Southern Silver Exploration [TSXV:SSV] is currently exploring what could potentially be one of the largest and highest grade undeveloped silver projects in the world. A recent mineral resource update put its Mexico-based Cerro Las Minitas project at around 140m ounces of silver equivalent (indicated).
The purity of the resource is indicated at 349g/t AqEq. According to its PEA the site has a 15 year projected life. Southern Silver is the 100% owner.
Cerro Las Minitas ticks the boxes on infrastructure quite well: management stressed to us that it is located in a safe jurisdiction, with “non-narcotic related agriculture.” The property is transacted by two federal highways, a railway line and transmission lines.
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Project in process of being de-risked
We spoke with Robert MacDonald, vice president of Geological Services for the Manex Resource group of companies, who is also currently VP for exploration at Southern Silver Exploration. He said: “We have continued to de-risk the project which we believe is highly leveraged to silver and zinc. We are possibly looking at initiating drilling again in Q4.”
He confirmed there was an engineering upgrade in process on the project at the moment.
What is getting the team excited here is how the project resembles a classic Ag-Pb-Zn CRD / Skarn system, characteristic of previous major Mexican polymetallic deposits. Exploration to date has identified seven deposits making up the current mineral resources.
Looking at the PEA in more detail, the base case for Cerro Las Minitas has an after tax NPV of 5% (USD 349m / CAD 1.55 per share) with an IRR of 17.9%. Base case revenues are touted at a punchy USD 3.7bn. The revenues factor in a balanced precious versus base metals profile for the project, with silver representing around 42% and most of the rest coming from zinc.
Management says that these projects are not taking into consideration further exploration at the site. New work will focus on increasing free cashflow within the current model. For example, new resources have been added at the North Fel site which could be incorporated into the mine design. Gold is not included as a payable in the current processing flowsheet and management is currently working to define gold playabilities.
Also not included in the flowsheet are 270,000 tonnes of Au-Ag-enriched oxide mineralisation which could be used to augment recovered gold from the pyrite-arsenopyrite concentrate.
New Mexico mining projects
Cerro Las Minitas, which is located in Mexico’s Durango state, is not Southern Silver’s only project. It also has the 100% owned Oro project across the border in New Mexico, which has a large Laramide Cu-Au-Mo porphyry system with an adjacent near surface gold target. The company also has the option to own 100% of the Hermanas project in New Mexico, which sits on a large, early stage Au-Ag epithermal vein system.
Southern Silver released assay results for Oro in April on two core holes from its 4050 metre drilling campaign, carried out last year. This tested a strong ZTEM geophysical anomaly in an area believed to be relatively high in the metal system. One hole intersected veins with strong anomalous gold (12.4 g/t over 0.8m at 495.7m depth). The drill program has reinforced the geological team’s belief that they are looking at the lithocap of a large Laramide-age copper porphyry system.
MacDonald told us the company is currently looking for a partner to help it develop the Hermanas project in New Mexico.
The big story with Southern Silver Exploration is going to be the further delineation of the resource with three mineralised shoots identified on the eastern side of the Cerro. Mineralisation is open at depth and the company reckons it has a clear pathway to a 40Mt+ deposit here.
Red Cloud Securities currently rates the stock a Buy with a target price of 90 cents Canadian. At time of writing it was trading at a mere 16 cents.
