Alberto Orozco
CEO
Capitan Mining
/
View from the Top

Capitan Mining: Recharging Mexico's Au, Ag Pipeline

By Alejandro Ehrenberg | Thu, 09/10/2020 - 09:36

Q: What opportunity led you to form Capitan Mining?

A: It is a good moment to start a new company. The mining market had been depressed since 2013. It has been especially hard for exploration, resulting in a depletion of the project pipeline. However, we have now entered a bull market. Capital can be raised and many promising companies that are listed on the TSXV have chosen to invest it in Mexico. Vizsla Resources, Magna Gold, GR Silver and Silver Tiger are among the companies that have chosen Mexico. More would come if the country’s investment conditions improved.

As a result of a thinning project pipeline, there is a need in Mexico for quality projects that have a certain degree of maturity and can be viably developed into a mine. The Peñoles project meets these conditions. Importantly, we have the right team for the job. We have been working on the project for 16 years with Riverside Resources. Capitan Mining is an exploration company. We will develop Peñoles until we have a PEA. That is the goal right now. Nonetheless, the team has the capacity and experience to eventually bring the project into production.

Q: What is the history of Peñoles and what are its main characteristics?

A: Riverside found Peñoles almost unexplored. It optioned the project to another company, Sierra Madre, in the beginning of the 2010s. The latter company worked on defining a mineralization body but the market was bearish and not interested. Sierra Madre passed the project on to Morro Bay Resources, which published the first resource estimate. But, again, the market was unenthusiastic and the project returned to Riverside with 10,000m of drilling and an inferred resource of approximately 500,000 AuEq. The Peñoles project reached a stage that was too advanced for what Riverside usually does, so we decided to spin off and form Capitan Mining.

Peñoles has a strong exploration upside. It has 2,200ha of property with other targets that can add mineralized zones. Some of them have not been drilled yet. As of now, the current inferred mineral resource has been estimated for an open-pit, heap-leach operation. Also, we have intercepted some high grades that show potential for an underground resource. Our immediate goal is to expand the resource. Peñoles has the potential to significantly increase the resource in the short term. It is also worth noting that the project is located at driving distance from the Laguna region in Coahuila. It has access to airports and other infrastructure. Moreover, Peñoles is located in a mining area and Durango is a mining-friendly jurisdiction.

Q: What does financing look like for the Peñoles project?

A: We have completed our inaugural financing. It is a private placement. We raised C$3.84 at 20 cents per share. Capitan now has 36.7 million shares, with 17.5 million of them owned by Riverside’s shareholders. We will be listing on the TSXV starting in early September. We want to carry out a step out drilling program to define the mineral resource’s real size. We are confident that the resource will grow in the coming months.

Q: What is Capitan Mining’s approach to community relations?

A: We believe that community relations need to be built from the very first stages of exploration or risk generating social liabilities that will make the project less valuable. Rather, one must take the opportunity to create social assets. At Peñoles, we have been working on that for many years. Proof of this is that in 2019 the 10-year agreement for exploring on the communities’ land expired and they agreed to renew it for another 10 years.

It is important to have continuity in community relations. The fact that Capitan Mining is a spinout of Riverside allows the project to harness all the trust created under Riverside. At the exploration stage, more than devising specific social programs, the most important factor is to build trust. That being said, Peñoles has reached a stage where we need to be more systematic in our community engagement. That means that we have to undertake quantitative measurements and generate hard data. We need to understand the community, what their economic activities are and how we should carry out our activities to coexist harmoniously. Crucially, we have to survey the community to understand their concerns and expectations. It is a mistake to assume that the community agrees with the project just because it will bring economic growth and jobs. A dialogue must be established and everything must be explained every step of the way. Expectations and reality need to fit coincide. The three most important pillars of our social engagement strategy at this point are trust building, hard data generation and constant communication.

Capitan Mining Inc. is a Canadian gold-silver mining exploration company engaged in exploring the Peñoles project in Durango.

Alejandro Ehrenberg Alejandro Ehrenberg Journalist and Industry Analyst