Great Panther stalks Topia silver

Vancouver — Great Panther Resources (GPR-V, GPRLF-O) is close to graduating to the rank of producer with the start of underground mining at its Topia silver-lead-zinc project in west-central Durango State, Mexico.

Mining is under way on the west block of the Veta Madre (Mother Load), the primary vein previously exploited at the silver operation. Material is being stockpiled for processing at the on-site plant, which is currently undergoing refurbishment with anticipated completion in late October. Preparation of additional stopes in this portion of the mine complex, dubbed the “1522 mine,” is ongoing. Work is also being done in the Argentina mine area — a parallel vein system located about 1 km northwest of Veta Madre.

The past-producing Topia mine, operated by Mexican silver major Minera Mexicana Peoles, reported total output of over 15 million oz. silver from 1952 to 1999 (in its last 10 years, the mine was operated by a private company run by the mine manager). The operation also had associated production of 18,500 oz. gold, 48,000 tonnes lead and 44,500 tonnes zinc. The entire Topia mining district has produced an estimated 30 million ounces of silver, with discoveries dating back to 1538. Over the life of its operatorship, Peoles recorded average head grades of about 437 grams silver per tonne, 0.9 gram gold per tonne, 3.9% lead and 4.2% zinc, processed through its 200-tonne-per-day mill. Metal recoveries averaged 86% for silver, 94% for lead, 85% for zinc and 55% for gold. Lead and zinc concentrates were shipped to Peoles’ smelter at Torreon.

The narrow, high-grade vein structures at Topia have been mined along almost 5 km of strike and over a vertical extent of 200-300 metres. The silver-lead-zinc mineralization is typical epithermal style, forming veins along a series of northeast-trending faults in Tertiary volcanics. The mined quartz veins host galena, sphalerite and pyrite along with lesser amounts of arsenopyrite, marcasite, chalcopyrite, silver-rich sulphosalts, electrum, muscovite and carbonates.

Following six years of dormancy, the former operator and property vendor recently placed the mine back into limited production for a short period, until Great Panther initiated its acquisition of the project earlier this year. The group was processing ore from three levels of the 1522 area that reportedly graded 710 grams silver, 5.5% lead and 6% zinc. Great Panther is purchasing the project for an initial payment of US$550,000, plus a further US$1.9 million to be paid from production proceeds over three years. There is no underlying royalty on the project.

With an eye on proving up further zones of high-grade mineralization, Great Panther plans on applying more modern exploration techniques to the project. Prior to committing to the purchase, the company conducted several thousand metres of core drilling in 2004-2005 on the Veta Madre, Argentina and El Rosario veins, successfully confirming similarities to past reported grades. Numerous other known vein systems have yet to be drilled.

In addition to vein-hosted mineralization, the company is considering reprocessing tailings generated from past operations. The tails pile, located just south of the mill, constitutes an inferred resource of about 1 million tonnes grading 70 grams silver, 0.4 gram gold, 0.3% lead and 0.7% zinc. An initial evaluation indicated reprocessing could yield a silver-gold bearing lead and zinc concentrate through standard flotation recovery.

Loading the treasury

Great Panther recently raised over $5.5 million in oversubscribed brokered private placement financing through Union Securities. In two tranches, the company sold almost 12.4 million units at 45 apiece. Each unit is comprised of one common share and one-half of a transferable share-purchase warrant. One full warrant entitles the bearer to purchase one common share at 62 for one year.

The net proceeds of the financing will be mostly used to cover rehabilitation and startup costs of the Topia mine.

The company recently entered into an agreement to acquire a group of producing silver-gold mines in Mexico’s Guanajuato state, from a local mining co-operative. The total purchase price is US$7.25 million.

The planned acquisition includes three mines, the Valenciana, Cata and Rayas, all of which are located on a major vein structure that trends over 25 km through the district. The Valenciana mine, once dubbed “the richest silver mine in the world,” still produces amounts of direct-shipping ore from bonanza-style mineralization. The district has reportedly produced between 700 million and 1.5 billion ounces silver since the discovery of mineralization in the mid-1500s, as well as some 4 to 7 million ounces gold.

Great Panther is acquiring the projects from a mining co-operative, formed in 1939 after labour unrest saw the mines turned over to the workers. The operation has recently suffered from a significant lack of working capital — not one hole has been drilled since 2000. As a result, there are no defined ore reserves, no systematic mine plan in place and the plant currently operates at only about 20% capacity.

Drilling in the 1980s and 1990s indicated that mineralization continues to depth under existing workings. Great Panther believes that with a comprehensive drilling and sampling program, there is significant potential to block out new resources on existing levels.

The company has begun a program of due diligence and a National Instrument 43-101-compliant technical report. In addition to the extensive underground workings, the proposed acquisition includes a 1,200-tonne-per-day plant, surface buildings and equipment, plus some surface rights.

With its 30.6 million shares outstanding, Great Panther posts an $18-million market capitalization given its recent 60-per-share trading level.