High-Grade, District-Scale Assets in Northern MexicoBy Cas Biekmann | Thu, 04/16/2020 - 16:12
Q: How has the company progressed in Mexico in terms of projects and financing?
A: MAG Silver is moving its Juanicipio asset, which it owns with Fresnillo, into production. This gave us an opportunity to partner with MAG. We are putting two of their original assets in Chihuahua, Batopilas and Guigui, under a new framework. MAG Silver remains a shareholder with 20 percent. Peter Megaw, founder and chief exploration officer of MAG, will be our chief exploration adviser. We will focus mainly on the Chihuahua assets.
MAG Silver has done about US$5 million worth of exploration on the Guigui project, with about 13 drill holes. We are going to pick up where they have left off. We concluded a US$6 million seed round and we are going to list on the TSXV. We are waiting for approval and expect to go public within two months. We are fully subscribed, with investors from around the world, but mostly Europe, Asia and North America. We have a market cap of about US$14 million, with US$6 million in the bank. Our shareholder base is made of funds with a strong interest in Mexico. We are actively looking for opportunities to grow the company and boost our exploration profile in Mexico.
Q: How important is the Guigui project in the company’s portfolio?
A: Guigui, an asset in the Santa Eulalia mining district, is our main focus. It is adjacent to the San Antonio mine, operated by Grupo México, and the Potosi mine, operated by a small Australian mining company. Historically, the Santa Eulalia district has 50 million tons of ore, 310 grams silver with a 15 percent lead/zinc combination. It is very high grade, and found in a system called a Carbonate Replacement Deposit (CRD). MAG Silver’s Dr. Megaw is credited with the geological model that explains CRD in a way that has allowed a number of companies, including MAG Silver and Excellon, to make discoveries in Mexico.
Our primary focus will be to explore the Guigui district and to look for the source of the CRD there. The geological model defines chimneys and an intrusive area where the source of the system should be. It has never been identified at Guigui. Dr. Megaw thinks it lies within our area. We will start the camping process in 4Q20.
Q: How is the company planning to progress at its second Chihuahua project, Batopilas?
A: Our second project, Batopilas, is an interesting mine that was Mexico’s highest-grade silver mine up until 1910. It was put into production by an American company. A book called The Silver Bullet was written about the start of the mine. In 1913, Pancho Villa came to town and destroyed it, after which it was left alone until the 1990s. MAG Silver acquired the old mine and about 4,000ha of land surrounding it, unifying the district for the first time. MAG Silver invested US$5 million, including 10,000 meters of drilling. We have access to all of this data. The first action will be to piece the data back together, and perhaps do some drilling in 2021.
Q: How do the projects in Sonora fit the company’s overall strategy going forward?
A: There are two projects in the state, El Durazno and Matilde. El Durazno is a 27,000ha land package, surrounding a number of producing mines from Alamos Gold and First Majestic as well as some junior mining companies that have exploration projects in the area. It is an asset that is available as a joint venture. Regarding the Matilde project, we are looking for a JV opportunity rather than working the asset ourselves.
The company also is looking for other opportunities in Mexico, both in exploration, which is our strength, and in asset development. Our projects still require quite a bit of exploration, and that is our objective at the moment. The Batopilas project, nonetheless, could be put into production on a small scale, and we might consider that. The immediate strategy includes two years of exploration, but depending on the results we could shift our focus.
Reyna Silver is a Canadian company with a strong focus on exploration targeting Ag, Au and base metals. Its operations are mostly in Chihuahua, although it also has two projects in Sonora.