Quaterra doubles resource at Nieves

Quaterra Resources (QTA-V, QMM-X) has various properties in Mexico and in Nevada, Utah, Alaska and Arizona, but it’s the junior’s Nieves silver project in northern Zacatecas state that is getting most of the buzz recently.

In August, Quaterra doubled its silver resource at the project and is now embarking on a 6,000-metre drill program that chief executive Thomas Patton says will be finished by the end of the year, followed by a preliminary economic assessment completed in the first half of 2011.

“Our big news is Nieves,” Patton said in a recent interview. “We’ve doubled the resource and we’ve got great metallurgical results . . . We want to get enough drilling done to figure out how big the thing can be.”

A preliminary metallurgical assessment on a 99-kilogram composite sample of coarse rejects from the company’s recently completed core drilling program demonstrated an average grade of 79 grams silver per tonne, a specific gravity of 2.74 and a Bond ball mill work index of 10.8 kilowatt hour per tonne. Open circuit flotation testing recovered 86% of the silver into a final concentrate assaying 2.3 kilograms per tonne silver.

“The rock is relatively soft on the hardness scale so it’s all good news,” Patton says, noting that softer rock means crushing costs should be “reasonable.”

“I always try to look for fatal flaws in a project but you can start crossing them off when you get good results like our metallurgical ones.”

Patton believes Nieves has the potential to become an open-pit silver mine. “It’s relatively shallow and we think it will make a nice open pit,” he said, adding that open-pit silver mines are hard to come by. “They’re not rare, but they’re not all that common either.”

Nieves, which is about 96.5 km north of Fresnillo’s (FRES-L) producing Fresnillo gold-silver mine, has an indicated resource of 4.5 million tonnes averaging 103.4 grams silver containing 15.26 million oz. silver.

Inferred resources at the La Quinta zone on the deposit’s Concordia vein, and the North zone on San Gregorio vein, total over 14.5 million tonnes averaging 83.8 grams silver for an additional 39.1 million oz. silver.

Initially the company thought Nieves was a smallish high-grade prospect, but further investigation soon convinced its exploration team otherwise.

“There were several theories at first,” Patton explains. “Before we thought that Concordia and San Gregorio might be one vein offset by faulting, but the induced polarization has demonstrated they are two parallel veins. There are also some strong anomalies extending out to the West that haven’t been drilled on San Gregorio… and the Concordia vein is open to both the east and the west with strong anomalies, so we think we’ve got a good chance to expand the resource significantly.”

Nieves is a 50-50 joint venture with a private syndicate and is looking like a very strong asset in Quaterra’s portfolio, particularly given mounting silver prices.

Silver outperformed gold last year with a 48% price gain, and so far this year it has set record highs, adding over 26%, Mark Bulsing, a strategist at UBS Wealth Management pointed out in a Sept. 27 research note.

The metal “last pushed US$21 per oz. for a brief period at the start of 1980, when the Hunt brothers cornered the market,” Bulsing writes, noting that in 1979 the Hunt family of Texas, one of the richest families at that time in the United States, owned more than 6,000 tonnes of silver or about half the global supply.

At presstime in Toronto, Quaterra was trading at $1.68 and has a 52-week trading range of 69¢-$2.50. Institutional investors as of Sept. 13 included Maple Leaf Partners, Libra Advisors, Keane Capital, Royce Funds, Peak 6 and Davenport & Co.