Defiance Silver to resume drilling at San Acacio

Defiance Silver (TSXV: DEF) remains determined to keep advancing the past-producing San Acacio silver mine in Zacatecas’ historic silver district in central Mexico, as investor sentiment and precious metal prices pick up ahead of its next drill program.

“There’s a lot more smiles on people’s faces these days,” Bruce Winfield, the company’s president and CEO, says. “It’s really nice to see the difference in people’s attitudes. So that’s going to assist us all.”

Winfield, a professional geologist who has worked for both major and junior mining firms, has been involved in the exploration and development of five mines in Latin America, including La Libertad in Nicaragua and La Colorado in Mexico. He’s now looking to make San Acacio his sixth success story.

Defiance, which became a public company in 2008, signed an option agreement to earn a 100% interest in San Acacio from a private Mexican firm in October 2011. Given the tough capital markets, Defiance revised the payment terms for San Acacio several times, to provide it enough financial flexibility to keep working on the deposit.

The historic mine contains 10 mining concessions, covering 7.5 sq. km. It controls about 65% of the 8.6 km long Veta Grande vein system, one of the three main vein systems in the Zacatecas silver district, where silver production started in 1546.

Defiance describes Veta Grande as a “classic epithermal silver-rich vein system with accessory gold and base metal credits.” Historically, Veta Grande churned out more than 200 million oz. silver, with about half of that coming from the San Acacio mine.

Past mining at San Acacio occurred over a strike length of 1.2 km and at an average depth of 210 metres, meaning much of the property has yet to see modern exploration.

“What we have been postulating is we can drill underneath and along strike and increase the resource,” Winfield says, adding the company plans to kickoff its largest drill program ever this year.

But the ride to this point has been rather slow given the junior’s limited cash.

Defiance had split its original focus on validating San Acacio’s historic resource and earning into the nearby Santa Gabriela mill from Impact Silver (TSXV: IPT).

In late 2012, it updated San Acacio’s historic open-pit resource to National Instrument 43-101 standards, using a silver equivalent cutoff grade of 65 grams per tonne.

At the end of 2013, Defiance dropped its option on the mill to concentrate on San Acacio, citing “difficult market conditions.”

It wasn’t until December 2014 that the junior initiated the first phase of its 5,000-metre drill program, designed to test the San Acacio deposit at depth.

Meanwhile, a month later, it replaced the previous resource estimate, using a higher silver equivalent cutoff grade of 100 grams to support its vision of mining the deposit from underground instead of from surface. It also eliminated some of the lower-grade stockwork mineralization to increase the resource grade.

As of January 2015, San Acacio contained an inferred resource of 17.9 million silver equivalent oz. (2.9 million tonnes at 192.5 silver equivalent grams), with results from the first phase of drilling, showing further expansion potential.

Between 2014 and 2015, Defiance completed 11 holes totaling 3,000 metres on the deposit.

The first eight holes extended mineralization by 140 metres below the current resource, bringing the mineralization to roughly 300 metres at depth, Winfield says, adding the silver equivalent grades were significantly higher than the current resource. For instance, hole no. 2 intersected 16.7 metres of 235.5 silver equivalent grams, including a 3.2-metre intercept grading 499.4 silver equivalent grams.

The remaining three holes, released this March, extended mineralization 550 metres to the southeast of the eight holes, as well as 140 metres below the current resource.

“We were very successful. We had a series of impressive intersections, wide widths and high grades of silver equivalent,” Winfield recalls.

The mineralized intersections averaged 5 to 12 metres wide, which is roughly the length of a large school bus with a 72-person capacity.

Defiance notes San Acacio is at an early development phase similar to Capstone Mining’s (TSX: CS; US-OTC: CSFFF) nearby Cozamin copper-silver underground mine before it started producing.

The company expects to receive its drill permit for its new program shortly. That program will focus on finishing the first phase of drilling or testing the 1.2 km vein under the San Acacio mine to grow the existing resource, as well as starting the second phase of exploration to test the 900-metre extension to the southeast, “where there are some intermittent old workings, but no past production,” Winfield explains.

The new program will include between 5,000 and 10,000 metres and could start in the fall, depending on permitting and financing.

Meanwhile, Defiance has signed another surface rights agreement, which allows it to explore the entire 5.6 km strike length on the Acacio property. It has also renegotiated its US$5.95 million San Acacio purchase agreement to defer US$300,000 in payments due this year to September 2018.

Under the revised terms, the junior will pay four quarterly payments of US$37,500 totaling US$150,000 by year-end. It has two quarterly payments remaining for 2016, and enough funds on hand to meet its commitments for the next 12 months, Winfield says.

That said, he adds the firm will look to raise more funds for its renewed drill efforts. Defiance last replenished its treasury in April, after receiving $1.2 million in proceeds from the exercise of warrants.

In late day trading, Defiance rose nearly 10% to 45¢ per share.