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Multiple projects in Peru
has Solex Resources positioned to take advantage of an increasing demand for commodities
in China, India and Southeast Asia, which has created firmer pricing, translating into
more money for exploration
Exploration
Mineral Exploration
(SOX-TSXV)
Solex Resources Corp.
1760 – 750 West Pender Street
Vancouver, B.C. Canada V6C 2T8
Phone: 604-646-7210
Jonathan Challis
President and Director
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
February 9, 2006
 
BIO:
Jonathan Challis
President and Director
Jonathan Challis is a mining engineer with over 30 years' experience in the operation,
management, financing and analysis of mining projects around the world. Mr Challis has an
honours degree in Mineral Exploitation from University College, Cardiff and an MBA degree
from Cranfield University. He has both the South African Metalliferous Mine Captain's and
Mine Manager's Certificates of Competency. He is a Fellow of the Institution of Mining and
Metallurgy and a Chartered Engineer.
Company Profile:
Solex Resources is a TSXV listed junior mineral exploration company, symbol SOX with just
under 24 million issued shares. It is focused on exploration in south-eastern Peru, with 4
properties, 2 of which are drill ready and a 3rd is being brought to that stage
by year end.
CEOCFO: Mr. Challis, you have a long history in exploration;
what attracted you to Solex?
Mr. Challis: “Solex is a company where I’ve known
the principals behind the company for over ten years and I’ve worked with them in
various guises during that time. It really was a combination of their knowledge of South
America and the ability to find projects that attracted me to what they are bringing to
Solex in Peru.”
CEOCFO: What is the focus for Solex Resources?
Mr. Challis: “Solex was created to look at mineral
opportunities in Southeast Peru, primarily focusing on four projects at the moment;
Pilunani, Princesa, Cullquimayo and Macusani. We cover a range of commodities including
lead-zinc, silver, copper and uranium. Therefore, we have taken a multi-commodity approach
rather than concentrating too much on any one product now. The rationale behind this
thinking is that in the early stage of exploration we would rather have a spread of
exposure instead of concentrating on one commodity. However, we are country focused, as I
said, in Peru.”
CEOCFO: What is it about Peru that attracted you, both in
terms of the minerals and in terms of doing business?
Mr. Challis: “Peru is a country that has a long mining
history. It is a country that has not been without its problems in the past, but with some
very big mines in operation and new discoveries has encouraged more investment. I’m
just impressed by the people in Peru and the geological potential, which is very under
explored, particularly in the south.”
CEOCFO: What is the status of your various projects?
Mr. Challis: “We are at various stages with the four
properties, two of which, Pilunani and Princesa, are drill ready and we will see them
being drilled in December (2005). Macusani is also being prepared for drilling, we are
just doing a final survey on the ground to try to define a better target area than we have
now and that program will commence as soon as we have completed at Pilunani and Princesa.
The fourth property, Cullquimayo, which in the local language means river of silver, is
one that had work done in the past, in the 1950’s, by a German Government group,
which defined some uranium, copper and cobalt. It had very high-grade silver values and
was the location of a major Inca silver mining operation. We have found silver grades in
grab samples of up to 90 ounces a tonne. This is not representative of the mining
situation, but just gives you a picture of the mineral potential in that area. Macusani is
joint ventured with Frontier Pacific where they can earn a 50% interest in the property by
spending $4 million over 5 years - the other three properties are all 100% Solex. We hope
to advance these properties over the next 12 months to the point where we can bring in new
joint venture partners for those properties, to reduce the money that we are spending on
them.”
CEOCFO: Could you further explain the financial picture of
Solex Resources today?
Mr. Challis: “Solex has just under 24 million shares
outstanding; we’ve had a number of warrants exercised in the past few weeks, which
brought in about a ½ million dollars. Therefore, we are sitting on a treasury position of
around $600,000 at the present time. We announced a private placement last week to raise a
maximum of C$1.1 million which together Frontier’s financial commitment on Macusani,
we will have sufficient resources to complete the planned programs at all the properties
over the next 12 months.”
CEOCFO: Are you looking at additional properties?
Mr. Challis: “With a company our size, 4 is the
opportune number that we can look at sensibly. As properties are moved forward in the
process into joint venture and less required of our people, then we will add additional
ones in there. However, I think as far as the shareholders are concerned, they are best
served by our concentrating on the ones that we have. If we have too many we are not going
to be able to concentrate; therefore lose control to some extent in the process going
forward. One thing that we don’t really want to become is an exploration services
company, where we are running thirty different programs for joint venture partners.”
CEOCFO: How would you
characterize the role of science as well as gut feeling and expertise in your choice of
properties?
Mr. Challis: “I think that in all of our projects it is
being led by science. In the case of Cullquimayo, we are using work that was done by a
German Government mission into Peru in the late 1950’s, early 1960’s, where they
had defined this as one of their top targets in the country. Pilunani and Princesa have
both being mined intermittently; Princesa has one large silver vein that was mined over
three different levels from a hillside, so we know that there is potential there. The vein
itself is 5 meters wide and there are 5 veins on the property and it stretches up to 2
kilometers and it has never been drilled, so we are following up on the old mining history
in the area. Pilunani too has had 5000 tonnes of ore mined at a grade of almost 30% zinc,
so there is a history there. We have so been working on this property on and off for about
10 years and the work that we have put in has reached the point now where we have to drill
it and see what happens. The Macusani area is an area where the Peruvian Government
defined numerous uranium targets during the 1970’s and we have managed to pick-up the
core of these properties over the last six months. We were the first company to start
acquiring ground in this area using data that had been acquired by us 15 years ago from
the Government. We are now the largest landholder in the area, with most of the identified
anomalies. The ground was acquired based on a lot of historical work being done by very
reputable parties and we are now moving that forward with modern science.”
CEOCFO: Has the current pricing for the commodities helped to
prompt the interest in these properties?
Mr. Challis: “We been looking at these commodities for a
number of years and I would agree that the rise in prices and the recognition that there
was a shortage of new projects in them has helped to accelerate exploration efforts. We
had seen that over the recent past, the equity market had been not very receptive to
exploration projects; money was not being spent and new properties were not being
discovered. However, you are now seeing that major mining companies, which, when times
were tough and commodity prices were down, de-emphasised exploration – that is, they
cut their exploration people. Therefore, they were no longer capable of generating new
projects. Now you are seeing the majors looking to consolidate in order to keep growing.
There is not a very strong project pipeline or idled capacity in the industry. This has
virtually eliminated the ability of the mining industry to shoot itself in both feet by
turning on that capacity ahead of the anticipated (and real) upturn in demand, thereby,
destroying the pricing potential. We haven’t got that ability this time around so,
there is a degree of expectation that this cycle is not going to be a three to four year
boom and bust cycle, but perhaps we are into a longer term period of better commodity
prices.”
CEOCFO: Would you touch on your uranium exploration; it is a
popular choice for exploration companies today?
Mr. Challis: “It is and again that is one of the
benefits from the gap between potential supply and the ability to supply increasing demand
that has stimulated the increase in commodity price, and exploration for new sources of
supply. With the breakup of the old Soviet Union, a lot of recycled material emerged which
obviated the need for new capacity being developed. There was surplus of supply over
demand for a number of years. However, that material is now gone and what you are now
seeing is that there is a structural imbalance in the uranium market between what the
power utilities are looking for and what the industry can supply. Most utilities will have
stockpiled to some extent, but with more emphasis being placed on where energy will be
generated in the future, and the growing recognition that new energy sources will need to
be developed, the nuclear industry is well placed to meet the challenge provided new
uranium sources can be identified (even Greenpeace is now starting to get behind uranium
nuclear power as a greener source of energy without the carbon dioxide emissions). If we
are going to see increases in nuclear energy in countries like China, India, Europe and
even the United States, then the material has to come from somewhere.”
CEOCFO: Address potential investors; first why should they be
interested in metals mining in general and why Solex Resources?
Mr. Challis: “I think that metals and mining is an area
that has been out of favour by investors over the past few years, but with commodities
very much in demand in the growth and building of new economies, the future looks
considerable brighter than it has for many years. It can be likened to the rebuilding that
took place after the Second World War in Germany and Japan, which created a sustained
demand for commodities. What you are seeing now is the industrialization and the
development of China, India and Southeast Asia, which is creating a similar demand for
commodities and the capacity to supply is not there in as big a quantity as has been.
Therefore, this is creating an era of firmer pricing, which will translate into more money
being available for exploration, which should translate into new discoveries. I think from
the investor’s perspective, to have exposure to both the producers who are benefiting
from the strong cash flow they are generating from existing production and from the
explorers, who ultimately if they are successful in finding new deposits, will be gobbled
up by the majors looking for new production. It is prudent to have exposure to all aspects
of the commodities business. With regards to Solex Resources, yes, we may be specific in
terms of country, but we have a diversified commodity exposure, so if demand impacted one
commodity, then not all of our projects are at risk, because we do have that diverse
exposure.”
CEOCFO: Final thoughts for our readers?
Mr. Challis: “I think overall, Solex Resources
represents an opportunity for people to look at an investment in mineral exploration in
South America and Peru in particular. We have a good team of people based in the country;
with very much a local focus. We have a very good country manager, an excellent team of
geologists, who are all native to that part of the world and the key aspect is that we are
focused on building relationships with the local communities. So far it is working very
well and we are looking at a long future involvement within Peru.”
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