MINING MARKETS & INVESTMENT NEWS — INVESTMENT COMMENTARY — Corner Bay eyes potential at Alamo Dorado

Silver buffs and mining analysts are taking a shine to the Alamo Dorado silver-gold project, being developed by Corner Bay Minerals (BAY-T) near the town of Alamos in Mexico’s Sonora state.

Mining analyst Wendell Zerb of Pacific International Securities recently initiated coverage of Corner Bay based on encouraging results from the project, now at the prefeasibility stage.

“Recent drill results, combined with preliminary reserve estimatations, metallurgy and scoping-level mine planning, suggest to us that Alamo Dorado could become a high-margin, operating silver mine by 2001,” he notes in a research report.

Zerb rates the company a “speculative buy” and sets a 12-month target of $3. The junior currently trades at $1.22 within a 52-week range of 15 cents to $1.35. Corner Bay has 9.8 million shares outstanding (11.1 million fully diluted) and working capital of $600,000.

The Alamo Dorado property lies in the western Sierra Madre Occidental geological province. Silver-gold mineralization occurs in moderately dipping quartz-carbonate stockworks and breccias hosted in structurally controlled zones within gniesses and schists. The mineralized zones are argillically altered and oxidized to at least 250 metres below surface.

To date, 26 reverse-circulation holes have tested the Alamo Dorado zone over about a strike length of about 700 metres. Widths vary from about 35 metres to more than 225 metres.

Mintec, an independent firm based in Tuscon, Ariz., has estimated a global geological resource and a preliminary minable reserve based on the initial 19 holes drilled at the project. The global resource stands at 47.8 million tonnes grading 42.06 grams silver and 0.15 gram gold per tonne, or 77.6 million ounces silver-equivalent. The reserve, minable by open-pit methods, stands at 24.7 million tonnes of 71 grams silver and 0.22 gram gold, or 66.5 million ounces silver-equivalent.

Zerb suggests that additional infill drilling is required to bolster the minable estimate. “The recent drilling by Corner Bay has intersected wide zones of silver-gold mineralization, and we believe that by extending drill holes, some areas within the current reserve could increase,” he writes. “Furthermore, the zone is still open in three directions and thus the potential to expand the resource is likely.”

A scoping study by Mintec proposes a 3-phase, open-pit design that would initially target a higher-grade starter zone. The stripping ratio is expected to average 1.09-to-1, with lower rates in the earlier phase, increasing to about 1.34-to-1 by year 12.

Metallurgical tests by Metcon Research indicate average recoveries of 67.23% for silver and 89.5% for gold. The silver and gold are predominantly free-milling; however, about 25% of the silver is encapsulated in silicates, and further work is required to determine the leaching characteristics.

Zerb estimates that Alamo Dorado will have cash operating costs of US$4.68 per tonne of ore mined — lower than at Manhattan’s Moris mine, Eldorado’s La Colorada mine and Geomaque’s San Francisco mine, all of which are in Mexico.

The analyst believes US$25 million will provide for an open-pit operation capable of producing at a rate of 2.3 million tonnes per year.

Corner Bay’s Mexican subsidiary can earn a 100% interest in the project by paying US$800,000 over six years. The property is accessible by road, and power and water could be obtained from a dam 10 km to the southwest.

Management is headed by Peter Mordaunt and Steve Brunelle, whom Zerb says are “capable of directing Corner Bay’s advancement of the Alamo Dorado project.”