Prime Mining Corp. (TSX.V: PRYM) (OTCQB: EPWMF) (Frankfurt:04V3) is a junior Canadian explorer, but it is aiming to break into the production ranks via its Los Reyes gold and silver project in Mexico. This promising project is running full steam ahead at a time when the price of gold is well north of $1,500 an ounce, with further gains expected as the precious metal’s safe-haven status is enhanced by global political and economic turbulence and low interest rates. This is bringing previously explored projects such as Los Reyes – which was abandoned in the face of depressed prices – back into focus. Former players who spent money on the project may wish they had stayed the course.
The company has recently made several exciting announcements regarding Los Reyes, as the prospects for the project’s growing potential are unearthed. CEO Andrew Bowering just announced that new trenches and road cuts from the company’s extensive surface exploration programme indicate mineralisation, with high grades and mineable widths, outside of the largest known deposits at Los Reyes, Zapote North and South.
These results are important for several reasons. Crucially, they support Prime Mining’s view that Zapote North and South may not have to operate as separate fragments but can be linked together to form one large ore body, adding tonnes and extractable ounces to the existing resource model. Intriguingly, evidence at Zapote Central indicates that mineralisation is continuous between the main north and south deposits, a trend concealed by erosion, which has displaced the surface expression down the slope. Previous drilling efforts were too shallow and did not account for the dip. One historic drill hole in the central zone appears to have missed the target, with the misleading reading of poor grades. The strip ratio in the mine plan is also likely to be reduced. Prime’s current programme for Los Reyes therefore is shaping up to be a game changer.
Have one big ore body will also ultimately save costs, as it reduces the entry points required. Indeed, this latest find occurs at an initial access point to the deposits, making it an ideal starting point for the proposed open-pit development – provided good mineralisation prospects are found deeper below the surface. That is entirely conceivable judging from surface results thus far.
So far 1,981 trench, road-cut and underground samples have been collected of a planned 3,500 samples, while results from 1,002 samples have been received and interpreted, with further results expected shortly. The results range from below detection to 33.6 gpt gold and 170.3 gpt silver. Given the encouraging results to date, Prime is studying the possibility of doubling the sampling programme from 5,000 metres to 10,000.
The project’s timeline has also been brought forward. Independent engineers are currently assessing and calculating a new resource model, which is now expected to be updated by the end of Q1 2020.
The established historic resource is 530,000 oz of gold and 10 million ounces of silver. Expect that to be increased, adding to the project’s lustre. There is upside resource potential on the gold deposits of 1.5 to 2 million ounces. The current resource estimate was prepared by Tetra Tech for Vista Gold in 2013
The path to production is now set to unfold within two years, with maiden production projected by 2022. Steady state output is set at 65,000-75,000 oz per year. No initial strip ratio is expected, and the project is seen offering robust returns, with payback expected within six months.
“Unlike many junior exploration companies, Prime aims to be a gold producer. Key to the plan to advance Los Reyes to near-term production, the surface sampling is providing a better estimation of the grades and tonnes of the first benches that can potentially be mined in the open pits. This estimation will provide confidence in the economic projections during the critical planning and mine start-up phase,” COO Greg Liller said in a statement.
Prime has a short list of permitting firms and expects to soon sign one up, with an eye to presenting an initial submission to regulatory authorities in 2020.
All the necessary infrastructure is in place and negotiations have been completed with local landowners and the Ejido community. This means that there is vital buy-in from the local community, which will benefit from the jobs created at an operation that will be labour-intensive and non-mechanised, with wider economic spin-offs. This is one example of how the project has been de-risked at a time when investors put a high premium on ESG compliance. The region is also a mining province with a long history of resource extraction.
Furthermore, the project was acquired a discount deeper than a South African gold mine. While $20 million has been spent to date on exploration and development, it was acquired for $6 million, of which $4.5 million has been paid. To date $8.7 million has been raised to bring it to fruition.
The project is spearheaded by experienced people who have developed similar projects in the region. Mining is in their veins. And their faith in its prospects, and commitment to the project, is underlined by the fact that they have spent personal money on the acquisition. The senior management team has also yet to draw a salary.
“Los Reyes came to our attention as a project that was shelved due to a series of unfortunate occurrences including bad timing and the cyclic nature of the resource sector … Luckily for us, the misfortunes of our predecessors culminated as a Prime opportunity propelling our efforts today,” said CEO Andrew Bowering.
The timing is now right, and the opportunities are ripe. Bought for a bargain with a huge exploration data base and ready infrastructure, the project is ready to be fast-tracked to production as the commodities cycle spins strongly into upward momentum for gold. Watch this space: there will be more news soon on Prime Mining’s Los Reyes.
