Site Visit: Americas Gold and Silver eyes extending decades-old Galena mine life as discoveries keep coming

Driving through the forested hills of northern Idaho, one could be forgiven for assuming the growing recreational city of Coeur d’Alene brings all the buzz and value to the region.

After all, it offers year-round recreational activities in stunning natural landscapes, serves as a commercial hub for the northern part of the state, and its adjacent Lake Coeur d’Alene hosts shoreline homes for a few Hollywood A-listers.

However, decades before the celebrities showed up, its own Silver Valley — just east of Coeur d’Alene — hosted numerous mines that produced millions of tons ore containing gold, lead, zinc and silver.

And if past exploration trends at Americas Gold and Silver (TSX: USA; NYSE-AM: USAS)’s Galena Complex mine are any guide, it could have many more years of production ahead of it.

The mine primarily produces the lead sulphide galena, from which silver is eventually extracted in the purification process.

The Toronto-headquartered company also has its 100%-owned, producing Cosalá operations in Sinaloa state, Mexico, where it mines copper, lead and zinc concentrates. Its Relief Canyon gold project in Nevada is under development and the San Felipe silver-zinc-lead project, located in Mexico’s northwestern Sonora state is under care and maintenance. 

Six decades of production

“We’ve carried five years of mine life for the last 40 years,” said the Galena chief geologist Sadae Lortz during a recent visit. “There are so many areas we haven’t touched and we have a large land package.”

Even in this quiet corner of the Silver Valley, Galena is in a busy mining neighbourhood. About 30 km to the north is Idaho Strategic Resources’ (NYSE: IDR) producing Golden Chest mine and about 15 km down the Interstate 90 highway is Hecla Mining (NYSE: HL)’s producing Lucky Friday silver mine. Bunker Hill Mining (CSE: BNKR; US-OTC: BHLL) is also working on the outskirts of Kellogg to restart its historically important namesake mine.

Located just a short drive south of the I-90, silver deposits were first discovered at Galena in the late 1800s. From 1953 until August of this year it has produced 238 million oz. of silver, 72 million tons of copper and 63 million tons of lead, according to figures provided by Lortz.

Silver-lead to silver-copper

In 2021, total ore production came to 132,250 tons, for a weekly output of 11,020 tons. Just over 1 million oz. of silver at 7.91 oz. per ton was produced, and 18.7 million lb. of lead at a grade of 7.6%.

The current monthly mine plan targets the operation averaging 11,000 tons of silver-lead ore at a grade of 15-20 oz. per ton, with the on-site mill’s throughput at 700 tons per day. Lortz said the operation isn’t currently running at its maximum capacity.

Galena shifted from mainly mining silver-copper to silver-lead in 2016, Lortz said. Its nearby Galena mill processes the ore that is then sent to Teck Resources (TSX: TECK.A/TECK.B; NYSE: TECK)’s refinery in Trail, B.C. The company hopes that its Coeur mill, which has been on care and maintenance since 2015, will eventually be restarted.

Galena mineralization inside a recently blasted stope at the 3200 level, part of the Upper Country Silver-Lead Zone. Blair McBride photo

“Our hopes are that we can…segregate the silver-lead and silver-copper ore and send silver-copper to Coeur, and from there to a smelter in Quebec,” said Lortz. “[But] we don’t have enough silver-copper now to send it there. This is dependent on exploration success and added development.”

New stopes are currently being extended, and at the 3,200-ft. level The Northern Miner observed slushing work in a stope that was recently blasted through the Upper Country Silver-Lead zone. The sulphur-tinged odour from the explosives was still hanging in the air.

2019 turnaround plan

But until just a few years ago, Galena wasn’t at its current output levels.

Exploration and development was underfunded for many years, Lortz said, with fleets of old equipment causing production interruptions. Its hoist was decommissioned in 2018, leading to bottlenecks in moving muck and supplies through its No. 3 Shaft.

Things began to turn around in 2019 when Americas Gold and Silver launched an improvement plan. Aging equipment was upgraded. It entered a 60/40 joint venture with financier Eric Sprott, and the joint-venture pledged up to US$20 million to fund capital improvements and operations.  

In 2020, Americas Gold and Silver started an 18-month exploration and definition drill program consisting of 118,000 ft. of drilling and it has surpassed its targeted silver ounces by 80%, adding 59.4 million oz. across the proven and probable reserves, and measured and indicated and inferred resources.

A second, ongoing exploration phase has completed 73,000 ft. of drilling to date and is scheduled to wrap up in December.

As a result of the improvement plan, proven and probable reserves at Galena went from 12.4 million oz. of silver in 2019, to 12 million in 2020, before rising to 16.6 million oz. in 2021. 

Its current reserves are at 12.5 million oz. for 980,000 tons of ore grading at 397 grams silver per ton, according to a June 30 resource statement. 

Measured and indicated resources also grew from 27.4 million oz. in 2019, to 37.3 million oz. in 2020, 64.2 million oz. in 2021 and 77.3 million oz. in 2022.

Significant among those discoveries was the silver-copper extension of the Silver Vein that extends from 2,400 ft. down to 5,500 ft. That extension comprises 1,010 ft. of 5.4 million oz. silver in proven and probable reserves contained within 111,802 tons grading 44.72 grams silver per ton.

Observing a diamond drill rig working a tunnel face on the ground level at Galena, a 10-minute walk through the adit, Lortz noted how significant it could be if assay results from that spot show the underlying deposits are economic.

 

“We could just portal right in from the parking lot,” she said. “It would be so much cheaper.”

Increasing mine life

Americas Gold and Silver has ambitious targets for Galena, including increasing silver production to more than 2.5 million oz. per year for 2023 and beyond, and doubling that production by the end of 2027. It also aims at increasing its reserves and mine life past 2030, despite some rocks on its path.

Lortz said the company is optimistic its new hoist can be installed by the end of the fourth quarter of this year, and getting that operational will be necessary if silver production is to be doubled. 

But the global inflationary environment has raised costs for materials and services, and the capital costs for the new hoist have jumped by about US$2.2 million to US$8.9 million. She estimates that operations and drilling costs have also gone up by 12% and 15%, respectively.

And even though Galena makes do with its workforce of 250 people, there is still a labour shortage.

“We used to receive stacks of applications but lately we’re at least 20 people short. It’s been that way for the last two years,” Lortz said. “With a full staff, operations would run more efficiently, but we still make do. The labour shortage is not unique to the Galena mine.”

But in the long history of the Silver Valley, Galena might still prove to be a solid route to its glittery resources.

“Our deepest resource is currently 6,400 ft. below the surface and is open at depth,” Lortz said. “We have only tested about 20% of our 68 reported veins to depth. There is great potential for expansion.”

Americas Gold and Silver shares were trading at 67¢ in Toronto on Monday afternoon, in a 52-week window of 50¢ and $1.66. It has a market cap of $133 million.