On July 20, 2021 Sierra Madre Gold and Silver Ltd. (SM:TSX.V) announced that it has acquired an option to joint venture for the La Tigra Project, located 148 kilometres north of Sierra Madre’s flagship Tepic project in the mining-friendly state of Nayarit, Mexico.
Fifteen kilometers from a regional airport, Tepic includes five mining concessions covering a total of 2,612.5 hectares.
At Tepic, a 2,000-meter Phase 1 reverse circulation drilling began on April 15th.
On June 18, 2021, SM reported that over 80% of the meterage had been drilled. All results from the Phase 1 drill program will be released when assaying is completed. A new drilling permit is being prepared for the upcoming 100-200 hole Phase 2 drill program.
Following this pattern for aggressive exploration, SM already has boots on the ground at La Tigra.
Sierra Madre geologists started working there in July, and the company has already sent 500 samples for assaying. SM plans to begin trenching and then drilling in the fall.
“Our technical team is excited about the La Tigra acquisition,” Alex Langer, CEO and President of Sierra Madre told Streetwise Reports. “It's a project we identified two years ago, that we really wanted.”
“Because of relationships that we have, we were able to contact the owner of the property and do a deal that is fair to both sides,” added Langer. “This asset has been in and out of production for 100 years, at a small scale.”
“The La Tigra Project consists of seven mining concessions, totaling 357 hectares, covering most of the historical mines in the Distrito Minero el Tigre,” stated SM in the July 20, 2021 press release. “The agreement is with the property's owner, Industrial Minera Mexico S.A. de C.V. (IMMSA)”.
"We are thrilled to be able to acquire the La Tigra Project," stated Langer. "The location and infrastructure of La Tigra fits seamlessly with Sierra Madre's strategy of consolidating high-value projects with production potential.”
With a history of past production and a significant amount of historical data, the SM technical team is applying modern exploration techniques to this highly prospective project.
La Tigra has been controlled by a major for the last 20 years. It fell by the wayside because a project with three or four million ounces of gold wouldn’t move the needle in their quarterly financials. This enabled SM to do a deal with them.
“If we do find a lot of gold, the major can come back in within the first three years,” explained Langer. “If not, they have the royalty, and they're covered by that.”
At La Tigra, there is visible gold at surface. The former head grade was over 10 grams per tonne gold.
Key La Tigra Deal Points
- SM to make payments totaling USD $1.5 million over a period of three years.
- SM required to provide a NI 43-101 compliant technical report containing a resource estimation before the end of the three-year period.
- SM must also inform IMMSA at least 90 days before and not sooner than 180 days before the last payment is made of its intention to exercise its option to acquire the property.
- Upon exercise of the option, IMMSA is assigned a 2.5% NSR royalty.
- SM can elect to purchase a 1.5% NSR portion of the royalty for US$1.5 million at any point in the future.
- If IMMSA does not elect to exercise the joint venture clause, SM will acquire 100% of the project subject to the NSR.
Potential Joint Venture
- If the NI 43-101 technical report has gold resources estimated at one million ounces or more, IMMSA, can elect to form a joint venture for the purpose of placing the project into production.
- The joint venture company will be 51% owned by IMMSA and 49% by SM.
- IMMSA has 60 days from the time it receives the NI 43-101 technical report to notify the company of its intent to form the joint venture.
We asked Langer about the synergies between the two Mexican projects.
“Tepic and La Tigra are only 140 kilometers away from each other; you can get there in about 90 minutes,” stated Langer. “Once we're in production, with a centralized, milling and processing facility, that is advantageous.”
Transportation, labor and fuel costs are low in Mexico. This gives Sierra Madre flexibility to pick a strategic location for the processing facility.
“We want to be in production,” confirmed Langer. “We're not afraid of production. We are looking for production. Any of the projects we've acquired or are looking to acquire, we feel can be part of that scenario.”
Exploring and mining require two different skill sets. Therefore, Sierra Madre has assembled a team with a track record in both areas.
The SM geological team is led by Gregory Liller, who has been operating in Mexico since 1993, playing a key role in the discovery and development of more than 11 million ounces of gold and 600 million ounces of silver.
Liller served as an officer or director at Prime Mining, Genco Resources, Gammon Gold, Mexgold Resources and Oracle Mining.
Langer considers Liller a key asset to Sierra Madre.
“Making one metal discovery could be good luck,” commented Langer. “Making six or seven is not. Greg has participated in multiple production scenarios. In fact, most our 11 technical people have production experience.”
We asked Langer if there were artisanal miners on the property.
“Yes, there's three or four families that are mining at La Tigra right now,” confirmed Langer. “They have their own small processing plant. We are hiring all of them.”
“The artisanal miners are welcome to continue mining, but they'll do much better financially if they work with us,” added Langer. “From our point of view, they are the best prospectors you can have. They know a lot about the vein structures.”
We went on to ask about community relations.
“One thing we did notice right away, there was an outdoor classroom, with about 10 old chairs, 10 broken desks, a blackboard and ripped tarp for a roof,” recalled Liller. “A very dilapidated structure that was functioning as a school. So right away, we asked, ‘How can we help?’ As the chairman of Sierra, the educational component is important to me. We are going to support educational programs, working with the local community.”
According to reports published by the Mexican department of geology, about 2,500 gold and silver hand-miners worked in La Tigra prior to 1900.
In the early 1900's, John Cleary acquired the mining rights and built an incline shaft on two principal levels with development begun on three lower levels.
The Mexican Revolution of 1910 to 1920 put a halt to mining.
Beginning in 1927, the mines were rehabilitated, and new processing facilities were built. The Mexican geological report states that 13,110 tonnes of material grading 10 g/t gold and 358 g/t silver was processed at this time.
We asked Langer if he has any projections about the future price of precious metals.
“The central banks aren't going to stop printing money,” stated Langer. “It's going to continue. Gold is a store value. Silver is a bit overlooked, because of how much it’s used within industrial components, whether it's medical or solar or aeronautics.”
“People are starting to understand the consequences of government money printing. The burden of global debt is going to reach an inflection point. And when that happens, owning precious metal assets in Mexico could be rewarding.”
We asked Langer about the 12-month milestones for Sierra Madre.
“We will continue doing due diligence on small projects with low capex to fit in with our ‘Hub & Spoke’ scenario,” confirmed Langer.
“Our plan is to get drilling on La Tigra,” Langer added. “We want to make a discovery here. We’ll be doing 1,200-2,000 meters to start, then launch into a full-scale program to deliver a resource. I'm not sure if a resource can be done in the next 12 months. But we'll be on the right track.”
Sierra Madre founders and management own about 40% of the company. Management has been adding to their positions through purchases in the open market. There are currently 64 million shares outstanding, fully diluted 66 million shares outstanding.
1) Lukas Kane compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor/employee. He/she or members of his/her household own securities of the following companies mentioned in the article: None. He/she or members of his/her household are paid by the following companies mentioned in this article: None. His/her company has a financial relationship with the following companies referred to in this article: None.
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