After finally delivering the progress report regarding the independently conducted autoclave tests at their Clarkdale Slag Project the direction Searchlight Minerals Corp. (OTCBB: SRCH) takes to actually recover gold remains just as uncertain as ever. While the results showed that pressure oxidative leach (POL) testing methodologies proved more favorable than pressure oxidation (POX) testing methodologies in gold extracted into solution the expense that would be incurred by SRCH to carry out such a method may not be feasible.
According to the autoclave tests performed by SGS Lakefield Research Chile, S.A., the optimized POX tests produced slightly less than or equal to 0.5 opt gold compared to the optimized POL tests which produced 0.5 opt gold or slightly greater. It was recommended by SGS that SRCH proceed “directly to the recovery of gold from solution using carbon or ion exchange resin technologies or other commonly used methods of extracting gold from solution.”
Following the tests SRCH noted in their September 6, 2011 press release “the Company has commenced planning for limited continuous pilot tests in a larger multi-compartment autoclave (30-50 liters) as it moves towards the completion of a bankable feasibility study. These limited continuous pilot tests will replicate a commercial autoclave system and should provide sufficient operating data to design and conduct the larger 7-10 day continuous pilot test required to obtain a bankable feasibility study and to design a commercial-scale production facility.”
Martin Oring, CEO of SRCH, went on to say “Results from the additional tests independently performed by SGS as well as reports received from our technical consultants are very encouraging and represent the next step in the Company’s ultimate goal of proving the economic feasibility of the Clarkdale Slag Project. On a near-term basis, we are intensely focused on finalizing the autoclave POX and POL protocols and extracting the gold from solution in order to commence the continuous pilot tests, in a larger multi-compartment autoclave, that are necessary to obtain a bankable study.”
The focus on autoclave POX and POL protocols came about following previous bench-and pilot-scale tests conducted in 2010 in which SRCH learned that “gold, copper and zinc could be extracted into an acid solution using chlorine compounds coupled with sulfuric acid at ambient temperature and pressure.” While that discovery was positive it was also realized that “due to the large quantity of iron and silica also dissolved during the process, the gold was extremely difficult to remove from solution.”
Oddly enough back in May the company appeared ready to accept that autoclave POX provided “the most consistent and cost-effective method for extracting gold from slag material” yet following the recent tests SRCH declared “since the POL method involves fewer process steps resulting in lower operating costs, and appears to consistently place higher grades of gold into solution, this process is likely superior to the POX method in achieving desired results.” Despite this recognition SRCH has stated “the Company will make a decision in the near future regarding which process to utilize in further pilot testing.”
Obviously maximizing the recoverability of gold is priority for SRCH but the recoverability must be cost-effective, something that could pose serious problems for the company. SRCH is an exploration stage company which has yet to record revenues from their planned mineral operations since inception in 2000. While they hold interests in two mineral projects, the Clarkdale Slag Project as well as the Searchlight Gold Project, it is Clarkdale that is now their focus. That being said, SRCH has also stated that they do not anticipate earning revenues until they “enter into commercial production of the Clarkdale Slag Project, the Searchlight Gold Project or other mineral properties we may acquire from time to time, and of which there are no assurances.”
Knowing that SRCH has been working on a solution to recover gold from Clarkdale since 2007, there aren’t too many shareholders holding their breath while the company proceeds. One thing is for sure, Clarkdale is what SRCH is selling to investors as they have postponed the exploration on their Searchlight Gold Project in Nevada in an attempt to conserve cash and resources. Moving forward SRCH has said their plan of action is to “identify capital requirements and operating costs to form the basis for a bankable feasibility study to support the financing of the commercial system.”
Identifying the capital requirements shouldn’t be that difficult, the problem will be in securing the necessary funds. In August SRCH stated “Our exploration and evaluation plan calls for significant expenses in connection with the Clarkdale Slag Project and the Searchlight Gold Project. During the next 12 months, our management anticipates that the minimum cash requirements for funding our proposed testing and feasibility programs and our continued operations will be approximately $7,300,000. As of August 12, 2011, we had cash reserves in the amount of approximately $5,850,000. Our current financial resources may not be sufficient to allow us to meet the anticipated costs of our testing and feasibility programs during the next 12 months and we may require additional financing in order to fund these activities.”
What should make investors nervous is another obvious statement made by SRCH back in August, “If the actual costs are significantly greater than anticipated, if we proceed with our testing and feasibility activities beyond what we currently have planned, or if we experience unforeseen delays during our activities during the next 12 months, we will need to obtain additional financing.” Given the fact that the company has a history of running into delays it wouldn’t come as a shock to see the company diluting shareholder value through offerings.
Despite the concerns over how SRCH is going to secure the financing to advance their efforts at their Clarkdale Slag Project shares actually jumped following their September 6, 2011 release, moving from an opening of 0.597 to a closing of 0.830 on trading volume that surpassed 3.6 million. Shares have remained strong, currently trading around the 0.730 – 0.780 range with volume maintaining an elevated level. SRCH is well above their 50-day moving average of 0.476 as well as their 200-day moving average of 0.548 but the reasoning behind such an elevated price per share isn’t based on anything that can be perceived as being positive.