Americas Gold and Silver hits high-grade silver at Galena complex

Americas Gold and Silver (TSX: USA) has announced drill results from two holes at its Galena complex in the Silver Valley of northwest Idaho, 3 km west of Wallace in Shoshone County. The Galena Complex consists of the operating Galena mine, the Galena processing plant, the Coeur mine, and the Coeur processing plant, both of which are on care and maintenance, and the Caladay exploration project.

Drillhole 55-124 intersected 4.2 metres grading 739 grams silver per tonne and 1.6% copper starting from 320 metres downhole, including 2.4 metres grading 1,046 grams silver and 2.3% copper, while drill hole 55-125 cut 1.8 metres grading 2,381 grams silver and 1.7% copper starting from 36.3 metres, including a high-grade core of 0.2 metres grading 8,779 grams silver and 5.9% copper.

The drill campaign is targeting extensions to three separate vein systems located below the Galena mine, the company’s president and CEO, Darren Blasutti, said in an interview.

The two drill holes represent initial exploration drilling and include the down-dip projection of the 72 vein, which was a significant contributor of mineralized material during the height of production at the mine from 2000 to 2004. The 72 vein produced over 9.5 million oz. silver between 2000 and 2006, which, Blasutti said, is more than the whole mine produces today.

“The Galena mine started over a hundred years ago, but it has never really had any modern exploration carried out at it,” Blasutti said. “It’s only in the last few years that we’ve had block model and 3D models to predict the main ore structures.”

The other vein systems being targeted include the high-grade 175, 185, and silver veins, which are projected to converge approximately 100 metres below the mine at what Blasutti calls the “triple point,” and follow-up drilling is planned to extend the 291 and 360 vein systems down dip.

“We knew there was high-grade ore at the bottom where we were mining, but you can’t drill ‘between your feet’ you’ve got to have the money to go out and be able to drill down below,” Blasutti says. “However, because the silver prices were so low, we weren’t able to raise the funds to start drilling.”

That changed in October 2019, when the company entered into a 60-40 joint venture agreement with Eric Sprott to recapitalize the project’s mining operations.

Under the agreement, Sprott initially committed up to US$20 million to fund capital improvements and operations for the first year, in return for a 40% interest in the property. Americas Gold and Silver invested an additional US$5 million to fund further capital improvements in 2020.

“We were thrilled to partner with Sprott on the joint venture,” Blasutti says. “He immediately recognized the project’s high-grade silver mineralization potential and was very excited to get involved.”

The 18-month recapitalization plan will allow Americas to increase development, modernize infrastructure, purchase new mining equipment, and target exploration below current operating areas, with the aim of increasing resources and production and reducing operating costs at the Galena. The plan is budgeted to fund approximately 39,000 metres of exploration drilling, he said.

“So far, we’ve drilled 13 holes over 13,000 metres and plan to complete the drilling by mid-2021, and will also include exploration of the Caladay project,” Blasutti says.

In other recent news, the company reported a second-quarter net loss of US$10.8 million, or 9¢ per share, on revenues of US$4.6 million, and a $25 million bought deal financing. A syndicate of underwriters co-led by Desjardin Capital Markets and Cormark Securities has agreed to buy 6.48 million common shares at $3.86 per share. The proceeds will be used for exploration, development and improvement of its existing mine properties and bringing Relief Canyon into commercial production.

In an operational update, the company noted that commercial production at Relief Canyon in Nevada has been delayed until the fourth quarter due to “various start-up challenges, including equipment issues with the radial stacker, inconsistent operating practices, and variable solution application rates.”

The company also noted that an illegal blockade at its Cosala operations in Sinaloa, Mexico, has been resolved, and it expects the operation to restart before the end of the third quarter.

At press time in Toronto, Americas was trading at $3.95 per share within a 52-week trading range of $1.39 and $5.12. The company has around 106 million common shares outstanding for a $418.7-million market capitalization.

Bhakti Pavani, who covers the company for Alliance Global Partners, has a buy rating on the stock and raised her target price on Aug. 18 to $5.25 per share from $3.09 per share.