Vancouver, BC / May 6, 2014 / Company to Recreate Successful Model with Mexico/US Properties
(VantageWire.com) - With global geopolitical issues roiling and the US dollar retreating, precious metals, have for the moment, taken a nice bounce back from a prolonged downturn. This kind of market always makes it harder for exploration and development companies to plan and only the most savvy business approaches will smooth out the bumps for investors.
Such is the case with Southern Silver (SSV: TSXV, SEG.F). CEO Lawrence Page has seen it all before as the Secretary and a Director of Western Silver, which was purchased by Glamis Gold in 2006 for $1.2 billion. The main asset was the Penasquito property in Mexico, which was a massive world-class deposit with reserves of 17.82 million oz of gold, 1,070.1 million oz of silver, 3,214 tons of lead and 7,098 million tons of zinc.
Interestingly, at the time of that transaction, gold had reached a 25-year high of $580 an ounce. Today it is $1300 an ounce.
"Our strategy is relatively simple," states Page. "We find the best properties, form alliances such as option agreements with deep pocketed majors, such as that with Freeport McMoRan Exploration Corporation at our Cerro Las Minitas project in Durango Mexico, and then monetize the property for our shareholders. After 50 years in the business and involvement with 100's of companies, it is a strategy that has been very successful as we have extensive experience finding the right properties and the right partners."
Right Properties. Right Partners.
The Cerro Las Minitas situation is a case in point. The property in Durango, Mexico is part of the Faja de Plata region. Major deposits including the aforementioned Penasquito, which is now owned by Goldcorp and also Coeur Mining's La Preciosa, surround the project. The Cerro Las Minitas is a large polymetallic system that has had 20,000 meters drilled to date: financed by Freeport and drilled by SSV's subsidiary Minera Plata del Sur, S.A. de C.V. So far, two high grade deposits have been found; Blind Zone and El Sol.
The arrangement with Freeport is compelling for SSV and its shareholders. Freeport optioned the property in 2012 and can earn a 70 percent interest with$25 million expenditure over 25 years. To date Freeport has spent $3.5 million on geophysics, drilling and property maintenance. Once it spends $5 million in the first 3 years, Freeport will have earned a 51 percent interest.
Freeport then has 90 days following the $5 million expenditure to decide whether to spend the balance. It would require Freeport to complete a feasibility study costing at least $19 million in additional expenditures.
Current plans are for approximately 2,000 metres of core drilling in three or more holes designed to test at depth several previously identified copper anomalies on the project. These include an extension of drill hole CLM-073, which terminated in anomalous copper mineralization at 708 metres depth; and a down-dip test of copper mineralization at the North Skarn target (CLM-003: 16.6 metres averaging 56g/t Ag, 0.8% Cu, 0.5%Pb and 1.6% Zn). Additional holes are planned for a deep test of the central intrusive and its southern margin (South Skarn target).
SSV's other two properties have no less promise than Cerro La Minitas.
The 17.2 sq. km Oro Project in New Mexico (at the Mexican border and part of the Faja de Plata Silver region) comprises eight patented mining claims and 89 BLM mineral claims which cover the majority of the historic Eureka Mining District in Grant County, New Mexico and is located approximately 40 km SW of the Silver City porphyry copper district.
In January 2013, Desert Star Resources optioned the Oro Project from Southern Silver. Desert Star can earn up to 70% interest in the Project with staged expenditures of $6 million over ten years. It took SSV six years to put the package together and the 17.2 km property transitions from precious to base metals. In fact, the geology looks a lot like the porphyry characteristics of Cerro Las Minitas. The company is preparing for a late 2014 drilling program.
The 12.8 square km Dragoon property lies 90 km southwest of Tucson, Arizona where SSV is targeting deep high-grade copper-molybdenum mineralization. Four holes drilled (two historic) deeper than 600 metres have tested positive for thick intervals of copper-molybdenum. Results include 271 metres grading 0.09 percent copper including 85 metres of 0.1 percent and 12metres of 0.2 percent. The company is currently looking for a partner to commence deep drilling.
Management Brings Experience, Depth
As noted above, SSV is very comfortable doing business in Mexico, with its experienced personnel having been involved in previous exploration and discovery there, including the Penasquito project previously described. At the time of the acquisition, Western Silver shares were valued at just under $24 in Glamis stock. In 2008, each Glamis share was then acquired for 1.69 shares of GoldCorp. Goldcorp currently trades for $27. All in all, a very good return for the original Western Silver shareholders.
Page and his experienced management team plan to use the same strategy with Southern: find properties, develop them with 'Other people's Money' (OPM), monetize for shareholders.
Mexico is the largest silver producer in the world, delivering 144 million oz. per year. The country hosts the second largest gold reserves in Latin America and the mining laws and foreign investment policy are extremely favorable.
Having seen this process successfully unfold before, President and Director Lawrence Page Q.C. brings a stellar and almost 50-year provenance to his shareholders. Through his experience with natural resource companies and, in particular, precious metals development, he has established a unique relationship with financiers, geologists and consultants. As well, he has been counsel for several public Companies, which have discovered and developed producing mines in North America.
Specifically, he has been a Director and Officer of Companies, which have discovered and brought into production the David Bell and Page Williams mines in Ontario, the Snip, Calpine/Eskay Creek and Mascot Gold Mines in British Columbia, as well as the discovery of the Penasquito Mine in Mexico. Page currently serves as a director of six public companies; Mr. Page is the principal of the Manex Resource Group of Vancouver, which provides administrative, financial, corporate, corporate finance and geological services to a number of public companies in the mineral resource sector.
The Bottom Line
While the properties bring excellent potential to shareholders, a purchase of SSV is really about tapping into the expertise, experience and savvy of Page and his team. There is likely not a CEO anywhere whom the team doesn't either know well or done business with, which bodes well and supports the Company's find/OPM/monetize approach.
And management knows the area. Having been involved in Mexico and contiguous properties for decades, whether Penasquito or others, this is familiar ground. And with shares at $0.02 cents and a ridiculously low market cap of $2.53 million, one good set of results will be a game changer.
People don't seem to be paying attention to SSV and its potential. Fairly soon, that will likely prove to be a significant opportunity loss.
Bob Beaty for The Bottom Line Report
Southern Silver Exploration Corp.
Suite 1100, 1199 West Hastings St.
Vancouver, BC, V6E 3T5 Canada
Toll Free: 1-888-456-1112
Tel: +1 (604) 684-9384
Fax: +1 (604) 688-4670
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SOURCE: The Bottom Line Report