Junior explorers scour Mexico’s Sierra Madre

Vancouver — Canadian-based junior explorers are heading to northwestern Mexico’s prolific Sierra Madre mineralized belt in search of silver, gold and base metals. Recent strength in the price of silver has been fuelling much of the exploration activity. Further, many juniors are drawn by the prospect of an operating mine, however small, as a quick path to producer status.

Starting from the border with the U.S., the Sierra Madre Occidental extends down from Chihuahua and Sonora through Sinaloa, western Durango, western Zacatecas and part of Jalisco states. From there the belt overlaps with the Trans-Mexican volcanic belt. The region covers some 800,000 sq. km.

The two upper-most strata in the mountainous terrain are Tertiary and Cretaceous, which comprise upper and lower volcanic sequences. Older marine and continental sediments are found throughout the belt.

In Chihuahua state, Gammon Lake Resources (GAM-T) is preparing for construction of a mill and heap-leaching facilities at its Ocampo silver-gold project. The company raised $110 million for first-phase development (estimated to cost US$104 million) and recently appointed a team to put Ocampo into production.

The project has an impressive after-tax internal rate of return of 52%, and payback is expected in just 1.6 years.

With a 1,000-ft. shaft nearing completion, the company expects to begin producing by the first quarter of 2006 at a rate of 6.2 million oz. silver and 170,000 oz. gold per year or 270,000 oz. gold-equivalent over the first seven years of mining. Cash costs are projected at US$151.74 per oz.

Encouraged by a recent discovery at Chica Rica and La Esperanza through ongoing exploratory drilling, Gammon Lake aims to expand resources and reserves, which will be updated later this year.

The Chica structure ran up to 42.1 grams gold with 1,590 grams silver while drilling on La Esperanza yielded 12.3 grams gold-equivalent over 1.9 metres.

The first phase of mining includes reserves for the first seven years of mine life. Ocampo has proven and probable reserves of 33.6 million tonnes grading 1.25 grams gold and 52 grams silver per tonne, or 1.3 million oz. gold and 56.2 million oz. silver. About 67% of the reserve’s ounces are in the open-pit area, with the remainder found underground in the Northeast.

Prices of US$400 per oz. gold and US$6.50 per oz. silver were used in the calculation.

At Tyler Resources‘ (TYS-V) Bahuerachi property in the La Reforma region of Chihuahua state, drilling is unveiling several different styles of mineralization, including copper porphyry, skarn and epithermal.

The company recently intersected epithermal-style gold and silver mineralization at the Los Alisos zone on the property. Los Alisos is some 1.2 km west of Bahuerachi’s Main zone which has been the focus of the company’s drilling and previous work on the property.

Hole 8 intersected 7.62 metres grading 3 grams gold and 34 grams silver per tonne, with 0.53% zinc, from a depth of 16.7 metres. Hole 9 returned 9.14 metres of 2.18 grams gold with 182 grams silver from 22.8 metres down-hole, and 12.2 metres of 2.7 grams gold and 38.7 grams silver with 1.57% zinc, from 35 metres depth.

Tyler began exploring Bahuerachi in 1993, when it acquired the project as a near-surface, potentially heap-leachable copper-oxide deposit. Work has focused on the Main zone, now outlined at surface for more than 4,000 metres of strike length, with widths varying between 200 and more than 700 metres.

On the heels of raising $5.1 million in the equity markets, Kimber Resources (KBR-T) continues to assess the economic viability of the Carmen deposit on its Monterde property, and recently staked surrounding concessions in Chihuahua state.

Kimber is working on drilling, metallurgical testing and environmental studies, which are designed to assess Carmen’s potential as an open-pit mine. Meanwhile, the company is examining the property’s underground potential, and is exploring other parts of the 18-sq.-km property, where structurally controlled gold and silver mineralization is hosted by a volcanic-intrusive complex.

The company aims to boost the resources. So far, drill testing of the Cocos structure, 200 metres to the east of the Carmen deposit, and the Cob structure, on the east side of Carmen, yielded grades and styles of mineralization similar to those of Carmen, which should help.

Kimber upped the resources at Carmen last September, based on results from 170 drill holes, using a cutoff grade of 0.5 gram gold per tonne for the higher-grade material while its lower-grade resource was based on a 35-gram silver cutoff. The higher-grade material contains some 289,000 oz. gold and 15 million oz. silver in the measured and indicated categories, in 5.1 million tonnes grading 1.75 grams gold and 91 grams silver per tonne. There are another 3.2 million tonnes grading 1.76 grams gold and 88 grams silver per tonne in the inferred category, which contain 183,000 oz. gold and 9.1 million oz. silver.

Montreal-based Dia Bras Exploration (DIB-V) started a prefeasibility study at its wholly owned Bolivar mine project in Chihuahua state, in late 2004. The work aims to confirm tonnage, grade and recovery as well as assess mining and milling costs at the former zinc-copper-silver-gold mine. As part of the study, an additional 20,000 metres of drilling will be completed this year.

The company completed 16,460 metres of drilling in 102 holes in 2004. Testing the skarn horizon, at the intersection of two faults, came up with an intercept of 37.9 grams silver, 2.21% copper and 13.84% zinc over 19 metres, from 37 metres down-hole. The mineralized structure is part of a northwesterly fault zone that extends over 10 km across the property.

Underground drilling yielded up to 1 metre averaging 4.65 grams gold, 112 grams silver, 4.49% copper and 16.50% zinc in hole 67, whereas hole 71 returned several mineralized sections including 13 metres grading 0.12 gram gold, 38.5 grams silver, 1.54% copper and 7.34% zinc.

The company started operations in late December and has shipped 1,000 tonnes of development ore to the newly started mill. The leased mill is situated in Malpaso, 125 km from the mine. It brought in the necessary mining equipment to access and mine high-grade ore on levels 1 and 6, which lie 50 metres apart. So far, more than 300 metres of rehabilitation or new drift have been completed. The ore mined averages 15% zinc and 3% copper.

The company plans to ship some 2,200 tonnes of similar grade material in February, and starting in March, tonnage will increase to 3,000 tonnes per month and average 25% zinc and 6% copper with silver and gold credits.

Vancouver-based Golden Goliath Resources (GNG-V) plans to drill 6,000 metres on its Las Bolas property in Chihuahua state, to follow-up in the area of the old Arbolito mine shaft, where the company is mapping and sampling a recently rehabilitated old tunnel.

Golden Goliath also plans to drill-test an induced-polarization anomaly in the Nopalera area on the east side of the property, some 5 km from the Arbolito mine.

Southern Silver Exploration raised $2 million to fund exploration at the Pinabete project it acquired from Anglo American (AAUK-Q). The project comprises 46.2 sq. km in a silver-lead-zinc, carbonate replacement deposit belt, some 120 km south of the city of Chihuahua.

Sonora state

Vancouver-based Sydney Resource (SYR-V) is looking at its Sabina gold-silver project in Sonora state as a potential open-pit mine. Prospective mineralization occurs over at least 2.1 km.

The company gained access to the old underground workings and confirmed the high grades from underground channel sampling (over 400 samples). From these, one returned 11.83 grams gold and 17.8 grams silver over 5 metres (true width).

Recent surface channel sample results
on the property were up to 55.6 grams gold with 150 grams silver over 0.6 metre in the La Fundadora area to 15-25-metre intercepts ranging from 1.7-2.41 grams gold and 15-23 grams silver in the El Rosario area.

Channel sampling at level 2 of the old Mina San Carlos workings, confirmed high grades in what is believed to be a feeder zone that runs up to 32 grams gold. Sydney plans to focus on the high-grade areas by trenching and drilling.

Meanwhile, reconnaissance work on the company’s recently acquired Montana de Oro gold-silver project in Sonora state included eight trenched and sampled areas for which gold is reported and silver assays are awaited.

Five notable intercepts included 15 metres grading 3.04 grams gold in Trench 5. In the La Violeta-El Porvenir area, one sample returned 11.88 grams gold over 2.5 metres, and the La Concepcion area returned a 3-metre sample grading 3.06 grams gold.

Sinaloa state

Vancouver-based Scorpio Mining (SPM-V) anticipates completing a new resource for the Candelaria deposit at its Nuestra Senora silver property in March. An 8,000-metre drill program, under way since last fall, has been expanded to 12,000 metres and is expected to finish soon.

The company aims to outline at least two years worth of resources on the project, initially. Peter Howley, its president and CEO, says that the company wants to move its mining equipment and 800-tonne-per-day capacity mill from Arizona to the property to mine the Candelaria and Nuestra Senora deposits. This would allow the high-grade and lower-grade material to be blended together while providing enough feed for the mill to run at maximum capacity.

Scorpio is testing the extent of a recently discovered zone that represents a bulk-tonnage target. Earlier this year, drilling yielded multiple intercepts of silver-copper-lead-zinc mineralization, similar to horizons that had been mined by previous operator, Asarco (now part of Grupo Mexico). These holes returned wide intercepts of lower-grade material. For example, hole NSS-3 intersected 57 metres grading 65.91 grams silver, 0.13% copper, 0.75% lead and 1.68% zinc.

Surface drill holes NSS-1 and 2 returned highlights that include 28.2 metres grading 43.7 grams silver, 0.08 gram gold, 0.02% copper, 0.35% lead and 3.31% zinc.

Underground diamond drill holes 22 to 32 at Candelaria returned selected results that include, from hole-27, 2 metres grading 1261.07 grams silver, 4.56 grams gold, 1.22% copper, 5.8% lead and 1.65% zinc in the 7.5 level drift. At the 15 level drift, hole 30 intersected a 0.85-metre section grading 3,044.71 grams silver, 1.4 grams gold, 3.73% copper, 15.21% lead and 17.11% zinc.

Vancouver-based Nevada Pacific Gold (NPG-V) started commercial gold production at its wholly-owned Magistral gold mine in Sinaloa state on Jan. 1. The silver production is being stockpiled in the meantime.

Nevada Pacific raised $7.4 million in November 2004 to fund exploration aimed at increasing the reserve and resource base at Magistral.

Ross River Minerals (RRM-V) recently acquired 100% of the rights, title and interest in the El Pulpo concessions and underlying agreements from Almaden Minerals (amm-t). The El Pulpo copper-gold-silver-molybdenum project is located 125 km northeast of Mazatlan in Sinaloa state.

Durango

With a 100% focus on silver, First Majestic Resource (FR-V), has one mine in production and another nearing production. The company brought the La Parrilla silver mine in Durango state into production last July. It expects to produce 1 million oz. in the first 12 months, while it works toward doubling the mill’s capacity. The La Parrilla property covers 2.8 sq. km.

First Majestic’s Perseverancia silver mine in Zacatecas state, some 60 km from La Parilla, is estimated to have produced 3.2 million oz. from average grades of 1,500 grams silver historically. The Perseverancia property covers 4.9 sq. km, encompassing three former mines: Magistral, San Juan and Esmeralda.

Last October, the company collected 270 underground rock samples that yielded consistently high silver grades. The company believes that extensive underground workings and these high grades bode well for near-term silver production at Perseverancia.

First Majestic signed a deal with Mexican miner, Exploraciones El Rey, in November for the purchase of the Dios Padre silver mine properties. The Dios Padre property covers 2.8 sq. km in east-central Sonora.

Quebec-based ECU Silver (ECU-V) recently reported satisfactory grades in channel samples from production and development workings of the Santa Juana mine on its Velardena property in Durango state. The company’s new drift on the Santa Juana vein on the 15th level yielded 21 metres averaging 16.8 grams gold, 643 grams silver, 5.1% lead and 11.2% zinc over 0.5 metre.

Last month, underground channel sampling on drifts and raises on the Santa Juana vein’s 17th level yielded average grades of 8.55 grams gold, 665 grams silver, 10.5% lead and 11% zinc over 0.79 metre. Initial assays for the first 18 metres of the new 15 level drift averaged 14.4 grams gold, 229 grams silver and 5.3% lead over 0.79 metre. The new drifting on the 15, 15.5 and 17 levels represents a vertical extension of 130 metres.

The company is currently processing high-grade development drift ores in milling facilities in Durango City at a rate of 180 tonnes per day. It plans to increase production by adding a transformer and running a second ball mill. The company is adding extra flotation capacity and another unit to float the pyrites. ECU hopes this will increase gold recoveries from 15% to at least 75%.

Roscoe Postle is working on a NI 43-101-compliant report for the company.

Endeavour Silver (EDR-V) expects to produce 300,000 to 400,000 oz. silver this year at its Santa Cruz silver mine in the Guanacevi district of Durango. The company aims to expand production ten-fold over the next 2.5 years by mining the North Porvenir, La Prieta and Deep Santa Cruz zones.

Endeavour’s drilling has identified eight prospective mineralized zones on the property, which are all slated for drill-testing this year.

At the newly discovered North Porvenir zone, crosscuts 9, 10 and 11 extend the North Porvenir high-grade zone over a total sampled strike length of 140 metres. Trial mining of this zone is now under way in an effort to assess the potential production rate, mining method and metallurgical recovery.

Exploratory drilling of 4,160 metres of diamond drilling in 12 holes was completed last year at North Porvenir. Some of the better drill results include 1,183 grams silver and 1.55 grams gold over 3.55 metres in hole 12A-1 and 1513 gram silver and 1.33 grams gold over 2.15 metres in hole 9-1. Endeavour aims to complete an initial resource estimate for North Porvenir in early March.

Drilling at Oremex Resources‘ (ORM-V) Tejamen property continues to expand the El Manto zone to the south and southeast. Drilling has confirmed the presence of the mineralized structure. Significant silver results include 36 oz. silver per tonne over 92 ft. in hole 141. Crews drilled a total of 23,799 metres in 144 holes on the Cerro Prieto and the El Manto zones to the end of last November.

Sierra Minerals (SIM-V) acquired the Pueblo Nuevo gold and silver project, in Durango state, from Aquiline Resources (AQI-V) late last year. The 10.7-sq.-km property occurs within a 2-by-4-km argillic-to-phyllic alteration system. Pueblo Nuevo encompasses a breccia zone over 150 metres wide by 150 metres long with mineralization up to 50 metres wide and open at depth. Previous drilling intersected 12 metres at 2.5 grams gold and 8 grams silver. Sierra bought the project for US$50,000, and assumes US$1.5 million owed to the Mexican vendor.

Current resources at Idaho-based Hecla Mining‘s (HL-N
) San Sebastian silver mine, in Durango, are expected to be exhausted by the third quarter of 2005, but the company is confident it can find new reserves to extend the mine’s life.

Production at San Sebastian has been hampered by a strike at the mill in Velardena, which processes ore from the mine. Although the strike has been ongoing since October 2004, the mine has been operating as usual, but the ore is being stockpiled.

Zacatecas

Capstone Gold (CSG-T) hopes to begin producing at its Cozamin copper-silver-zinc project in Zacatecas state by early 2006.

The company’s recent metallurgical study found 95% recovery for copper and 79% for silver. The company has completed dewatering of the San Roberto mine and rehabilitated the San Roberto hoist, and headframe shaft.

Capstone is re-sampling levels 8 and 9 of the underground workings. Crosscuts will enable drill stations on level 8 by the end of February. Starting in early March, Capstone plans to drill 15,000 metres from underground to evaluate resources between levels 9, 10 and 11 where some of the best mineralization has been found.

The company is also finishing a 7,000-metre phase II surface drill program. Results from drilling on the Mala Noche vein system indicate that copper, silver and zinc mineralization extends more than 5.5 km on strike and at least 650 metres downdip from surface. The Mala Noche vein remains open in all directions, and copper and silver mineralization increases with depth.

The property is one of five that were optioned to the junior for a 90% interest from Mexican mining conglomerate Grupo Bacis late in 2003. Bacis retains a 1.5% net smelter return royalty and a 10% interest in the properties, which include Claudia, Copala, Montoros and Promontorio, all of which have historical gold and silver resources.

A feasibility study has been under way on Western Silver‘s (wtc-t) Penasquito silver, gold, zinc and lead property in Zacatecas state since December. The study, scheduled for completion mid-year, will incorporate the oxide and sulphide zones from Chile Colorado and Penasco deposits.

The company drilled 56,570 metres in 112 holes since February 2004. Assay results from the last six holes on the Penasco deposit expanded the North contact high-grade zone.

Much of the prospective contact above 500 metres remains untested and is slated for drilling.

An initial resource calculation at the Penasco deposit in October 2004 almost doubled the resource on the project. Penasco, one of three deposits that have been delineated on Penasquito, has an indicated sulphide resource of 124 million tonnes grading 27.5 grams silver and 0.5 gram gold per tonne, with 0.31% lead and 0.64% zinc. Its indicated oxide resource is 26 million tonnes grading 19.7 grams silver and 0.52 gram gold per tonne, plus 0.24% lead and 0.26% zinc.

Earlier resource calculations on the Chile Colorado and Azul Breccia deposits had estimated 149 million tonnes.

Western Silver raised $64.83 million to finance the development of Penasquito.

Toronto-based MacMillan Gold (MMG-V) is focusing on developing its Cerro de Oro gold-silver project in Zacatecas in an effort to attract investment from a major. MacMillan also plans to drill its La Violleta-Palmeira silver properties in northwest Mexico. These properties lie near the Alamo Dorado silver mine, being developed by Pan American Silver (PAA-T).

At Pan American Silver’s La Colorada mine in Zacatecas state, silver production nearly doubled to 441,959 oz. after a US$20-million expansion, which began in late 2002. The mine resumed production at the beginning of 2004. The new mine plan has reduced dilution, increased silver grades, and opened up areas of ore with lower clay content to increase recoveries.

Diamond drilling resumed at Quaterra Resources‘ (QTA-V) Nieves silver project in central Zacatecas. Fifteen holes (5,000 metres) followed up on the bonanza-grade silver mineralization intersected in hole 19 and evaluated other targets. Drilling focused on the Dolores-Concordia-San Gregorio vein system.

Tumi Resources‘ (TM-V) Cinco Minas project in Jalisco state, includes the historic underground El Abra high-grade silver-gold mine, and other prospective targets along a 5-km belt. The El Abra mine, first developed in the early 1920s, was shut down in the 1930s. The property lay dormant until July 2002 when Tumi joint-ventured it.

Drilling by Tumi intersected bonanza grades that, combined with other drill results, enhanced the project’s open-pit potential.

An independent resource estimate for Cinco Minas, based on three phases of drilling in 2003 and 2004, pegs the indicated resource at 2.27 million tonnes of 171.9 grams silver containing 12.5 million oz. silver and 1.22 grams gold containing 89,100 oz. gold; and inferred resources of 400,000 tonnes of 137.9 grams silver containing 1.8 million oz. silver and 1.07 grams gold containing 13,800 oz. gold.

The Gran Cabrera, located about 20 km northwest of Cinco Minas, includes more than 20 old high-grade silver-gold mines.

Tumi intends to acquire a 100% interest in the La Trini and Mololoa mineral properties in the Jalisco silver belt, some 100 km northwest of Guadalajara. A limited sampling program by the company generally confirms historic data. Tumi intends to map and sample the accessible workings at La Trini this year.

Toronto-based miner Metallica Resources (MR-T) restarted construction of its Cerro San Pedro gold-silver project in San Luis Potosi state. Metallica, which began construction in January 2004, had to suspend work in June, owing to legal obstacles from ecologists. The company was given the go-ahead to restart the project in November 2004.