Canadian-based Prime Mining Corp has updated its mineral resource estimate for its Los Reyes Oxide Gold and Silver Project located near Cosalá, Mexico. Crucially, it underscores Prime’s commitment to and belief in the project as it demonstrates that the oxide resource is far larger than historic estimates. The project, shelved by previous investors in the face of depressed prices, has been under explored and overlooked. Prime‘s exploration activities are now painting a fuller and more accurate portrait of its rich potential, at a time when gold prices are on the boil in the face of the global Covid-19 pandemic.
The updated mineral resource estimate, prepared by Stantec Consulting Ltd, increases total oxide mineralized material and upgrades the assurance category estimate reliability. The new pit constrained updated resource (at 0.22 g/t Au cutoff) has risen to 19.8 million tonnes measured and indicated plus 7.1 million tonnes inferred from 6.8 million tonnes indicated and 3.2 million tonnes inferred historic global resource (at 0.5 g/t Au cutoff).
The updated resource also has a gold equivalent of 833,082 ounces.
Prime has elected to delay its plan to advance quickly to the production stage, choosing instead to conduct further exploration with a view to boosting the size and the scope of the project even further.
“We are very pleased with these results and the major increase in potential open pit material,” Prime COO Gregory K. Liller was quoted as saying in a recent statement. “The successful Prime sampling program, started in September 2019, allowed us to evaluate the tonnage and grade in areas between the unsampled outcrop and the drilled subsurface. The sampling program confirmed our belief that the mineralized zones are substantially wider than previously modelled.”
“We believe our planned 2020 exploration program will build on this success with emphasis on three target efforts:
1) down dip and along strike in the pit areas,
2) between pits to connect them together; and,
3) the remaining 60% of Los Reyes’s undrilled structures where outcrop grab samples are similar to sample results in the Updated Resource.”
There is also upside to enlarge the resource and extract more gold and silver in a way that limits costs. Heap leach processing of mineralized material can be utilised below certain grades, while mill/gravity/CIL processing can be applied to material with better grades.
A 2013 Preliminary Economic Assessment included test work supporting recoveries of 93% gold and 83% silver with conventional milling, gravity and carbon-in-leach. The Updated Resource is based on recoveries of 72% gold and 25% silver.
Prime has $1 million in cash which will enable it to maintain operations for the rest of 2020. Funding for the proposed 2020 programme will be raised from the capital markets if conditions are favourable. Or Prime may find a strategic partner. Prospects on both fronts look good given the outlook for gold.
Prime has already made infrastructure upgrades to the project site and is seeking approval to build roads to access new areas for drilling. This is anticipated to be a smooth process. Mexico, Latin America’s second largest silver producer, is a miner-friendly jurisdiction and the project is in a province with a rich history of mining. And the road construction phase will add to the project’s job-creation appeal among the local community.
Meanwhile, the engineering team has put together a drilling blueprint to reach the mineralised structures in areas where the pits can be linked together. There are also prospects for high grade ore bodies in new areas around the project.
The Update Resource technical report has a number of recommendations. These include additional trending, which has the potential to expand the mineralization in El Zapote North and South, San Miguel East and West, between San Miguel East and Noche Buena, as well as in the Tahonitas area.
A 40 hole drilling program is also envisioned to measure the mineralization prospects down dip below current pit bottoms. On top of this, such a program will allow for subsurface testing of mineralization identified during the trenching program.
Crucially, it will also assess the continuity between ore bodies, such as El Zapote North and El Zapote South, and between San Miguel and El Zapote North. Linking such bodies will ultimately save production costs while hopefully unearthing more extractable deposits.
The unfolding Covid-19 pandemic has created a lot of uncertainty in the markets but gold remains a very solid investment. Indeed, the crisis has enhanced the safe-haven status of the precious metal – a status it looks set to retain for some time. Gold broke above $1,700 an ounce on Monday 6 April, and the fundamentals for a run to its historic highs are well in place. Even at much lower prices, Los Reyes is a profitable proposition offering a fast return on investment.
As the World Gold Council recently noted: “Gold benefits from diverse sources of demand: as an investment, a reserve asset, a luxury good and a technology component. It is highly liquid, no one’s liability, carries no credit risk, and is scarce, historically preserving its value over time.”
In 2008, at the start of the global financial crisis and “The Great Recession,” gold – along with US Treasuries and a handful of other “safe havens” – was one of the few assets to post positive returns. If current trends continue, it will do the same in 2020.
Smaller, nimbler projects are also appealing at a time when larger companies are conserving cash and cutting back on expansion projects – especially large-scale ones – and withholding dividends while the Covid-19 pandemic plays out. Some of the bigger projects may be delayed indefinitely, leaving smaller and profitable ones as the best route into the sector. Add this to Mexico’s mine-friendly reputation and the experience of Prime’s executive team – none of whom have received a salary yet for their efforts – and Los Reyes begins to stand out, like the legendary Mexican wold “Lobo”, from the rest of the pack.
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