Consolidated Silver to acquire stake in Mexican silver play

Emerging from several years of dormancy, Consolidated Silver (NASDAQ) is trying to gain a footing in the industry.

Under an agreement with Hecla Mining (NYSE) which owns 67% of Consolidated, the junior can earn a half interest in a silver play in Mexico’s Zacatecas state.

The project, known as Ojo Caliente, is held jointly with Mexican-based Minera Portree de Zacatecasny.

The agreement with Hecla will be effective upon the sale of Consolidated Silver’s namesake mine, near Osburn, Idaho, to Sunshine Mining & Refining (NYSE). The sale transfers the subsurface mineral rights and mill site to Sunshine for US$750,000 and a retained 4% net smelter return royalty on any future production on the property.

Production in the district surrounding Ojo Caliente dates back to the 1600s. The property consists of two claimed areas, measuring 10 by 5 km and 6 by 6 km, and contains about 20 surface veins, some of which are up to 15 km long. At least four zones of mineralization have yet to be explored systematically.

Hecla agreed to sell its interest because it has insufficient resources to carry out further work on the Ojo Caliente. This is the result of several factors, including exploration work at the company’s Choya gold mine, and its recent partnership with War Eagle Mining (VSE) regarding the Fortuna silver project. Both projects are in Mexico.

To gain the interest, Consolidated Silver must reimburse Hecla for the US$130,000 it spent on the property. The rest of the money will fund a 12-hole drill program totaling more than 2,000 metres.