Impact Silver: Following the Veins to Success

Q: What defined your activities last year?

A: We have two production centers, one of which is not in production. We are waiting to conclude the metallurgical work and want to know if we can upgrade the feed. If that cannot be done, we will revisit our current ore body. There are two other ore bodies nearby, which we would then drill. One is primarily producing silver, lead and zinc, with most of it being lead and silver. Ninety-five percent of our revenue comes from silver. We are probably the highest grade in terms of concentrate of silver mines in Mexico. Most other miners use silver equivalent but we do not. Ours is strictly silver production. We have been in Mexico close to 20 years and at this property for about 15 years. It started as an existing mill and the owner basically ran out of ore. We acquired it because we believed that there was a lot more potential in the area. I think we will remain there for a long time. Cortez was there 500 years ago mining. I am not sure we will be there for another 500 years, but we do have a long road ahead of us.

We have had a great deal of success with our most recent work in our Guadalupe mine, and we are now expanding our production operations. Two years ago, we had zero production, now we are putting in new equipment, upgrading the shaft, and we will probably produce between 40 to 45 percent of the feed for the mill. When we came to Guadalupe for the first time right after acquiring the mine, we realized that among other things, we needed to redo the exploration. Meanwhile, we had two other targets that were outside of Guadalupe, which were very high grade and easily accessible. We began work immediately. Thankfully, we hold the title for the land next door, and we will be pursuing that actively for the next few years. In terms of new equipment, we are also installing a new track system. Rubber tires are very flexible when used underground but costly. Once you have an established track system, costs are reduced dramatically, sometimes to the point where these OPEX savings easily absorb the CAPEX expense of the system’s installation. We are developing this system in-house with our own engineers and mechanics.

Recently, we also found an old open pit that somebody else had tried to mine previously, around 5,000m to the west of Guadalupe. This is what we have come to call our Negra mine, which has two veins running parallel. In between the veins, the ground has been fractured, and this has permeated the mineralization. We have evidence that one of the veins extends over 600km. Four months ago, the mining from this section accounted for 15 percent of our feed. We will be continuing to exploit this prospect. We are trenching to determine the extent of the open pit. In general, throughout our assets, we are looking at a variety of targets, some of which include minerals such as gold and copper.

Q: What would you consider to be your main strategies for cost optimization?

A: We made a conscious decision over a year ago to reduce production. At some of these mines, the margins are tight and the mining costs are high. We selectively reduced our production and staff by around 25 to 30 percent. This gave us cash flow, even when the silver price was extraordinarily low. As the price now is on the rise, we plan on ramping production back to our original target levels. This move represented an enormous part of our cost-optimization strategy.

Q: What would you define as the central characteristics of your exploration strategy?

A: That is a little more complex. At the bottom of a valley, very subtly named Valle de Oro, we identified the veins carrying gold and copper. Therefore, our search is going to extend all over that valley. South of the valley, we are working to upgrade the feed through metallurgical work so that we can lower prices, which at the same time gives us the space to address our other targets in the immediate area.

Q: How would you define your general outlook for Mexico and interacting with its governmental authorities?

A: Mexico in general is friendly to the mining sector. I think Mexico’s bureaucracy understands money, which is a huge advantage. Obviously, we are concerned about some of the references to Canadian companies “exploiting” Mexico. We are starting to hedge our bets, which in this case means that we are redirecting some of our efforts to Peru. This is just to protect ourselves and diversify our risk. It is still at a very early stage, but if the government’s discourse continues to be so negative, we might have to put more money into those prospects.

I like Mexico and I enjoy working here. I will say that my shareholders have not made as much money from this mine as the local community, which we have brought into the 21st century. When we first arrived, only one employee had a truck. Now, I have a parking problem. We actually had to build a new parking lot to fit everybody’s trucks. We are creating real value in this community, so it is frustrating to hear that we are exploiting the community. Over 250 people work at our projects. This has been instrumental in building the economy of the local community for the past 15 years. Naturally, people can say things without meaning it because it is good for politics. That is fine, but if they start enforcing these ideas, then we will have to intensify exploration activities in Peru.