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PROJECTS / Cerro Las Minitas, Durango, Mexico

Breaking News: click here to view the resource estimate released March 21st, 2016

 

The Cerro Las Minitas project is located about 70 kilometres to the northeast of the city of Durango in Durango State, Mexico, and is accessed easily by road. The property comprises 18 concessions, totalling approximately 13,640 hectares, and lies within heart of the Faja de Plata (Belt of Silver) of north central Mexico. The belt is one of the most significant silver producing regions in the world, with current reserves/resources and historic production in excess of 3 billion ounces of silver.

Near surface mineralization occurs as massive-sulphide pipes, veins and replacement deposits distributed in the skarn-altered margins of a large intrusive body. To date, Southern Silver has identified two high-grade silver-polymetallic deposits, the Blind zone and El Sol zone, which have been partially delineated and several other high priority targets throughout the property. For a list of select intercepts from the Blind zone click here and for the El Sol zone and other property targets click here.

In addition to the higher level silver-polymetallic targets at the Blind and El Sol zones, there exists excellent exploration potential to develop deeper porphyry or skarn targets nearer the contact with the central monzonite intrusion.

Exploration

Southern Silver explored the property from late 2010 to 2012 and completed airborne and ground geophysics over the project and 15,510 metres of core drilling in 62 drill holes, with Freeport completing another 7,800m of drilling in 13 holes in 2013/14. Mineralization occurs as massive-sulphide pipes, veins and replacement deposits distributed in the skarn-altered margins of a large intrusive body in a similar geological environment to that of major Mexican Carbonate Replacement Deposits (CRDs) such as Santa Eulalia (45Mt of 310g/t Ag, 7.1% Zn and 8.2% Pb) and Skarn deposits such as San Martin (60Mt of 118g/t silver, 0.9% copper and 3.9% zinc).

To date, two high-grade silver-polymetallic deposits, the Blind zone and El Sol zone, have been partially delineated and several other high priority targets have been identified throughout the property Geological modeling of the Blind and El Sol deposit using a nominal 80g/t AgEq cut-off has identified multiple distinct mineralized structures with a 820 metre cumulative strike-length, with depth projections of up to 600 metres below surface.

Between 2012 and 2014, FMEC completed a program of soil and vegetation geochemistry and geophysical surveys over the entire property. FMEC completed three additional lines of deep-penetrating IP geophysics and a gravity survey over the area of the ‘Cerro’ (or hill) that have confirmed both the lateral extent of anomalies identified in earlier work by Southern Silver and have significantly extended the projection of several of the existing targets to over 600 metres depth.

Summer 2013 drilling targeted the South Skarn area and specifically an offset of drill hole 12CLM-055, which previously identified strongly anomalous gold mineralization over a 20 metre interval within a hematite breccia which averaged 0.8g/t gold and included a 4.3 metre interval averaging 2.8g/t gold and 28g/t silver. A second 4.3 metre interval averaging 1.4g/t gold, 89g/t silver and 1.8% copper was intersected further down hole in an interval of chlorite-garnet skarn. 4 holes were drilled in this area, which extended the strike length to 250 metres and the depth to 300 metres below surface. One hole was abandoned prior to target depth. Mineralization at the South Skarn is still open along strike to the north-northeast towards the historic La Bocona Mine and at depth.

One hole (13CLM-066,) was drilled through the Blind Zone as a test for deep skarn mineralization adjacent to the central intrusion. This hole was not only successful in intersecting the various horizons of the Blind Zone, but also extended the El Sol zone to a depth of over 600m below surface and encountered wide intervals of zinc rich skarn mineralization.

Additional drilling commenced in November 2013 and targeted deep porphyry style mineralization. Hole 13CLM-073 confirmed the presence of anomalous alteration and mineralization deep within the central intrusion, (see News Release dated February 27, 2014) but did not encounter economic mineralization. Two more deep holes have been drilled in this area, both of which encountered wide areas of anomalous mineralization.

In May 2015, Southern Silver announced an earn-in agreement with Electrum Global Holdings L.P. that granted the right to earn an indirect 60% interest in the property by funding exploration and development expenditures of US$5.0 million on the property over a maximum 48 month period. The 2015 drill program was successful in identifying new high grade mineralization in the area of Mina La Bocona, (hole 15CLM-078,) as well as extending the Blind Zone and the El Sol Zone along strike and to depth. The figure below shows the distribution of the 2015 drillholes and is followed by a complete assay summary from all of the 2015 drillholes.

 

Figure: Drill Hole Distribution and Significant Targets – Cerro Las Minitas

Table: Assays from 2015 Drillholes

Analyzed by FA/AA for gold and ICP-AES by ALS Laboratories, North Vancouver, BC. Silver (>100ppm), copper, lead and zinc (>1%) overlimits assayed by ore grade ICP analysis, High silver overlimits (>1500g/t Ag) and gold overlimits (>10g/t Au) re-assayed with FA-Grav. High Pb overlimits (>20%) assayed by titration. AgEq was calculated using the approximate 2 year trailing average metal prices as of September 25, 2015: US$18.2/oz silver, US$1240/oz gold, US$2.8/lbs copper and US$0.9/lbs lead and US$0.9/lbs zinc. AgEq calculations did not account for relative metallurgical recoveries of the metals.

Estimated true thicknesses were calculated for the Blind Zone and the El Sol Zone using down-dip projections of mineralization. Estimated true thickness were calculated for the La Bocona extension by assuming vertical structures perpendicular to drill core

Resource Highlights

On March 21st, 2016, the company released an initial 43-101 resource for the Cerro Las Minitas project of 10.8Mozs Ag, 189Mlbs Pb and 207Mlbs Zn (36.5Mozs AgEq) Indicated and 17.5Mozs Ag, 237Mlbs Pb and 626Mlbs Zn (77.3Mozs AgEq) Inferred(1) This works out to an approximate exploration cost of $0.10 per oz of silver equivalent in the ground, suggesting a fast and cost-effective upside potential which the company plans to execute in the coming years.

Table: Base-case Mineral Resource Estimate utilizing a 150g/t AgEq cut-off value

1. The 150g/t AgEq cut-off value was calculated using average long-term prices of $15/oz silver, $1,100/oz gold, $2.75/lb Copper, $0.90/lb lead and $0.90/lb zinc and metal recoveries of 82% silver, 86% lead and 80% zinc. All prices are stated in $USD.

The resource estimate is a substantial milestone in the development of the Cerro Las Minitas project, in that it begins to quantify the potential for development of a major mine. The figure below shows the plans for 2016 to quickly and efficiently expand on the existing resource base with a target of +20 Mt grading 80‐120 g/t Ag and 4‐8% Pb/Zn (+200 Mozs AgEq)(2)

Figure: Drill Hole Distribution and Significant Targets – Cerro Las Minitas

2. The exploration target is conceptual in nature and relies on projections of mineralization that are beyond the standard CIM classification of mineral resources and should not be relied on as a mineral resource estimate

Resource Parameters

The estimate was carried out using a block model constrained by 3D wireframes of the individual mineralized zones. The block model is comprised of an array of blocks measuring 10m x 2m x 10m, with grades for Ag, Au, Cu, Pb and Zn interpolated using Inverse Distance to the Second Power (ID2) weighting. Silver equivalent values were subsequently calculated from the interpolated block grades.

The interpolation was carried out in 3 passes using progressively larger search radii to a maximum of 100m x 100m x 25m. For all passes, the interpolation was restricted to a minimum of 1 and a maximum of 8 composites, with a maximum of 4 composites from any one drill hole (i.e. a minimum of two drill holes required for +4 composites).

Bulk densities were based on a total of 106 individual measurements taken by Southern field personnel from nine mineralized zones ranging from 2.9m to 10.9m in thickness. These density values ranged from 2.51 t/m3 to 4.15 t/m3. However, an average value of 2.85 t/m3 was used as it was thought to representative of the densities within the Blind, El Sol and Santo Nino zones.

Only silver values have been capped in order to remove the effects potential overestimation due to statistical outliers. The threshold chosen was 600 g/t silver. Analysis was performed to determine if grade limiting was necessary for the other constituent metals and it was determined that this was unnecessary.

Table: Summary of Mineral Resources at the Cerro Las Minitas Project, Durango State, Mexico

Notes:

  1. 1. The current Resource Estimate was prepared by Garth Kirkham, P.Geo. of Kirkham Geosciences Ltd. who is the Independent Qualified Person responsible for presentation and review of the Mineral Resource Estimate.
    2. The 2016 Cerro Las Minitas Resource Estimate was prepared following CIM definitions for classification of Mineral Resources.
    3. Resources are constrained using mainly geological constraints and approximate 10g/t AgEq grade shells.
    4. The block models are comprised of an array of blocks measuring 10m x 2m x 10m, with grades for Au, Ag, Cu, Pb, Zn and AgEq values interpolated using ID2 weighting. The models identified at a 150g/t AgEq cut-off, an indicated resource of 3,724,000 tonnes averaging 90g/t Ag, 0.05g/t Au, 2.3% Pb, 2.5% Zn and 0.09% Cu and a cumulative inferred resource of 6,611,000 tonnes averaging 82g/t Ag, 0.17g/t Au, 1.6% Pb, 4.3% Zn and 0.2% Cu.
    5. Mineral Resource cut-offs are estimated using an average long-term price of $15/oz silver, $1,100/oz gold, $2.75/lb Cu, $0.90/lb lead and $0.90/lb zinc and metal recoveries of 82% silver, 86% lead and 80% zinc.
    6. AgEq calculations did not account for relative metallurgical recoveries of the metals. All prices are stated in $USD. Mineral Resources are conceptual in nature and as such do not have demonstrated economic viability.

The mineralized zones were initially defined by Southern personnel and then validated and refined by KGL. The mineralized wire frames were defined using a combination of geological constraints, grade threshold of approximately 10 g/t AgEq grade cut-off and no minimum thickness. For all zones, blocks are classified as Inferred if they fell within 100m of a drill hole intercept. Blocks within 50 m of the nearest intercept, and estimated by at least two drill holes were classified as Indicated. However, an interpreted boundary is the final determination of indicated resources in order to remove “spotted dog” effect.