Juanicipio Keeps Mag Silver Climbing

Vancouver — Mag Silver (MAG-V, MVG-X) has become a major Mexican explorer, with seven properties to juggle that all involve hunting for new mineralization below alluvial cover in historically high-grade, well-explored districts. The company is working hard to develop its primary properties while exploring its other targets — and that work is paying off. Two years ago, Mag’s share price was $1, but it now hovers around $14.50.

Mag’s star prospect is the Juanicipio property, host to two major silver-gold-lead-zinc veins. In the late 1990s, Mag geologists noticed extensive advanced argillic alteration and silicification of the tertiary volcanic and volcaniclastic rocks, indicating mineralization at depth. Since the property had not seen any previous exploration, Mag ran its 2003 to 2005 drill programs based on a model and found new sources of precious metals in one of the oldest silver districts in the world.

Mag’s success attracted Industrias Peoles (ipoaf-o, penoles-m), owner-operator of the nearby Fresnillo mine, which is the world’s largest primary silver mine. In mid-2005, Peoles started earning a 56% interest in the project by completing a US$5-million exploration program. The company had four years to complete the program, but had earned its interest by mid-2007. Mag and Peoles formed a new company, Minera Juanicipio, to operate the project.

Work on the Valdecanas vein, which was discovered in late 2005, was halted for eight months while negotiators from Mag and Peoles met with the local Ejido people and developed a US$1.4-million deal to purchase the surface rights along the projection of the vein.

Peoles drilled 10,758 metres on the Valdecanas discovery in 2006, delineating a low-sulphidation vein typical of the Fresnillo district. Interestingly, the Valdecanas and Juanicipio veins contain significantly higher gold grades than the average veins in the region.

The first drill results, out in October, started a share price climb that has yet to falter, small-scale drops aside. Hole 17 hit the Valdecanas vein proper, returning 1,347 grams silver and 0.5 gram gold per tonne over 8 metres starting at 625 metres depth, and then intersected the Valdecanas footwall vein at 687 metres depth, returning 5.1 metres of 683 grams silver and 0.41 gram gold.

A series of good drill results through 2007 kept the share price rising. At the west end of the steeply dipping structure, hole GC recently intersected 5.9 metres (true width) of 1,634 grams silver, 0.52 gram gold, 3.02% lead, and 4.75% zinc. In addition, a re-assay of hole GD (because the silver levels were above range in the first assay) returned 21.2 metres of 1,343 grams silver, 3.76 grams gold per tonne, 7.73% lead, and 5.73% zinc. The re-assay also identified a second hanging wall vein, 11 metres above the Valdecanas vein, which returned 1.3 metres of 421 grams silver, 1.11 grams gold, 1.1% lead, and 1.62% zinc.

A few hundred metres east, hole 06-KD returned the highest-grade intercept on the site to date: 11.9 metres grading 2,279 grams silver and 2.66 grams gold per tonne.

Moving east, hole MG was targeted to define the bottom of the high-grade zone on Section M and cut 5.4 metres of 192 grams silver and 2.29 grams gold. The intercept defined a 500-metre minimum dip length for the vein.

At the eastern end of the strike, hole SD returned 4.3 metres (4 metres true width) grading 271 grams silver and 2.78 grams gold, as well as a deeper gold-rich zone grading 5.64 grams gold and 121 grams silver over 1.4 metres.

All together, the results outline a high-grade silver-gold vein with some zones of significant lead and zinc over a 1.3-km strike length. A resource estimate is currently under way. However, recent drilling confirmed the presence of a fault near the western end of the vein that appears to have displaced mineralization towards the northern edge of the property.

Analyst Bart Jaworski of Raymond James Equity says the recent results from Valdecanas are “excellent” and he is pleased with the discovery of the new hanging wall vein, but the fault offset of the Valdecanas vein is a negative. “From the latest drilling, we believe it will be difficult to grow the strike of Valdecanas any further within the property boundary,” he says.

Luckily for the joint-venture operators, Valdecanas is not the only vein on the property. In August, the company purchased land covering a 2.5-km strike projection of the Juanicipio vein for US$3.6 million, and attention has shifted there. Drilling is set to begin in October.

The Juanicipio vein is a separate, parallel structure located about 1 km south of Valdecanas. Mag geologists now believe that the company’s early intercepts, such as 689 grams silver and 11.4 grams gold per tonne over 2 metres, represent the top of a bonanza zone in a structure similar to the Valdecanas vein structure, and thus believe that longer, lower-grade mineralization exists at depth. The vein structure remains open both along strike and at depth.

On either side of Juanicipio sit two other Mag claim groups, together referred to as the Lagartos properties. Both, like Juanicipio, lie on the Fresnillo silver trend. Mag staked the properties because, even though the region is covered by alluvial soil, it shows similarities to high-grade mining districts found nearby through outcrop.

Mag’s third vein-mineralized Mexican prospect is Batopilas, a 48-sq.-km property in southwestern Chihuahua state. Batopilas produced some 200-300 million oz. silver between 1632 and 1920 from oreshoots of very high-grade native silver hosted in calcite veins. Batopilas veins are often at least 700 metres deep, making them distinct from other epithermal veins in Mexico that usually stretch to a only few hundred metres.

Mag’s first drill program at Batopilas started in April 2006, with the second hole intercepting 1.7 metres of 2,357 grams silver per tonne. Holes 5 and 6 hit the same structure, defining the Don Juan vein. A second drill program was started in February.

Mag also has four carbonate-replacement deposits (CRDs) in Mexico, the largest of which is the 50-sq.-km Cinco de Mayo prospect in north-central Chihuahua state. Mexico’s CRDs, which have contributed 40% of the country’s historic silver production, occur along the intersection of the Laramide-aged Mexican thrust belt and the tertiary volcanic plateau of the Sierra Madre Occidental, where carbonate host rocks were invaded by metals-rich intrusive bodies.

Cinco de Mayo lies on the western bounding fault of the Chihuahua trough, in a zone cut with ferruginous jasperoid veins. The degree of mineralization and alteration attested to a CRD system lying hidden under a blanket of alluvial soils.

Guided by geophysics and geochemisty, Mag drilled 9 holes along a prominent northwest-trending fault. Six of the nine holes intercepted structurally controlled replacement-style semi-massive to massive sulphide zones. Hole 1 returned 1.9 metres of 191 grams silver per tonne, 4.3% lead, and 7.9% zinc from 355 metres depth; hole 8 hit 6.5 metres of 27.4 grams silver, 1.2% lead, and 2.2% zinc from 318 metres down-hole.

After a 450-line-km airborne electromagnetic and magnetic survey, Mag moved two drills to Cinco de Mayo in August. Exploration continues.

Mag’s other CRD properties are Guigui, in the Santa Eulalia mining district, Chihuahua state; Adargas, also in Chihuahua; and Sierra Ramirez, in eastern Durango state. Each property has seen limited exploration work because of the focus on Juanicipio.

Mag has traded in a 52-week range of $2.72 to $16.40. The company’s market capitalization, with 41.1 million shares issued and outstanding, is $591 million.