Tawn Albinson
President
Prospero Silver
/
Insight

Exploration Firm Seeks Opportunities from Crisis

Wed, 10/21/2015 - 15:46

Prospero Silver is a Mexico-based exploration company with over 30 years of experience in Mexican deposits, that is now doing its best to stay in the business. After the sharp, short downturn caused by the financial crisis of 2008, the market quickly recovered, enabling the company to go public in early 2010. Prospero Silver generated funds which enabled it to drill, advancing some properties. However, with the recent sustained downturn, the panorama is looking gloomy, and the company has adopted a survival modality which allows it to do some generative work and seek joint ventures. In doing so, Prospero Silver is ready to seize new opportunities that surface in such a crisis.

Currently, the company has five properties in exploration but is keeping the operations to a bare minimum while it continues the search for new properties. Tawn Albinson, President of Prospero Silver, explains that the company currently holds three flagship properties: San Luis del Cordero in Durango, El Petate in Hidalgo, and Santa María del Oro in Durango. The latter two are greenfield, drill-ready properties, the first of which, El Petate, comprises a highlevel replacement type deposit which is precious metal enhanced. The second, Santa María del Oro, was staked by Prospero Silver in several stages in late 2011 and early 2012, resulting in a land package that almost completely surrounds the historic Magistral del Oro mines. Based on historic mining records, more than 1 million ounces of gold were recovered at this property with an average grade exceeding 15 g/t. Though Prospero Silver started to meet with third parties over the acquisition of these properties last year, the poor timing of the Mexican tax and royalty meant that the interest in greenfield exploration was lowered. “As exploration and producing companies both began cutting their expenses, the first dispensable activity for both was exploration,” explains Albinson.

The company has had to adapt its strategy, given the market conditions of the last few years. Prospero Silver is now more interested in the joint venture model, preferring producers as partners since they can take a project all the way to production. Cost-saving measures have involved reducing the sizes of claims, and giving up a number of them entirely since claim taxes as well as minimum investment requirements have dramatically risen in Mexico. Up until now, Prospero Silver has had partnerships with companies like Hochschild Mining and Silver Standard. Hochschild Mining was drilling the Baborigame Project in Chihuahua, under a JV agreement, but decided to give the project back to Prospero Silver since it could not get the environmental permit from SEMARNAT to build the necessary roads for drilling more attractive targets. In the first quarter of 2014, Silver Standard also opted to back out from a JV option on Prospero Silver’s San Luis del Cordero property because of low tonnage potential. This was decided after Silver Standard completed a 15 hole, 5,135m diamond drill program on the Santa Rosa vein and the Santa Rosa East skarn zones. The recent withdrawals from JV agreements also represent a drastic shift in opinion regarding ideal targets in the exploration market. “Ten years ago, the ideal target was a large bulk mineable open pit that was heap leachable at a decent grade,” recalls Albinson. “As Mexico is particularly endowed with higher grade underground mines, it is becoming a more popular target in the current market.” Prospero Silver’s targets also include underground type properties. With the idea of having small, high-grade underground mines, the polymetallic San Luis del Cordero project is a good prospect for the company. Polymetallic projects have both precious metals and industrial base metals potential, making them particularly attractive deposits, as Albinson explains “In the past, Mexican polymetallic deposits have been resilient to downturns. When precious metal prices are depressed they can become base metal mines, and vice versa. San Luis del Cordero is currently at the resource drilling stage and we are focusing on additional exploration to expand the resource to a 50 million ounce silver deposit. San Luis del Cordero is likely going to be a mine. It has the opportunity to either become a small high-grade operation or a longer term medium-sized, lower grade operation, dependent on further drilling and who the ultimate operator will be.”

The opportunities for silver dominant deposits, typically silver-gold-lead-zinc-copper deposits, are significant in Mexico. These usually have noble metallurgies amenable either to flotation or cyanidation and can sustain operations of a few thousand tonnes per day, with a CAPEX of less than US$100 million. Since mining is a cyclical industry, mineral prices are destined to rise again, as it is unlikely that the emergence of the middle classes and the global growth will come to an end. “There is a strong belief that copper is going to lead the comeback, as it is the metal that moves the world. Copper is in everything that has a motor and I expect that the growth of the middle class worldwide will increase consumption. Copper is going to continue to be in demand, and there are no significant new copper properties coming online,” explains Albinson.