BeMetals starts PEA on South Mountain project ahead of resource update

With an updated resource for its past-producing zinc-silver-gold-copper South Mountain project expected in April, BeMetals (TSXV: BMET) has also started a preliminary economic assessment (PEA), which is scheduled for completion by September.

“These studies are part of the critical path towards advancing South Mountain to a potential mine construction decision stage given continued positive results,” John Wilton, BeMetals’ president and CEO, said in a press release.

Alongside these project updates, the company has also released assay results for one drillhole that conforms “significant” extensions of mineralization in the DMEA zone, one of two main zones at South Mountain.

The intercept returned four mineralized intervals, such as 30.9 metres of 4.66% zinc, 103.9 grams silver per tonne; 1.59 grams gold per tonne; 0.39% lead and 0.17% copper; and 4.4 metres of 7.11% zinc, 108.7 grams silver per tonne, 0.14 gram gold per tonne, 0.22% lead and 0.68% copper. This drillhole appears to suggest good continuity of mineralization intersected in 2019 and supports potential for deeper extensions to these zones.

The resource update will incorporate drilling completed in 2019 and 2020; the release notes that BeMetals’ 2019 and 2020 drilling campaigns confirmed the high-grade nature of the polymetallic mineralization at the site and extended the DMEA and Texas zones.

A 2019 resource for South Mountain defined 154,100 tonnes (169,900 tons) grading 17.66% zinc-equivalent (10.66% zinc, 149 grams silver, 2.09 grams gold, 0.8% lead and 0.69% copper) and 329,500 tonnes (363,200 tons) at 16.63% zinc-equivalent (9.7% zinc, 174 grams silver, 1.49 grams gold, 1.2% lead and 0.7% copper).

Mine Technical Services has been tasked with delivering the PEA. A metallurgical test work program is underway on samples from DMEA and Texas to refined a 2014 process study and provide input parameters for the PEA.

South Mountain is in southwestern Idaho, approximately 110 km from Boise. The project was mined between the late nineteenth century and the late 1960s; smelter records suggest output of 53,642 tons grading 14.5% zinc, 363.42 grams silver, 1.98 grams gold, 2.4% lead and 1.4% copper.

BeMetals entered into an option agreement with Thunder Mountain Gold (TSXV: THM) in 2019, to acquire up to a 100% interest in the project. To complete the acquisition, BeMetals was required to make an initial US$100,000 payment, needed to purchase 2.5 million shares of Thunder Mountain, and issue 10 million shares to the vendor. Four US$250,000 cash payments are due on the 6, 12, 18 and 24-month anniversary dates. BeMetals would also need to complete a PEA for South Mountain and make a final value payment of the greater of US$10 million or 20% of the after-tax net present property value derived in the PEA. The final payment would be reduced by US$850,000 to account for previous payments and capped at 50% of BeMetals’ market capitalization.

Commenting on the company’s latest news, Geordie Mark of Haywood Securities said in a research note to clients that the most recent assays reported from drill hole SM20-027 “were notable, demonstrating continuity of mineralization first observed in holes SM19-014 and -016 from the Phase 1 program, with interval 2 intersecting a wide zone of massive sulphide returning appreciable zinc and silver, and intervals 3 and 4 returning traces of appreciable base metal concentrations at depth (>265 metres), supporting the deeper extensions encountered in holes SM19-014 and -016.”

“Overall, BeMetals has identified a high-grade zinc-rich massive sulphide system with an appreciable precious metals content where drilling shows that there is ample upside given the results of a successful 2019 program and success to date from Phase 2 assays that has featured a relatively limited footprint,” he said. “While expansion and discovery of massive sulphide mineralization via underground drilling represents the low-hanging fruit to prove resource ground and baseline economic potential, the ground to the west/north-west represents further potential over the mid-term.”