Pilot mining to help Dia Bras build reserves

SITE VISIT

Chihuahua, Mexico — To this day, no one really knows what happened to plans to mine the Cusi property in the early 1900s. They went missing while Mexican revolutionary hero Pancho Villa and his villista forces had control of the Cushuiriachic silver mining district in Chihuahua state, northern Mexico.

Local legend has it that Pancho Villa’s horse ate the plans while it temporarily resided in the mining office.

That didn’t put an end to the mining of the high-grade deposits that dot the hilly area, 120 km west of Chihuahua city. A 1928 report by Cusi Mexican Mines, which mentions Pancho Villa and the missing plans, describes Cusi as the perfect example of the “improvident method” of mining used in the old days, where “irregular” development saw ore extracted as fast as it was discovered, with no reserves.

Improvident is a stretch, but one could argue that Dia Bras Exploration (DIB-V, DBEXF-O) is employing a similar strategy a century later.

With neither reserves nor resources to speak of, Dia Bras plans to start a pilot mining project at Cusi by the third quarter, which vice-president and chief operating officer Andr St-Michel says will provide the company with hard cash to fund an aggressive exploration program.

The method has already been proven at the company’s Bolivar copper-zinc mine, located in the Sierra Madre belt, 250 km southwest of Chihuahua city and 150 km southwest of Cusi.

After producing 5,500 tonnes of copper concentrate and 16,000 tonnes of zinc concentrate last year, the company raked in US$15 million in revenue through a pilot mining project.

“We want fifty-fifty revenue from Cusi and Bolivar,” St-Michel says.

Dia Bras is not completely without a plan — a National Instrument (NI) 43-101-compliant resource for Bolivar should be out in July and another one for Cusi by early 2008.

Dia Bras has been poring over old maps and reports with the goal of developing a regional picture of the area.

“When I saw the historical report from 1930, I said, ‘we need to go there,'” St-Michel says.

St-Michel and president and CEO, Rjean Gosselin, looked at 17 different properties in Mexico before deciding on Cusi, which they acquired in mid-2006.

It’s the first time the entire 79-sq.-km district — home to 12 now-inactive mines that have produced nearly 120 million oz. silver over the last 300 years — has been consolidated under the ownership of one company. Most areas haven’t been mined since the 1930s, though gambusinos have periodically mined the area, depending on the price of silver.

Dia Bras acquired Cusi through several transactions with Mexican families, one Mexican private company, one Canadian public company and by claiming open ground. The company owns 100% of all the deposits except San Miguel and La Bamba, which are 70%-owned by Dia Bras and 30% by Pershimco Resources (pro-v, rsprf-o).

There’s a familiar face in some of the photos that came with the old mining reports. Director of operations for Dia Bras Mexicana, Louis Medrano, represents the third generation of Medranos to work in the Cusi silver district, which has been helpful when dealing with local landowners.

“First we say, “Let’s go see if Louis knows them,” St-Michel says. “One old man took one look at Louis and said, ‘You must be a Medrano.’ The man knew his grandfather.”

‘Swiss cheese’

Silver mineralization occurs in vertical quartz-veined breccia zones of epithermal origin while silver and base metal sulphides are found at depth.

While St-Michel says Cusi is like “Swiss cheese” due to the number of adits driven into it over hundreds of years, he believes the district has not been fully exploited — especially the sulphide zones — due to a lack of technology, infrastructure and expertise.

Indian raids, wars, economic crises and revolution have also played their part, but production has never stopped due to a lack of silver.

Last year, Dia Bras drilled 11,700 metres, confirming silver-gold mineralization. The company also received a NI 43-101-compliant technical report from Scott Wilson Roscoe Postle Associates, which found that there is “good potential” for economic silver-gold mineralization on the property.

Dia Bras is focusing on the northwestern portion of the property. The mines and deposits are within a few kilometres of one another along the northwest-trending Cusi fault.

The highlight of 2006 was a 40-cm bonanza intersection grading 35.4 kg silver per tonne at the La India mine. La India has two accessible levels. The company collected 166 samples along three veins with adjacent breccia zones over a distance of 300 metres and completed 16 diamond-drill holes totalling 2,800 metres.

Also in 2006, channel sampling at the Santa Edwiges deposit returned 3.62 metres grading 2.7 kg silver per tonne.

Drilling at the La Bamba open pit returned intersections such as 22.5 metres grading 113 grams silver to 1 metre grading 981 grams silver. More than 250 truckloads of material from La Bamba were sampled and assayed at the company’s Malpaso laboratory and mill, 40 km from Cusi, yielding an average head grade of 247.8 grams silver per tonne, 0.17% zinc and 0.21% lead and 0.04% copper.

The 850-tonne-per-day Malpaso mill, which has a newly added 500-tonne-per-day circuit to accommodate material from Cusi, is being fine-tuned while additions such as a gravity circuit and leaching permits are being set up. When everything’s ready, material from the La Bamba and San Nicolas open pits will be the first to feed the mill.

In May, the company began a new ramp into the Promontorio mine, which is in the midst of being dewatered and rehabilitated. Old maps show areas of high-grade blocks of ore in the mine, but Dia Bras has yet to prove it.

“We didn’t start the ramp for nothing,” St-Michel says.

As for exploration this year, Dia Bras is undertaking a 25,000-metre drill program to test the downdip and strike extensions of silver veins on the property. The company is dedicating 11,000 metres to test new targets found through geological mapping over the last year, including 2,000 metres to further explore the La India deposit.

The rest of the drilling will be at the San Miguel, La Bamba, Santa Edwiges and San Antonio targets, which will be the initial focus of the pilot mining, as well as the Promontorio and Santa Marina deposits.

The latest drill results, from Promontorio, returned a 9-metre intersection grading 1.65 kg silver per tonne, including 1.5 metres grading 8.3 kg silver and 4.5 metres grading 3.2 kg.

May results included assays from the San Antonio pit, where a 40-metre intersection averaged 0.1 gram gold per tonne, 101 grams silver, 1.78% copper and 2.09% zinc.

Assays from the Santa Marina vein cut 3 metres grading 0.3 gram gold per tonne and 372 grams silver with traces of copper, lead and zinc.

Another intersection was a mix of broken core left in what the company believes is an old pillar. A 3-metre intersection graded 2.3 grams gold per tonne, 150 grams silver, 0.3% lead and 0.78% zinc.

A hole drilled 20 metres north of the shaft intersected several zones of mineralization, including 3 metres grading 582 grams silver per tonne.

Bolivar mine

The Malpaso mill had been out of commission for eight years before Dia Bras revived it in 2005, when it began pilot mining at Bolivar, 150 km southwest of Cusi. Bolivar ore is milled at a rate of 350 tonnes per day.

Bolivar was acquired in fall 2004 for US$1.2 million. Though it had been out of commission for five years, the mine was still fully permitted. The company started a prefeasibility study later that year, which included pilot mining.

If a big enough deposit is discovered at Bolivar, the company will consider building a mill there, but for now, mined material must be shipped 125 km by road and rail to Malpaso.

Even with a mill on-site, the remoteness of Bolivar means it will never be without its challenges. A scenic, hour-and-
a-half helicopter ride over the Sierra Madre doesn’t compare to the six-and-a-half-hour drive from the remote mountain location to Malpaso.

“When a town is close by and you break something, access for repair is easy,” St-Michel says.

Dia Bras mined a record 12,336 dry metric tonnes of ore in March, bringing the first-quarter total to 30,014 dmt, and producing US$5.2 million in concentrate production value.

Grades averaged 6.77% zinc and 1.34% copper — slightly below the company’s forecast of 7.5% zinc and 1.5% copper and significantly below the grades from the first quarter of 2006, which were 16.3% zinc and 2.9% copper. That’s because the company had mined a known high-grade zone to take advantage of the metals’ prices in order to increase its cash position.

Splashes of green are evident across rugged and rocky terrain at Bolivar — the malachite stains provide evidence of the copper mineralization in the skarn. All of the targets are within a few kilometres of the Bolivar mine and are accessible along dirt roads that climb up and down the mountains.

The lower skarn hosts magnetite-copper mineralization. It’s a tabular body that dips gently to the northeast and contains magnetite and chalcophyrite. Dia Bras has drilled the body between Mina de Fierro, an adit into the lower skarn, and the El Gallo and Increible deposits. The body is open along strike and downdip. So far, drill spacing is too wide for a proper resource calculation, but the company believes the drilled areas look economical.

Dia Bras has budgeted for 25,000 metres of drilling this year to follow up and define mineralized zones.

The company hopes to have a NI 43-101-compliant resource by July, after drilling 5,000 metres on the upper and lower skarn between the Bolivar mine and El Gallo.

Another 15,000 metres will be drilled to evaluate the extension of the high-grade targets of the upper skarn horizon and test the lower skarn horizon north and east of the Bolivar mine.

The final 5,000 metres of drilling will test the strike extension of the favourable upper and lower skarn horizons over 2,000 metres of strike length from the La Montura to El Val targets, southeast of Bolivar.

Recent drilling on the high-grade Fernandez and Rosario trends returned 21 metres grading 3.3% copper and 22.3% zinc and 8 metres grading 0.7% copper and 33.8% zinc. Underground drill holes from the Selena breccia measured 43 metres grading 2.2% copper and 13.1% zinc.

Based on the company’s current knowledge of Bolivar, St-Michel estimates mining will continue for three to four years on the property, though Dia Bras aims to expand resources beyond that.

Now Dia Bras is 350 people strong with two projects that will provide it with fast cash to help it achieve its goal of commercially producing zinc, copper and silver.

“We have solid revenue for the future,” St-Michel says. “Now we need to build bigger revenue from silver, zinc and gold at Cusi.”