Azure finds silver deposit 
on top of a hill in Mexico

BEAVER CREEK, COLORADO — When Azure Minerals (ASX: AZS) picked up an option on the Alacran project in Mexico’s northern Sonora state, 12 km south of Grupo Mexico’s Cananea copper mine, the second largest copper mine in North America, the Australian junior expected that it would explore mainly for copper.

A copper deposit (Cerro Alacran) already existed on the property, which had once been owned by Grupo Mexico. The Mexican mining company carried out a drill program there in the 1990s, carving out an in-house resource of 100 million tonnes grading  0.3% copper in a near-surface, chalcocite blanket in volcanic rocks overlying a porphyry.

But Azure’s exploration team was pleasantly surprised to find more opportunities for precious metals than base metals on the Alacran property.

“We did not really want to have another crack at a porphyry. We wanted to have a look at something that would be of more interest to a company of our size,” the company’s managing director and CEO, Tony Rovira, said during a presentation last month at the Precious Metals Summit at Beaver Creek, Colorado. “So we focused on those areas where the high-grade old mine workings were.”

It found what it was looking for in just 12 months: an epithermal silver deposit it calls Mesa de Plata, sitting at the top of a hill with no overburden to hide it.

“It’s quite amazing that this is literally sticking out of the ground and undiscovered,” Rovira says, adding that Mesa de Plata is the first epithermal precious metal deposit found in the Cananea district.  “It’s quite an amazing rock — it carries silver mineralization that is in the hundreds to thousands of grams per tonne silver in outcrop.”

A map of the prospects at Azure Minerals’ Alacrán project in northern Mexico. Credit: Azure Minerals.

Rovira adds that the entire hill contains silver mineralization, and the highest grade (averaging 220 grams per tonne) is near or at surface.

“There’s a road that runs right over this and people have been driving on that road for over a hundred years,” he says. “But no one got out of their car and cracked a rock and assayed. You can’t see the silver mineralization in it because it’s fine grained.”

In May, Azure completed a JORC-compliant resource estimate. Mesa de Plata has an indicated resource of 9.6 million tonnes grading 84 grams silver per tonne for 25.9 million contained oz. silver, which includes a high-grade portion measuring 2.2 million tonnes grading 219 grams silver per tonne for 15.3 million oz. silver.

The resource estimate confirms that the deposit’s silver mineralization starts from surface, and the mineralized zone has a true vertical thickness of up to 70 metres, the company reports. The mineralization extends throughout Mesa de Plata with internal continuity of silver grades.

The high-grade zone extends over a 400-by-150 metre surface area, with a true vertical thickness ranging from 20 to 50 metres. The high-grade zone exists within the larger mid-grade zone of silver mineralization, which extends along the whole Mesa de Plata ridge, which in places is 300 metres wide, with a 1 km strike length.

The company says that the high-grade zone presents an attractive near-term development option, and it initiated a feasibility study a few months ago, which could be done before the end of next year’s first quarter.

“It will be a definitive feasibility study,” Rovira says. “We’re not doing a preliminary economic study, not a scoping study, not even a prefeasibility — it’s a definitive feasibility study to bring the high-grade zone into production and mine and process those 15 million oz. silver.”

The company is infill drilling to upgrade the resource to the measured category, and as part of this drilling is increasing its understanding of the controls on the near-surface high-grade zone.

“We’re finding it’s slightly larger and potentially higher grade than what we have in the indicated resource, which is encouraging,” Rovira says.

The mining executive adds that the operation would be simple and involve “just taking the top off a hill and processing it.”

Metallurgical work has gone on for several months, with the more advanced work in progress. Rovira says most of it can be done over the next couple of months.

“Recoveries are good — it can be treated either by flotation or leaching, and we’re looking at opportunities for both heap leaching and a carbon-in-leach style operation. It depends on capital costs versus recoveries.”

“It’s a good deposit, and the high-grade portion of it is a great deposit,” he says.

Before Azure’s involvement in Alacran, Teck Resources (TSX: TCK.B; NYSE: TCK) owned the project.

“Teck pulled out of Mexico three years ago, and we entered into an agreement to buy or earn 100% of the project by spending US$5 million,” Rovira says. “We’re at US$4.5 million on that, so we’re getting close.”

When this point is reached, Teck has a one-off, back-in right under which it can earn 65% ownership by spending US$15 million.

“This decision point for Teck will be reached in the next two months, and by Christmas we’ll have an understanding on whether they want to come back in, or whether they’re going to leave it to us,” he says. “If they pull out entirely, we’ll own it 100%, and there are no outstanding royalties.”

If Teck drops its right, Azure would own 100% of Mesa de Plata as well as 100% of the copper deposit, and Rovira points out that “no one has tested underneath it.”

Azure has also found a near-surface gold zone 200 metres from Mesa de Plata that it is calling Loma Bonita, which Rovira says “could be a nice sweetener, and in terms of economics, could be of equal value.”

Intercepts at Loma Bonita announced in May include 48 metres grading 2.68 grams gold per tonne and 32 grams silver, including an interval of 27 metres of 4.07 grams gold and 27 grams silver. Another intercept ran 18.4 metres averaging 1.57 grams gold and 40 grams silver. The gold and silver mineralization is hosted in weathered rock in the oxide zone and the zone is over 300 metres long, and remains open in all directions, the company says.

Azure’s other project in Mexico is called Promontorio. The company has explored there for eight years and has identified high-sulphidation, epithermal, high-grade copper-gold-silver deposits at surface.

“We’ve drilled underneath those, and we identified a porphyry that hosted copper mineralization, and two years ago we entered into a joint-venture with Kennecott, or the Rio Tinto group,” Rovira says. “They’re exploring on that at the moment, drilling a lot of holes down there, deep holes — 1,000- to 1,200-metre deep holes — testing this porphyry. When that program of 9,000 metres is completed, the information will be released publicly, but at this stage there isn’t a great deal of information that I can say about that project.”

Kennecott can earn 80% of Promontorio by spending US$45 million, after which Azure is free-carried for the next US$200 million of joint-venture expenses.

As for Azure’s balance sheet, Rovira says the company is well funded, with A$16 million (US$12 million) in the bank.

The company also plans to list on the TSX, he says.

Seventy-five percent of its 1.6 billion shares on the ASX are owned by Australians and the remaining 25% are owned by North Americans. Azure’s current market cap is just under A$50 million.

“As with all junior companies, and in order to survive, we’ve issued a lot of stock,” Rovira notes. “However, we recognize that the Australian market isn’t doing us any favours at the moment, and we recognize the benefits of North American investors, and to that end we’ve put a lot of effort into attracting North American investors to our register.

“We’re gradually transferring our share ownership into North American hands,” he continues, “and to accelerate that process, in the first half of next year, we are looking into a listing on the TSX — a share consolidation and rollback to bring the share structure more into line with what North Americans would expect.”

Azure has been in Mexico for the last decade and has developed strong relationships with the federal government, state organizations and local communities, Rovira says.

During a panel discussion on Mexico at the recent Mines and Money Conference in Toronto, Rovira described the country as having had 500 years of mining history, and is a place where “deposits are being found all the time.”

He also pointed out that because of its long mining history, “you get a positive and proactive response from the government, and most of the local population, too, because they see the benefits that mining brings … It’s a powerful, pro-mining message.”