ConSil increases Mexican resource

Idaho-based ConSil (CS-V) will buy the assets of Minas la Colorada, a Mexican company which owns two silver mines in Zacatecas state.

ConSil reached the agreement with the principal shareholders of Minas de Colorada, Ramon Davila and Jaime Gutierrez, with the help of Consil’s principal shareholder, Hecla Mining (HL-N).

The agreement calls for Davila and Gutierrez to receive 4 million shares of ConSil from Hecla’s treasury in return for the assets of the Mexican company.

The transaction is thereby not dilutive for ConSil’s current shareholders.

Hecla holds 7.4 million shares representing 78% of ConSil. After the transaction, Hecla’s share would drop to 35%. Hecla had entered into an earlier separate agreement with ConSil, which granted Hecla the opportunity to participate in ConSil’s Mexican acquisitions.

The agreement with Minas de Colorada also calls for ConSil to assume the Mexicans’ US$3-Million debt and for Davila and Gutierrez to join ConSil’s board of directors.

The transaction, which has yet to be approved by regulators, requires that ConSil raise US$6 million by Aug. 1.

Upon closure, the assets will be placed into Puente de Plata, a wholly owned subsidiary of ConSil.

The two silver operations — Candelaria and Recompensa — are in the Chalchihuites mining district of Zacatecas state.

The company intends to spend US$8 million on exploration and development of additional silver-bearing veins and 11 mineralized breccia pipes over the 1,000-ha property.

Candelaria and Recompensa are producing a total of 300 tonnes per day, which is sent to a flotation concentrator. Silver-bearing lead and zinc concentrates are sold to smelters in Mexico.

As of mid-1996, proven and probable reserves consisted of 1 million tonnes grading 486 grams silver per tonne plus 1% lead and 1% zinc. ConSil believes the two mines have potential for hosting an additional 2 to 3 million tonnes of material at the same grades.

Candelaria has been mined for 1 km of its 4-km strike length and to a depth of only 295 metres. At deeper levels, the vein averages 1.8 metres in width.

At Recompensa, ongoing development has progressed 150 metres along the vein on the 70-Metre level, with increasing silver grades.

The mines produced 243,000 oz. silver in 1996. The company hopes to increase production to 1.75 million oz. by 1999.