New holes expand Bahuerachi

Further drill results from Tyler Resources (TYS-V, TYRRF-O) at its Bahuerachi copper-zinc project in Chihuahua state, Mexico, have indicated extensions of mineralization west of the known resource.

Tyler, which is fighting a takeover bid from Mercator Minerals (ML-T, MLKKF-O), is working toward a new resource estimate on Bahuerachi in the hope it will command a higher valuation. Mercator has bid 0.113 of a Mercator share for each Tyler share, which values Tyler at $115 million based on prices at presstime.

Six of the seven most recent holes reported by Tyler were drilled on the Main Zone Porphyry deposit’s western flank, where mineralization had been thought to be cut off by a fault. The new holes indicated mineralization in porphyry and skarn settings west of the previously defined resource envelope.

Five of the holes cut more than 100 metres of total mineralization, excluding internal dilution by post-mineral dykes. In hole 124, a 184.6-metre run of core included 127.7 metres of mineralized material — about half of it in marble and skarn, and half in porphyry — plus 57 metres of barren dyke material; the mineralized intervals averaged 0.46% copper and 0.1% zinc, with 0.008% molybdenum, 7.4 grams silver and 0.07 gram gold per tonne.

Two nearby holes, 127 and 128, intersected zones of similar length. Hole 127 cut 235.8 metres, 130.9 mineralized and 104.9 metres barren, with the mineralized length averaging 0.29% copper, 0.12% zinc, 0.007% molybdenum, 6 grams silver and 0.03 gram gold per tonne. In hole 128, 128.4 metres, broken up by about 21.2 metres of dyke material, averaged 0.26% copper and 1.04% zinc, with 0.003% molybdenum, 11.5 grams silver and 0.07 gram gold per tonne (for a total of 107.2 metres of mineralization).

Hole 126, about 500 metres to the west of that cluster of holes, intersected 126 metres of mineralized sediment and porphyry, largely unbroken by post-mineral dykes. It averaged 0.3% copper and 0.015% molybdenum, with 2.4 grams silver and 0.02 gram gold per tonne.

A seventh hole was abandoned in bad ground.

A war of words between Tyler and Mercator continues. Tyler, arguing that a revised resource estimate for Bahuerachi should be available in January and a pre-feasibility study in the first half of the year, says shareholders should wait and get the value those developments should add to the project. A director’s circular from the Tyler board, recommending that shareholders reject the Mercator bid, said Mercator’s bid was “opportunistic” and significantly undervalued Tyler. It also played up a rejected friendly bid from Mercator of 0.1437 shares for one Tyler.

Mercator, in reply, said the higher bid in the friendly offer captured the value of typical friendly-bid conditions, such as an agreement not to solicit other bids and an agreed break fee. It also said Tyler faced considerable dilution if it were to try bringing Bahuerachi into production on its own, and might never be able to fund it; Mercator could allocate cash flow from its Mineral Park mine to development at Bahuerachi.

Tyler’s reply to that was to say the Mercator deal would dilute Tyler shareholders’ ownership of the project to 15%.

Mercator also charged that the resource estimate for Bahuerachi did not comply with securities rules and that the director’s circular used a “potentially misleading” pre-tax net present value calculation and a resource figure twice the size of the proposed mining tonnage in the project’s preliminary economic assessment (T.N.M., Oct. 15/07). Tyler said its resource figure was fully compliant with National Instrument 43-101.

The circular itself quoted a pre-tax net present value, based on an 8% discount rate and base-case metal prices, of US$343 million, and an internal rate of return of 19.2%. At a tax rate of 28%, the rate of return at the same price assumptions was 16.1% and the net present value US$216 million.