my lifetime in mining, when you can catch an event like that – either a political change, or the laws get revamped to encourage investment, or access to mineral resources that have been off-limits for 42 years – that’s a one in a lifetime opportunity. And when you can do that with people that have, with a partner that has access to all the right people, you know, the odds are stacked in your favour.

Ed Milewski:  So you had to give your assistant some stock options.

Pierre Gauthier:   I did, I did. And his wife, and his wife.

Ed Milewski:  Yeah, yeah. So I know, and everybody that goes to Colombia, loves Colombia now. It’s gone from a hated place to a revered place.

Pierre Gauthier:   Yeah, and there was another consideration…

Ed Milewski:  You’ve got some technology.

Pierre Gauthier:   That’s it, that’s it. That’s what I want to talk about, absolutely. So there’s something called a Minamata Convention in the world, that’s a UN Convention signed by 144 countries that eliminates the use of mercury in artisanal mining. And Colombia is one of those countries that signed that convention. So they have a problem, is that there’s all kinds of people, artisans, that make a living mining gold and extracting it with mercury. They can’t put them out of a business; you know, you’d have a revolution on your hands if you stopped that.

Ed Milewski:  These artisanal miners, they’re out there chipping away, trying to make a living, right?

Pierre Gauthier:   But they use mercury to extract the gold.

Ed Milewski:  And mercury’s considered a very poisonous –

Pierre Gauthier:   Yeah, for the human being and for the environment.

Ed Milewski:  Yeah, I remember in chemistry class we used to play with mercury, and don’t play with it anymore.

Pierre Gauthier:   Absolutely. So Auxico has this technology to extract gold and silver without the use of mercury or cyanide.

Ed Milewski:  Now, how did you get that technology?

Pierre Gauthier:   Well, that was developed in Canada. I’ve been financing innovation in mining and metallurgy for a number of years, and through an associate company we licensed Auxico with the rights to this technology. And when the governor of the state of Bolivar found this out, then that would solve his legal problem in terms of creating a new way to extract gold and silver without the use of mercury, and allowing the indigenous people to continue to work under legal terms, the right legal terms, okay? So we signed an agreement with the –

Ed Milewski:  I bet you there’s a lot of these indigenous miners that are trying to make a –

Pierre Gauthier:   Well, what it is here, there’s 100 million ounces of gold produced worldwide; 20 million of those ounces are produced by artisanal miners – Africa, Central America, Latin America. It’s huge.

Ed Milewski:  Wow. Wow.

Pierre Gauthier:   So this is a big problem –

Ed Milewski:  Mom and pop operations.

Pierre Gauthier:   Yeah. But all the governments that need to solve this, and we happen to have a technology that does not use mercury or cyanide, that can do this.

Ed Milewski:  But is this technology, like, how proven is this technology? I mean, it’s early days, right?

Pierre Gauthier:   It’s early days, but you know what? What’s the alternative? There’s nothing else, okay?

Ed Milewski:  Right, okay.

Pierre Gauthier:   So I’ll answer it that way, and it’s very simple technology. It uses ultrasound extraction to break up particles so they can get them out faster. It’s that simple. You know, if you went to a hospital and you had a kidney stone problem?

Ed Milewski:  I know.

Pierre Gauthier:   They use ultrasound to break it up.

Ed Milewski:  Well, they clean your teeth using ultrasound, right?

Pierre Gauthier:   So it’s the same thing. If you put ultrasound in oil –

Ed Milewski:  When you get old like me, you get a lot of problems with your teeth. They need special –

Pierre Gauthier:   That’s right. It’s inoffensive, but it breaks down particles into nanoparticles and allows you to get them a lot faster. So we signed with the governor to do this in the state of Bolivar, but now happened we had about 20 companies call us who wanted the technology, and how we did the business –

Ed Milewski:  So what do they do? They send you samples and stuff?

Pierre Gauthier:   No, we sign option agreements on those properties first, because they didn’t want to start spending a bunch of money and then have to negotiate terms.

So all of a sudden we’re getting all these samples in Canada…

Ed Milewski:  And this is all because of your relationship with your assistant?

Pierre Gauthier:   No, no, and the deal with the governor. The governor announced this –

Ed Milewski:  Okay, okay.

Pierre Gauthier:   So that got a lot of press in Colombia. Samples started coming in, and we started getting these samples that had nothing to do with gold; they were like gravels.

Ed Milewski:  You’re looking at them thinking, what is this?

Pierre Gauthier:   Absolutely.

Ed Milewski:  But did you test them?

Pierre Gauthier:   Yeah, of course we did. So on analysis, this is coltan material: tantalum and niobium.

Ed Milewski:  Which are expensive minerals.

Pierre Gauthier:   Very expensive and very rare. Very rare.

Ed Milewski:  Probably – are they elements?

Pierre Gauthier:   Yeah, yeah, they’re on the periodic table, absolutely, absolutely. Just to talk about that –

Ed Milewski:  But they’re rare, and expensive.

Pierre Gauthier:   Yeah, they’re very rare and very expensive, but now they’re being mined in the Congo, okay? And tantalum goes – how many cell phones are there in the world today? Maybe 6 billion, as many humans? Well, tantalum is in every cell phone and every computer, so the large companies, Samsung, Apple, they have to buy this stuff. It’s being produced out of the Congo, and as you know, in the Congo, there’s –

Ed Milewski:  Well, the Congo’s not exactly a picnic place, right?

Pierre Gauthier:   No, it isn’t, but you know, there’s issues with child labour, human rights abuses, etcetera.

Ed Milewski:  Sure, yeah.

Pierre Gauthier:   So if you’re some of those large companies, you’d rather not buy from there if possible, but if that’s the only place it comes from, you’re sort of stuck. So all of a sudden, happily for us as a company, Colombia, the war is over, it opens up, and they have very important reserves of this coltan, and right in the heart of this.

Ed Milewski:  Did you get some, did you get some grades that you thought were a bit amazing?

Pierre Gauthier:   Yeah, we did. You know, these are gravels, and you know, some of our press releases indicate what those grades are, but it’s running as high as 35 percent tantalum, so if you did some math on that, a little bit, tantalum sells for $90 a pound; so if you’ve got 30, 35 percent of your rock that’s tantalum, that’s about 600 pounds out of a ton. At $30 a ton, do the math on that; it’s $50,000 a ton of tantalum.

Ed Milewski:  $50,000 a ton? I mean, the only thing I know of that’s $50,000 a ton is uranium. Like – I’m sure there’s some gold deposits, but it’s rare. You start getting into, you get $1000 rock, people are excited. So 50,000 – not 5,000?

Pierre Gauthier:   No, no, 50,000. But you know, so what’s happened here is –

Ed Milewski:  But you don’t know how much of this stuff is over there.

Pierre Gauthier:   Not yet.

Ed Milewski:  Have you gone and taken –

Pierre Gauthier:   Absolutely.

Ed Milewski:  Are you going to bring me with you?

Pierre Gauthier:   If you want…no, I don’t think you want to go. [laughter] If you want to come, you’re most welcome, but it’s difficult. You know, but these are gravel deposits.

Ed Milewski:  This is at surface?

Pierre Gauthier:   At surface, in the river beds, and they’ve been concentrated by nature over the years. So think of a river coming down, and in the bend –

Ed Milewski:  Over millions of years.

Pierre Gauthier:   Yeah, over millions of years, and this tantalum is very heavy; it’s almost as heavy of gold. It has a specific gravity of 16; gold is 18. So something really heavy that’s being washed over stays behind and the light stuff goes on. So it’s this natural phenomenon of being washed by nature that creates a concentration with these kind of numbers.

Ed Milewski:  You’ve taken some photos, and we’ve got some of these photos now of what these gravels look like. And then we can see this on the screen, and that’s what you tested?

Pierre Gauthier:   Yeah. So when we receive samples, in order to have an idea of what they are – are they hard rock, are they anything else – the lab takes a picture like this before we analyze it, just so we can have a sense of what the material looks like.

Ed Milewski:  Right, right.

Pierre Gauthier:   So in this case, you know, you can see these are gravels. They haven’t been grounded; they’ve perhaps been concentrated in river beds like I was talking about. So that’s what was analyzed in our lab.

Ed Milewski:  So is that niobium and tantalum?

Pierre Gauthier:   Absolutely. That would be, that sample could be 30, I think it’s 30 percent tantalum, perhaps 20 percent niobium, and there are other elements in there that are quite fascinating, like scandium, for instance.

Ed Milewski:  Is that right? So this just stuff is just sitting there, is that right? Am I making it sound a little too easy?

Pierre Gauthier:   No, no, no, well, you know –

Ed Milewski:  So I should take a trip down there with a bag and start shoveling this stuff in there.

Pierre Gauthier:   Well, if you knew where it was, you could, but you know –

Ed Milewski:  You’re not going to tell me.

Pierre Gauthier:   No, no, but this is in the Amazon – access is really difficult right now, you know. Access is really difficult.

Ed Milewski:  But it sounds like – I mean, if it’s just sitting there at surface, you know, most of the time you hit something high grade, it’s, you know, 500 metres down, and where do you start, right?

Pierre Gauthier:   I know. Well, like I said, this is not hard rock, it’s gravels that have been concentrated by – these alluvial deposits, concentrated by nature.

Ed Milewski:  Yeah, yeah, sure.

Pierre Gauthier:   You know, and the indigenous people, when you go in there, you have to work with them, collaborate with them, and we’ve signed an agreement with the governor of the state of Bolivar now to organize commercial exploitation of this coltan, all right? And then, you know, so there are other elements in there; when you sell it, it can’t be radioactive. There tends to be a bit of uranium and sodium in there, so those levels have to be below a certain amount in order to be able to sell it commercially worldwide, you know?

Ed Milewski:  Right, right.

Pierre Gauthier:   So we’ve been doing a lot of lab testing on this, and in terms of how do you increase the values through gravity and magnetic separation? How do you reduce the value of radioactivity? So these are some of the things we can do for the indigenous people as they could supply us their ore, and we have a profit split with them: 70 percent to us, and 30 percent to them. So we want to bring technology to the table to upgrade the value of the ore, make it more commercial, and allow local people to earn a living with us.

Ed Milewski:  Wow. Fascinating. You’ve also shown us a chart, the lower the value of the rock, the much more capital expenditure you need, and therefore it gets a little boring if you’re talking $300, $400 a ton – and that’s what people want, in a lot of cases, right?

Pierre Gauthier:   Yeah. I’ll put it this way: I’ve been in the mining business for 30 years. I’ve had projects pretty well on every continent, all over the world, you know?

Ed Milewski:  Yeah.

Pierre Gauthier:   And you know, at the end of the day, you know, as you know, high grade rules the game, you know? Because that can offset a lot of the mistakes you’re going to make along the way.

Ed Milewski:  Yeah, and by the way, before I forget: that chart only went up to 10,000, and you’re talking, you’re talking multiples of that.

Pierre Gauthier:   Yeah, put the chart back, okay? So what I want to explain to you is that 90 percent of the business lives right down in that corner at the bottom, where your rock value is never more than $500 a ton, and to make a project happen, you probably need 100 million to do it. So that 100 million creates tremendous dilution for your shareholders, okay? So what kind of project are you looking for?

So I have sort of an inverse relationship where you’re looking for that project way at the other end that’s only $5 million, and you’re trying to go a ton that has the highest value possible. So when you do that, you end up, you know, with less capital needs, and that’s what this ultrasound technology can do, also: it can extract minerals in one hour as opposed to 20 hours, so it reduces your CapEx.

Ed Milewski:  Was the ultrasound technology, was that created here in Canada?

Pierre Gauthier:   Yes it was, absolutely, absolutely.

Ed Milewski:  Interesting. So Auxico, how many shares outstanding?

Pierre Gauthier:   44 million shares.

Ed Milewski:  44 million shares, and you – because I know, even though we haven’t met until recently, you know a lot of the people that I know, and, like, for instance, like, Jeff Green is a good friend of mine.

Pierre Gauthier:   Long shareholder, yeah.

Ed Milewski:  And he kept telling me, you gotta talk to Pierre, you gotta talk to Pierre; he’s a big shareholder. You must have a pretty good Rolodex.

Pierre Gauthier:   Well, I mean, I’ve raised a lot of money in the mining business for over 30 years, on a lot of projects everywhere. But I’ve never come across a project where the value per ton is even close to this.

Ed Milewski:  I know, I know. It’s almost –

Pierre Gauthier:   You know, but it’s singular to the limited amount of this material being produced in the Congo, and the demand for it outside the Congo, you know? So the buyers now are asking us for a certificate of origin, okay? We have to say it comes from Colombia.

Ed Milewski:  Does most of it now from the Congo? Does it all come from the Congo?

Pierre Gauthier:   60 percent comes from the Congo. But this could be a big replacement source, okay, because it’s a large area, there’s a lot of it, and like I said, it’s just not the tantalum, but the niobium that’s in there, and other rare earth – scandium, okay? Scandium sells for 4,000 a kilo, as its nature, and if you refine it, it’s 15,000 a kilo.

Ed Milewski:  So would you have, like, a couple ounces of scandium – is it scandium?

Pierre Gauthier:   Yeah, four kilos, we have up to four kilos of scandium per ton.

Ed Milewski:  What?

Pierre Gauthier:   Four kilos per ton. And if you can put that, and if you can refine that, it’s worth 15,000 a kilo, times four kilo, that’s $60,000 worth of scandium that’s in there.

Ed Milewski:  And that’s just the scandium!

Pierre Gauthier:   But now we wouldn’t be paid for that, because now, if you sell this coltan, they’ll pay you for the tantalum and nothing else. So the challenge is, let’s start selling these tons as soon as possible so we can create some cash flow, and then let’s see what we can do about taking out the niobium and the scandium and create more value added per ton, okay? So that’s our game plan right now.

Ed Milewski:  Yeah. So, gotta be exciting. You know, I mean, it just sounds like you just fell into this, kind of.

Pierre Gauthier:   We did, we did, because of the geopolitics there become open, having access to the right people, and having a technology that can contribute to optimizing the value of these, okay? And it’s not only Colombia; it’s Colombia and the border of Venezuela and the border of Brazil, there’s a whole geologic area that covers these three countries, and the geology doesn’t know there’s a frontier; it’s all the same geology everywhere.

Ed Milewski:  Of course, the assets don’t know…

Pierre Gauthier:   That’s right. So we’ve tested the stuff in Venezuela and Brazil, and then Colombia. So it’s not unique to Colombia, it’s really in these three countries.

Ed Milewski:  So this is a pretty big deposit.

Pierre Gauthier:   Well, we –

Ed Milewski:  We can’t talk about it, but it looks like it could be. At surface.

Pierre Gauthier:   Yeah, absolutely, at surface. So back to the chart, you know, you’re not going to have excavators in there breaking the rock to try and mine it; you’re not going to have to crush it; you can sell it as-is in the picture that’s there, all right? So hopefully we’ll be concluding some sales here in the near future, and then that’ll indicate to the marketplace –

Ed Milewski:  So did you hear what the plan is to generate some cash flow off of this?

Pierre Gauthier:   Absolutely, right?

Ed Milewski:  Like, even if, you know, even a few hundred thousand dollars a month to a small mining company is a lot of money, as you know.

Pierre Gauthier:   So I can tell you we’re in touch with five different trading outfits – Japan, Canada, China, etcetera.

Ed Milewski:  Yeah, yeah, yeah.

Pierre Gauthier:   They all want this material, and there’s specific rules you have to follow for sales. You have to have it in a Brinks warehouse, you have to have independent analysis –

Ed Milewski:  Yes. Because it has to be a protocol.

Pierre Gauthier:   All of these things, yeah. So we’re into those protocols right now, and I think we’ll announce our first sales within the next 30 days.

Ed Milewski:  Pierre, thanks for coming in. We’re going to leave it there; we’re going to have you back real soon to find out what’s going on, because this sounds like something that could be really big.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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