The return of Sierra Madre Gold and Silver (TSXV:SM) to the TSX is creating another opportunity for investors to get into the closely-watch gold miner. The company is returning to trading following the announced acquisition of the La Guitarra project from First Majestic last month.
In an all-share transaction, Sierra Madre issued US$35m in consideration shares to First Majestic. On closing, this made First Majestic the biggest shareholder in Sierra Madre. First Majestic has the right to maintain a pro-rata interest in future share issues, out to a maximum of 19.9%.
At the same time, Sierra Madre was also able to complete its most recent private placement to the tune of C$10m.
La Guitarra: Mexican mine, a mill and future prospects
La Guitarra is a fully-permitted Mexican mine with a 500 t/d mill, sited in the country’s silver belt. It has a high grade underground mine that was operated up to August 2018. It is currently on care and maintenance and is awaiting a prompt restart. Sierra Madre actually operated the mine itself between 2006-09 so is highly familiar with the project.
Past production from the mine at La Guitarra is around 1 – 1.5m ounces of silver equivalent a year. The company now also has a permitted 5.8m tonne tailings facility and the requisite mining and processing permits squared away. The fast track re-start strategy will include a district exploration and mine development program, with a 4km wide vein belt that spans 15km of strike.
Mining options currently being evaluated by Sierra Madre include a switch to underground mining techniques from the historic open pit activity on the surface. The mine also comes with a hefty data set which gives the company a head start in terms of further exploration activity. Investors are being told to anticipate a new resource report within six months which should make interesting reading.
- Ormonde offers high-potential mining
- Corcel focusing on high-potential O&G assets
- IPO Radar: ServiceTitan, Shein, Greatland Gold
Sierra Madre mine tailings project
Sierra Madre is also looking at reprocessing existing mine tailings with a potential target of 2.0 to 2.5 mt @ 0.4 – 0.6 g/t Au and 35-40 g/t Ag. Initial tests on the tailings, which have already been completed by First Majestic, indicate 80% gold recovery and 70% silver recovery, using CN leaching. Additional metallurgical testing is being carried out to see if recoveries can be enhanced.
In terms of the wider district, there is plenty of further opportunity at La Guitarra. There are over 100 epithermal veins in five main systems. A 4 km wide vein belt is known to span some 15km of strike. There is plenty of data already for the geological team to mull over, with more than 1400 drill holes – at over 236,000 metres – completed historically.
Further land packages at Tepic and La Tigra
We should also note additional land packages under exploration in Mexico at Tepic in Nayarit, which represents over 2600 hectares, and La Tigra, an historical gold and silver mine with an associated land package of 357 hectares covering most of the historical mines in the Distrito Minero Del Tigre. Phase 2 drill results are pending on Tepic, with Phase 1 drill results awaited on La Tigra, so plenty of interesting news flow to come out here.
The company is currently well-capitalised, with approximately C$9m in the treasury to fund the upcoming work programs at Tepic and La Tigra. Sierra Madre is also understood to be seeking requalification for the OTCQX, to provide easier access to the stock for US investors. The management team does not seem to have much trouble getting successive and hefty private placements away, so investor demand looks strong for the stock.
