First Mexican has big plans for Guadalupe

Hermosillo, Mexico – Ongoing exploration for a cash-strapped junior is hard to do in a turbulent market, but one that could reap handsome rewards. The possibility of a huge pay off is keeping First Mexican Gold‘s (FMG-V) president and CEO Jim Voisin pushing the company’s Guadalupe gold property in Mexico’s Sonora state forward, in hopes of it becoming the next market darling.

The project is surrounded by producing and past-producing gold mines near the Sonora-Chihuahua border. Some producers in nearby districts include: Alamos Gold‘s (AGI-T) Mulatos gold mine, Minefinders’ (MFL-T, MFN-X) Dolores gold-silver mine, and AuRico Gold‘s (AUQ-T, AUQ-N) Ocampo gold-silver mine.

While junior Corex Gold (CGE-V) is First Mexican’s closest neighbour, the nearest mine is Mulatos, 50 km away. Mulatos has a reserve of 2.3 million oz. from 58.4 million tonnes grading 1.27 grams gold per tonne.

While giving The Northern Miner a tour of Guadalupe in mid-October, Voisin recalls how he came across the early-stage property.

As the former head of another mining junior Voisin had visited what is now First Mexican’s prized property in 2006 but decided that company wasn’t set to venture into northern Mexico.

“But I was extremely taken by the property when I was there. When I came down the mountain and I looked at the guy I was with, I said ‘I’m going to take this mountain down,'” says the 54-year-old executive. “And we probably will now [with First Mexican].

 “I knew who owned the property, so I called them and asked if they would like to sell it.”

So that’s how the story started. Voisin got in touch with previous owner International Millennium Mining Corp. (IMI-V), and from there launched First Mexican Gold, formerly named Auric Development Corp. First Mexican completed a reverse merger of Auric on Dec. 29, 2010.

Prior to that in January 2007, First Mexican secured a 60% option from International Millennium to earn into the original Hilda properties (30, 37 & 38). These properties altogether are known as Guadalupe, after the concessioner Guadalupe Rocha, who named the targets after his wife Hilda.

To keep with the pattern, Voisin has subsequently dubbed every new zone after a woman, starting with labeling the project’s highest-grade gold zone after his wife Karen.

“It’s pretty fun,” he says with a chuckle. “I never forget the names of the zones. So I kept on with the naming of related women that Guadalupe Rocha started by naming them Hilda.” His two daughters, daughter-in-law, and granddaughter all have zones named after them.

In 2009, First Mexican increased its option in the Hilda properties to 80% by agreeing to spend an additional $3 million on top of the $1 million it already said it would.

Before focusing on drilling, the company locked up more ground around its original 13-sq.-km concessions. The land package has now grown to 151 sq. km. Most recently, First Mexican added to its land position by closing a joint-venture agreement with Kootenay Gold (KTN-V) on an adjoining property. 

It also spent a significant amount of time and cash to erect a modern camp on the Guadalupe property and build about 40 km of road to access the project’s potentially rich targets. With most of the infrastructure in place, First Mexican is now ready to explore.

Guadalupe is about a four-hour drive or 190 km east-southeast of Hermosillo, the nearest major city. 

After passing a quick military checkpoint on the junction of highways 16 and 11, we veered off the highway and continued about 18 km on a sparsely maintained gravel road to the property, passing the village of Guadalupe Tayopa and Santa Ana, in the Yecora district.

After a quick tour of the camp which can house up to 12, we headed to assess a few of the targets. In total, the project hosts more than ten targets underlain by favourable Cretaceous-Tertiary andesite-rhyolite volcanic stratigraphy. These rocks are part of the Sierra Madre Occidental province, which hosts several epithermal gold-silver mines and mineral occurrences.

The three main targets the company plans to explore include the Diana, Erica and Karen zones. It also hopes to further examine the known potential at the Karen East, Bailey, Linda, Luce and Katelyn zones.

Some of these zones could potentially each host a million gold-equivalent oz. or more, predicts First Mexican’s CEO.

While the company aims to eventually develop all of its targets, it notes amid the current market conditions it will make calculating an initial resource estimate at the Diana zone its top priority.

“We can do at least half a million oz. [of gold equivalent] on Diana,” reckons Voisin. “Then people can start to take us more seriously. But I think that will be just a scratch on the surface.”

The junior anticipates putting out the resource estimate on Diana by the third quarter of next year to garner the market’s attention and in turn lift its share price.

Recently the company’s shares closed at a 52-week low of 10¢. It reached a high of 71¢ on Jan. 21, 2011. As of December 2011, it had 37.9 million shares outstanding.  

While the property requires a lot more drilling, Voisin says Guadalupe has already received some interest from two majors. Currently, the company is looking to get some help to speed up the development of the property.  

“I’d like to get some assistance,” admits Voisin, who believes the company and its neighbour Corex are sitting on a large copper-gold porphyry. “Whatever it is, it’s big. It would take us two or three years to figure it out. If we can get a major it will reduce that time and they can come in and put the dots together.”

But, he adds a lot of thought will go into who First Mexican will partner with.

“I am being a bit of a princess at the ball,” he says, cracking a smile. “This type of property doesn’t come along every day. So I want to be very careful who I dance with.”

Meanwhile, the company has been working alone on its sizable land position.

In early November it brought a second drill rig to complete 1,200 metres or five holes on its high-priority targets.

Two of those holes will test the western extent of the Diana zone. The company has already completed three holes on that zone early this year as part of an eight-hole program, which delineated 400 metres along the eastern extension.

Those holes intersected 0.77 gram gold and 105 grams silver over 15.7 metres, .47 gram gold and 135 grams silver over 29.1 metres, and .42 gram gold and 86 grams silver over 49.4 metres.

Near the end of that month, the company said fieldwork indicated that the Diana zone could extend another 500 metres to the west for a total of 950 metres. The zone is thought to be almost vertical with fractured brecciated structure from 30 to 40 metres in width.

First Mexican is confident it could now prove up an economic bulk mineable low- dilution gold-silver deposit at Diana, a target it discovered through prospecting and surface sampling in 2010.

“Diana is a miner’s dream,” Voisin says while driving to the zone sitting on the Hilda 38 concession, “because it’s right on the crest of the mountain. You couldn’t ask for it any sweeter or easier to mine.”

If all goes as planned, the company aims to start a resource drilling program in mid-January, which should take four to six months to complete. The program will punch 30 holes in Diana’s eastern flank.

“We have designed this next drilling campaign at Diana zone on fifty-metre spacing as we believe proving up continuity over Diana’s eastern flank in this manner can represent a large resource target,” said Voisin in a press release.

Elsewhere on the property, First Mexican believes Karen East is a vent associated to the mineralization that it intersected earlier this year at the Karen zone, which is 300 metres west and downhill from Karen East.

In late November, the company said it had three holes left to be drilled in the Karen zone to test both the vertical extent of the zone and strike.

As part of a small program conducted in January to February of this year, the explorer had drilled five holes into Karen, of which three hit significant mineralization. Highlight hole 11-05 cut 33.4 metres of 4.27 grams gold, 395 grams silver and 1.24% copper per tonne.

During the summer of 2009, before the company went public this year, it intersected the best intercept to date at Karen. Starting at surface, hole 09-03 cut 37.8 metres grading 6.51 grams gold and 678 grams of silver.

Karen was used as the company’s main zone to take it public. First Mexican debut on the Venture Exchange at 35¢ a share in early January 2011, raising $2.16 million.

The junior also anticipates testing its Linda zone, along with the northern portion of the Erica and Bailey zones. The Bailey zone hasn’t seen any drilling yet, while Erica received a few pokes but failed to produce significant results. 

“Our problem is we have lots of targets, and we need more money,” says Voisin. “We got so much property we haven’t touched.”

At Linda, the company recently completed surface sampling and geologic mapping to start drilling below the large leach cap.

“Linda is very sexy, it’s very vuggy,” says Voisin. He adds it has taken the company some time to figure out how best to drill Linda because it has a very large leach cap.  

In early December, the company was placing its first hole on Linda, and will put in another in 2012. 

With a string of targets lined up to be drilled, the junior recently announced a non-brokered private placement to help fund ongoing exploration.

First Mexican is set to sell 2.5 million units at 12¢ apiece to raise $300,000.

Each unit will consist of one share and half a warrant, whereas each whole warrant can be exercised at 15¢ for two years. However, the financing still requires regulatory approval.

While First Mexican is slowly working away, the company hopes all the efforts it puts into Guadalupe will help propel it into the spotlight.

“Anything that is real takes time. You do little steps. First you walk then you run,” says Voisin, who is confident that with the right mix of diligence, rich targets, and more funds First Mexican could potentially become the next big thing.

The Beatles played in a basement pub for years before becoming an “overnight success,” he says, before adding, “We could become an overnight success. Come out of nowhere. It happens.”