MAG Silver celebrates initial resource at Cinco de Mayo

The Cinco de Mayo project in northern Mexico’s Chihuahua state contains inferred resources of 12.5 million tonnes grading 132 grams silver per tonne, 0.24 gram gold per tonne, 2.86% lead and 6.47% zinc, MAG Silver (MAG-T, MAG-X) reports, in the project’s newly released, maiden resource calculation.

The estimate is based on 97,600 metres of drilling in 151 drill holes in the project’s Jose Manto-Bridge zone, and an economic cut-off grade set at a net smelter return (NSR) of US$100 per tonne.  

A higher NSR cut-off of US$150 per tonne yielded inferred resources of 9.4 million tonnes, with 151 grams silver, 0.26 gram gold, 3.37% lead and 7.35% zinc.

The resource remains open in several directions and did not include drilling in the Pegaso zone, where the company reported a 61-metre, massive-sulphide intercept in July averaging 89 grams silver, 2.7% lead and 7.3% zinc in discovery hole 120431.

John Hayes of BMO Capital Markets notes that “exploration is at an early stage on the property,” and that “the most promising mineralization appears to be in the Pegaso zone.”

The next step is to link the Jose Manto-Bridge zone to the new Pegaso discovery at depth, the company says, adding that management believes “there is abundant potential for a much larger resource to emerge at depth.”

The Bridge and Jose Manto zones are related, and combined, they demonstrate overlapping manto-style, silver-rich base-metal mineralization over a strike length exceeding 4 km, at depths ranging from 125 metres to 900 metres.  

Management believes that the Bridge zone and Jose Manto demonstrate “all of the hallmarks of being the distal to medial part of a major carbonate-replacement deposit system that MAG has been systematically exploring at Cinco de Mayo.”

The company expects to renew its drill permits before year-end, and plans to complete an orientation 2- and 3-D seismic survey to define drill targets.

In a research note BMO’s Hayes estimates that Cinco de Mayo’s initial resource at long-term metal prices is roughly 70% base metals and 30% precious metals by value, and notes that about 60% of the world’s silver production comes from base-metal deposits.

“The initial resource estimate demonstrates potential for the Cinco de Mayo project,” Hayes continues. “There is further potential for growth. We have increased our exploration valuation for the project beyond that for the Pozo Seco deposit. The increase in value for Cinco de Mayo and Valdecanas has increased our 10% net asset value by 14%.”

MAG Silver owns 100% of the 250 sq. km Cinco de Mayo property, located 199 km north of the city of Chihuahua.

The company discovered the deposit in 2006, It is the most advanced of the three wholly owned carbonate-replacement deposit (CRD) properties that MAG is exploring.

Seventy-five percent of the Cinco de Mayo property is covered with alluvium, with little outcrop to guide exploration.

The company says that CRDs make up 40% of Mexico’s 10 billion oz. historic silver production. They are characterized by massive to semi-massive silver-lead-zinc sulphide intrusions, which replace the limestone carbonate host rocks.  

In addition to Cinco de Mayo, the company owns 44% of the Juanicipio joint venture in the Fresnillo district of Zacatecas State. Fresnillo (FRES-L) owns the other 56%. The project has identified three significant, high-grade silver-gold-lead-zinc veins: Valdecanas, Juanicipio and Las Venadas.

Results from Juanicipio’s preliminary economic assessment in June outlined a high-grade underground silver project that would produce an average of 15.1 million payable oz. silver over the first six years of commercial production, and 10.3 million payable oz. per year over a 14.8-year total mine life.

At press time, MAG Silver shares were trading at $12.08 apiece within a 52-week trading range of $6.17 to $12.25. The company has 60 million shares outstanding.