Prepping for Production

Q: What are the main characteristics of the Cerro Las Minitas project?

A: The Cerro Las Minitas project is the flagship project of Southern Silver Exploration. It is a large skarn-type deposit sitting in the heart of Durango’s Silver Belt in north-central Mexico. We acquired it in late 2010 and started exploring in early 2011. During the nine years we have been working on the property, we have identified four main deposits with a total resource of over 23.9 million tonnes: an indicated resource of 134 million ounces of silver equivalent and an inferred resource of 138 million ounces silver equivalent. The total contained metals are about 85 million ounces of silver and 2.2 billion pounds of combined lead and zinc. 

This is a very significant deposit for the company and like many projects in Mexico, this is a project that had a long history before we got involved. Cerro Las Minitas had mining activity for decades, usually small-scale operations of about 50 tons per day. We came on board seeing the potential of the project and then, after identifying an excellent geophysical target, we drilled in early 2011 and it became a significant discovery for the company. The discovery allowed us to continue financing the project and get another series of holes and that led to the delineation of what we called the Blind Zone and the El Sol Zone. Those ended up being the first two deposits that we identified at Cerro Las Minitas. 

Later, with the partners that we brought into the project, we drilled deeper and first identified what we now call the Skarn Front Zone, which is the proper zone of skarn mineralization that occurs in the halo around the central intrusion. We have been focusing on this zone over the last four years. This deposit is the largest identified to date and with biggest potential currently on the property. Out of a total 272 million silver equivalent ounces identified on the property to date, over 200 million are hosted within the Skarn Front deposit. As of today, we have been able to drill 133 holes and 59,000 metres so we have been effective in finding mineralization.

We have significant resources to do pre-development work to prepare the project for eventual mining and exploitation. We have done some engineering work and some advanced metallurgical testing and have obtained very good results.

Q: What was the decisive factor to go for a silver mine project or a base metal mine?

A: I believe that, like many of the skarn deposits that occur throughout Mexico, they are base metal-rich and we have about 2.2 billion pounds of combined lead and zinc. Those base metals make up the bulk of the mineral resources. In in-situ terms, about 50 percent of the value is in zinc, around 15 percent is lead and about 35 percent is silver. It is a base metal project with a very sweet silver kiss. That means that a number of our concentrates are very silver-rich, making them desirable products for some of the larger companies or potential smelters.

Q: What does the Southern Silver Exploration's alliance with Red Cloud Financial Services entail?

A: Over the last few years, we have worked with a number of enterprises to help increase the shareholder value in the company. For that purpose, we contracted Red Cloud to provide investor relations and corporate development services because there are many companies and many investors out there that might be very attracted to gold, some to silver, while others understand base metals very well and find their niche in those areas.

It is our job to identify those people on the retail side and on the institutional side who are going to be interested in our company and in our properties. This is what we are doing with Red Cloud. It is an effort to increase the shareholder base of the company and we have been effective in those efforts over the last months and years. We are fortunate to have a significant silver presence in our deposit, and we expect our share price to increase through the summer and into the fall. 

Q: You said in a past interview that Southern Silver Exploration is undervalued. Why is that?

A: Currently, we have a joint venture partner in Electrum Global Holdings. They own 60 percent of the project and we own 40 percent; however, we remain the operators of the project. When we look at our enterprise value and at the ounces or tonnes that are attributable to us, we have 40 percent of the project and our enterprise value per ounce silver equivalence is less than US$15 cents. That seems to be on the low end of comparable companies.

Southern Silver Exploration believes that through further exploration, we can increase the current mineral resource from 272 million silver equivalent ounces to up to 350 million silver equivalent ounces and in that way increase the total value of the project. Through engineering and metallurgical test work, we will further de-risk the project and provide the opportunity to not only increase the value of the project, but also increase the value that we get for every ounce that we have in the resource. This is part of an overall strategy to continue building value within the company. 

We believe that further drilling and exploration are a viable strategy because at this point, we are able to discover mineralization in a very cost-effective manner. As an explorer, we want to make sure that the money that we are spending goes into the ground, and less into other things. But we also want to ensure that when we are drilling, we are targeting the best parts of the system. We believe that we have done that very effectively over the last eight years and that our strategy of continued exploration is an effective way to increase the value of the company.

Southern Silver Exploration is a Canadian company. Its flagship is the Cerro Las Minitas silver-lead-zinc property located in Durango. At over 340km2, the project features a large land position within the Belt of Silver in northern Mexico, with historic production and resources of over 3 billion ounces of silver.