In conversation I Translating decimal points into millions of dollars

Northern Vertex Mining Corp’s (TSX.V: NEE / OTC Nasdaq Intl.: NHVCF) Moss Mine has exceptional exploration potential to become a significant, long-term profitable producer. When you’re building to be bigger, you need people who know how to get there. David Splett, Northern Vertex’s CFO, certainly knows what the destination looks like. David had CFO and senior executive roles overseeing world-class open-pit mine operations including Peñasquito (Newmont), Cobre Panamá (First Quantum) and Antamina (Teck). While Moss Mine is not viewed in the same weight class, David sees Northern Vertex’s flagship asset as a world-class opportunity. In an interview, David talks about three pillars for growth and translating decimal points into millions of dollars. Part 1 of 2.

Q: You joined Northern Vertex in January 2020 just when the company completed its first full calendar-year of production and pivoted to scaling up. Previously, you’ve overseen the operations of multiple mine sites and have a first-hand understanding of the growth cycle of mining operations. What’s been the key focus for you to have helped bring Northern Vertex to its stronger outlook today?

David: Throughout my history there’s been a consistent focus on operations because it’s the lever that sustainably moves cashflow for a mining company. You can do some financial engineering – one-time benefits – but if you really understand the levers that drive profitability, particularly my experience with open-pit mining, that’s where you should be spending a significant chunk of your time. It comes down to three key pillars to creating a strong company well-positioned for growth. The first is making sure we have a clean capital structure. Getting our house in order was a big focus in 2020. We repaid approximately US$12M in debt, reduced our borrowing costs, cleaned up warrants and strengthened our balance sheet. The second pillar is operating excellence, which comes down to really measuring and managing our operations with rigour. You need to have a real close eye on key levers like ex-pit tonnes per day, cost per tonne moved, blasting precision, crusher throughput, recoveries and cost management. This is key for mine optimization and realizing maximum cash flow for an operational asset. The third pillar is resource strength and capturing growth potential. That’s really what (President) Mike Allen and (VP Exploration) Warwick Board have brought to the table. When I look back on when I joined the Company in 2020 and compare it to where we are now with the additions of Mike and Warwick, we bring a much more complete team to the company and, as such, are really well positioned to get where we aspire to be. 

Q: There’s an order of magnitude in terms of potential positive outcomes when you focus to the right of the decimal point in open-pit mine operations that is lost on some, especially in jurisdictions like the Walker Lake Trend. How big an impact can you make when you sharpen your pencil?

David: Moss Mine has a pretty good grade for an open-pit mine. Our overall grade has been running for the past couple of years at approximately 0.02 ounces per tonne, which translates into 0.7 grams per tonne. While that may not make your hair curl, it helps generate anywhere from $10-20 million in free cash flow before we re-invest in growth-focused capital expenditures. Over the year, we’ve gone through our entire mining value chain to improve productivity and reduce costs. Simple things like going from quarter inch crush to 3/8th crush, changing our mine contractor, heap leach solution management – all big levers that improve profitability. At its core, open-pit mining is a logistics business: your objective is to extract the most metal possible to the economic limit, at the lowest potential cost per tonne, and with the highest viable recovery rate. In a typical open-pit, your mining operation is going to account for 50-60% of your total cost. So, control over mine planning, drilling, blasting, excavation and hauling are foundational to profitability.  Hidden behind these processes are maintenance costs and equipment utilization. Better mine planning/drilling/blasting facilitates maximized crusher throughput.  Rock fragmentation through blasting is cheaper than crushing the rock and helps to maximize crusher throughput. The financial results will speak loud and clear. We still have some outstanding measures to achieving our ultimate productivity and cost numbers, which underlines the value we have yet to unlock.