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Overview
The state of Sinaloa is well known for its mining industry and best known for its gold, silver, lead, copper and zinc deposits. In particular, the Rosario mining district is known historically as a significant area for silver, gold, lead and zinc production.
The Rosario mining concession totals 16,279 hectares in south east Sinaloa, Mexico. This land package is located approximately 94 kilometers southeast of Mazatlan and nearby the town of Rosario. The mining concession represents a high priority mining district and consolidates three past producing mines: Plamosas, San Juan, and San Marcial. Extensive infrastructure is in place at Rosario, including a fully functional mining camp facility at the Plamosas mine. Facilities and infrastructure at Rosario include 20 year surface rights agreement in good standing, 30 year water use permit, tailings dam, 60 km - 33 KV power line, 120 man camp, infirmary, offices, shops and warehouses, and assay lab. The Company is utilizing the mining camp infrastructure while it continues to develop the primary projects toward commercial production.
Extensive underground development at the Plamosas and San Juan mines allow rubber tire access to mineralized zones. This existing development will allow the Company to accelerate development at significant cost savings. At Plamosas, previous owners recently invested approximately $11 million in property payments, exploration, upgrades and renovations to the mine and mill site including upgrading of electrical substations and wiring, camp and accommodations, mine dewatering and detailed engineering of an 800 tonne per day (tpd) mill designed to be installed on the existing foundations and structures. The land directly surrounding the Rosario mill site (330 ha) is owned in fee simple.
Historic production on the Rosario Project by Grupo Mexico, the prior operator, averaged 600 tonnes per day from 1986 to 2000. During this production period a total of 2.5 million tonnes of ore were extracted which averaged 190.5 grams per tonne (g/t) silver, 0.92 g/t gold, 2.02% zinc and 2.38% lead. Operations were ceased in 2001 due to low metal prices and a regional labor dispute.
San Marcial
The San Marcial project is located directly adjacent to the Plamosas and San Juan mines. The Company's focus at San Marcial is a high-grade silver resource, contained within the overall resource.
Preliminary high-grade resource modeling using a 180 g/t Ag cut off, estimates that the San Marcial project currently hosts a near-surface, high-grade Indicated resource of approximately 1.13 million tonnes grading 310.20 g/t silver. This estimated high-grade resource is the primary focus of the current Preliminary Economic Assessment.
San Marcial Mine - High Grade Zone
| Category |
Tonnes |
Ag g/t |
Au g/t |
Pb% |
Zn% |
Ag ozs |
Au ozs |
Pb lbs |
Zn lbs |
| Measured |
- |
- |
- |
- |
- |
- |
- |
- |
- |
| Indicated |
1,130,000 |
310.21 |
- |
0.36 |
0.67 |
11,269,846 |
- |
8,949,600 |
16,656,200 |
| Inferred |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Preliminary metallurgical testing on the San Marcial project returned encouraging results. Five oxide and sulphide samples from holes SM-2, SM-4 and SM-5 were sent to ALS Chemex in Reno NV for column leach tests. Recoveries from all columns exceeded 80% over a 72 hour leach period. Additional metallurgical test work were completed on four samples composed of drill core rejects submitted to Process Research Associates Ltd. in Richmond, B.C. Recoveries from flotation and Cyanidation ranged from 90 to 97.9 percent.
San Marcial Geology
The San Marcial property is situated in the west limit of the sub-province of Zona de Barrancas which is part of the Sierra Madre Occidental physiographic province, very close to the plains and rolling hills of the coastal plain. The Sierra Madre Occidental physiographic province is characterized by a relief of high and large volcanic plateaus, dissected by deep gorges which drain towards the Pacific Ocean. San Marcial is located in an area of high relief where the topography averages approximately 900 m above sea level.
The San Marcial project area is situated along the western edge of the Sierra Madre Occidental geological province. This linear belt of volcanic rocks, approximately 1,500 km long by 250 km wide, is known to host many important gold and silver producing mines and prospects. The province is divided into two main Tertiary volcanic units referred to as the Upper and Lower Volcanic groups, both of which are separated unconformably by a period of erosion and associated with local felsic intrusive activity. The Lower Volcanic group is characterized by basal conglomerates, ignimbrites, rhyolites and felsic tuffs. The contact between the two volcanic groups (Lower and Upper) is highly prospective for precious metal mineralization, as a majority of the other known gold and silver mines and prospects in the belt occur close to, if not just below, the contact interval.
The geology at the San Marcial project can be sub-divided into two distinct rock types. The Upper Volcanic group, comprised of basal conglomerates, rhyolites and dacites, occurs in the higher and more mountainous portions of the property in the northeast. Individual lithologies in this group are generally flat lying and trend 052° and dip 28° southeast. The basal conglomerate is a reddish to maroon volcanic conglomerate to agglomerate, with dacitic and rhyolitic fragments derived from the underlying volcanics and hematized fragments from contemporaneous volcanism. Fine grained tuffs and flows are common. The basal conglomerate lies on the erosional surface above the Lower Volcanics. Basaltic to andesitic dykes and sills intrude into the Upper Volcanic group. See Figure 7.2 for the geology of the
San Marcial property.
Unconformably underlying the Upper Volcanic group is the Lower Volcanic group of andesites and dacites which occur at lower elevations in the southwest and generally trend 015° and dip 45° to 68° easterly. The known silver prospects on the San Marcial property are hosted along what appears to be a narrow set of northwest trending fault structures with a 60° northeast dip which is in close proximity to the prospective unconformity. Along the trend and within the local area are prominent outcrops of highly weathered hydrothermal breccia and relatively fresh dacite porphyry intrusives. The volcanics vary from andesitic to dacitic ash tuffs, banded rhyolite flows interbedded with lapilli tuffs grading to agglomerate and andesitic conglomerate/agglomerate.
Faulting is common within the San Marcial area and is an important structural feature relating to the silver mineralization. There are at least four orientations of structural breaks or features interpreted from satellite imagery, trending primarily northwest, with fewer trending east, west, north and northeast. Movement along the northwest feature is normal but the displacement is unknown. The intersections of the east-west with northwest features are considered the most prospective areas for mineralization at San Marcial.
Silvermex has an option to acquire 100% interest in the San Marcial project from Silver Standard Resources (NASDAQ - SSRI; TSX - SSO). Under the terms of the formal agreement with Silver Standard, Silvermex can acquire a 100% interest by issuing 3 million common shares in three stages by February 1, 2012 at a deemed share value of $0.75 per share for the first 1 million shares and based on the market price of the shares of Silvermex at the time of each subsequent issuance. Silvermex must also pay US$15 million (less the deemed value of the 3 million common shares issued) in either cash or shares at the election of Silver Standard, by February 1, 2012. The US$15 million purchase price is based on Silver Standard's resource estimate of 14.26 million ounces of inferred silver resources on the property, prior to additional drilling by Silvermex. Silvermex must also expend US$1 million on exploration by February 1, 2012.
Technical Report
Plomosas-La Cruz Mine
Historic production on the Rosario property by Grupo Mexico, the prior operator, averaged 600 t/d from 1986 to 2000, during which a total of 2.5 million tonnes of ore were produced which averaged 190.5 grams per tonne (g/t) silver, 0.92 g/t gold, 2.02% zinc and 2.38% lead.
In 2001, Grupo Mexico reported the Plomosas Mine has existing historic reserves and resources of 638,756 tonnes grading 136 g/t silver, 3.21 % zinc, 2.23 % lead, and 1.05 g/t gold. The Mine has extensive development and has been partially refurbished by the previous operator in preparation for an 800 tpd operation. The mine has been dewatered and has undergone partial rehabilitation.
The reader should be cautioned the historic reserves and resources Plomosas do not conform to National Instrument 43-101 for reporting purposes; as such the Company is not treating these historic estimates as current reserves or resources. These estimates should not be relied upon until they have been verified by further due diligence and by the Company's "Qualified Person".
Extensive data collection, underground mapping, control surveys, resource modeling and preliminary exploration programs have been completed by the prior operator. An extensive underground channel sampling program has been completed at Plomosas which yielded positive results with numerous high grade intersections of gold, silver, lead and zinc.
Future plans at Plomosas include the preparation of an NI 43-101 resource estimate and the continued exploration at depth and along strike of the existing known structure. The company will also collect material for advanced metallurgical testing and develop a comprehensive mine plan for the potential extraction of the resource.
San Juan Mine
The San Juan Mine at Rosario is 4 km from the Rosario mill site and is strategically located along trend between the San Marcial Mine and the Plomosas Mine.
Grupo Mexico reported historic reserves and resources of 256,756 tonnes grading 329.3 g/t silver, 3.73% zinc, 1.69% lead, and 0.19 g/t gold.
The San Juan workings consist of a main adit approximately 5 meters in width, 5 meters in height and 250 meters long and a crosscut extending easterly for 150 meters, plus a partially flooded ramp with a further 150 meters development. The mineralized structure averages 3.0 m in width and has been traced down dip for approximately 150-200 meters. A decline has been driven into the San Juan zone and has been tested over a vertical distance of 40 meters with the zone still open to depth.
Extensive data collection, underground mapping, control surveys and exploration programs have been completed at San Juan by previous operators. A recent surface and underground channel sampling program has been completed which yielded very positive results.
The company will be initiating a 3,000 meter HQ core drill program at San Juan in July 2010 to expand, define and upgrade the current historic reserve and resource and prepare an updated NI 43-101 resource estimate. The company is currently collecting a representative sample of material for advanced metallurgical testing.
The reader should be cautioned the historic reserves and resources at San Juan do not conform to National Instrument 43-101 for reporting purposes; as such the Company is not treating these historic estimates as current reserves or resources. These estimates should not be relied upon until they have been verified by further due diligence and by the Company's "Qualified Person".
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