James McDonald
President and CEO
Kootenay Silver
View from the Top

Permitting Headaches Stall Mexico Projects

Sat, 12/01/2018 - 13:06

Q: What differentiates Kootenay most from other exploration-stage companies?

A: The expertise of our team on the ground is one of our strongest assets and there are few companies that have this kind of experience. We have assembled one of the largest silver-asset banks in Mexico held by a junior that provides our shareholders with exceptional leverage to the silver market. At a corporate and board level, we have broad knowledge that covers the whole mining spectrum from grassroots discovery to mine construction, finance and operations.

Q: What progress is being made on La Cigarra?

A: It had a strong start last year and has recently pulled back slightly, which is natural. We are now responding by advancing the La Cigarra asset because we believe we acquired something that can be turned into a mine and expanded significantly. It is a strong asset in a historic Mexican silver district and just south of our project there are significant production levels. We now want to start exploring that asset, testing our targets, expanding resources, making some discoveries and ultimately take it to a feasibility stage where we can make a production decision. The near future will hold a lot of geological work, drilling and metallurgical studies for potential future extraction.

At the beginning of 2017, we began exploring our options for improving the existing resource model on the La Cigarra asset. After leach testing in March, we began a 7,500m drill program in May and through this program we identified a significant new mineralized silver target at the La Navidad zone. Moreover, drilling at the Las Venadas zone on this property extended silver mineralization 140m northeast. As of September 2017, Kootenay mobilized our drilling activity to the La Navidad zone and we eagerly await the results of the first drill holes on this target.

Q: What other projects are you working on in Mexico apart from La Cigarra?

A: We also have the very promising Promontorio-La Negra asset in Sonora that we optioned one year ago to Pan American Silver. This is one of the biggest silvermining companies in the world and is now overseeing the exploration of that mine with a carried to production interest. Through this agreement, Pan American has four years to earn 75 percent and must invest US$8 million and pay us another US$8 million. After four years, Pan American must supply all the money for any further expenditures incurred on the property but is allowed to recover these expenditures from 75 percent of our share of production if it is successful in building a mine. This is good for us because it mitigates the financial and technical risk faced by Kootenay. Pan American recently began its second phase of drilling on the La Negra project following a phase one program that was highly successful in returning a series of high-grade silver intercepts at depth, confirming results from previous drilling.

Q: What are the main challenges you have faced working in Mexico?

A: When we are looking to acquire new concessions, we are running into significant problems with the process of application, granting and cancellation of mining concessions by the government. Some of this is a result of the new energy law, which placed a priority on hydrocarbons in Mexico over all other assets. This has created a barrier to mining in large areas across Mexico and, unfortunately, a mechanism has not yet been created to address this issue.

We recently completed a deal on a project for which we have been waiting for approvals for over three years. This project would not require a great deal of investment to take it to the drilling stage, which is extremely rare. This is because the target is so clear and we have already carried out sampling and determined that the grade is sufficient. We are concerned about this and we want to start discussing the problems with officials at different levels to gauge how it is affecting the company and the country.