MAG Silver completes initial resource at Cinco de Mayo

The Cinco de Mayo project in Mexico contains inferred resources of 12.45 million tonnes grading 132 grams silver per tonne, 0.24 gram gold per tonne, 2.86% lead and 6.47% zinc, MAG Silver (MAG-T, MVG-N, MAG-X) reported in a maiden resource calculation today.

The resource estimate was based on 97,609 metres of drilling or 151 drill holes in the project’s Jose-Manto/Bridge Zone and an economic cut-off grade set at a net smelter return of US$100 per tonne.  

A higher NSR cut-off of $150 per tonne yielded inferred resources of 9.4 million tonnes of 151 grams silver, 0.26 gram gold, 3.37% lead and 7.35% zinc.

The resource remains open in several directions and did not include recent drilling in the Pegaso zone, where in July the company reported a 61-metre massive sulphide intercept averaging 89 grams silver, 2.7% lead and 7.3% zinc in discovery hole CM-120431.

John Hayes of BMO Capital Markets notes that “exploration is at an early stage on the property” and that “the most promising mineralization appears to be in the Pegaso zone.”

The next step is to link the Bridge Zone/Jose Manto to the new Pegaso Zone discovery at depth, the company says, adding that management believes “there is abundant potential for a much larger resource to emerge at depth.”

The Bridge Zone and Jose Manto are two separate but related zones that when combined demonstrate overlapping manto-style silver-rich base metal mineralization over a strike length of more than 4,000 metres at depths ranging from 125 metres to 900 metres.  

Management believes that the Bridge Zone and Jose Manto demonstrate “all of the hallmarks of being the distal to medial part of a major Carbonate Replacement Deposit system that MAG has been systematically exploring at Cinco de Mayo.”

The company expects to renew its drill permits before the end of the year and also plans to complete an orientation 2- and 3-Dimensional seismic survey to better define drill targets.

In a research note entitled “Significant base metals deposit with a silver shine,” BMO’s Hayes estimates that at long-term prices, the initial resource at Cinco de Mayo is roughly 70% base metals and 30% precious metals by value, and notes that about 60% of the world’s silver production essentially comes from base metal deposits.

“The initial resource estimate demonstrates potential for the Cinco de Mayo project,” Hayes continues. “There is further potential for growth. We have increased our exploration valuation for the project beyond that for the Pozo Seco deposit. The increase in value for Cinco de Mayo and Valdecanas has increased our 10% NAV by 14%.”

MAG Silver owns 100% of the 25,000-hectare Cinco de Mayo property in Mexico’s northern Chihuahua state.

The company discovered the deposit, 199 km north of the city of Chihuahua, in 2006, and it is the most advanced of the three 100%-owned Carbonate Replacement Deposit (CRD) properties the company is exploring.

Interestingly, about 75% of the Cinco de Mayo property is covered with alluvium, with virtually no outcrop to guide exploration.

According to the company’s website, CRDs make up about 40% of Mexico’s 10-billion-ounce historic silver production. They are characterized by massive to semi-massive silver-lead-zinc sulphide intrusions, which   replace the carbonate host rocks (limestone).  

In addition to Cinco de Mayo, the company owns 44% of the Juanicipio joint-venture in the Fresnillo district of the state of Zacatecas. Fresnillo Plc (FRES-L) owns the other 56%. The project has identified three significant high-grade veins (silver, gold, lead and zinc): Valdecañas, Juanicipio and Las Venadas.

Results of a preliminary economic assessment of Juanicipio in June outlined a high-grade underground silver project that would produce an average of 15.1 million payable ounces of silver over the first full six years of commercial production and 10.3 million payable ounces per year over a 14.8 year total mine life.

At presstime in Toronto MAG Silver was trading at $12.08 within a 52-week trading range of $6.17-$12.25. The company has about 60 million shares outstanding.