The team behind Silvercest Metals (TSX-V:SIL | OTC: SVCMF) have a history of creating wealth, and they’re already proving they can do it again in their latest venture.
With promising exploration plays in stable Mexico, tightly controlled exploration budgets and the money to fund them, and plans for a fairly quick push towards development and eventually to production, the company has already led to significant investor interest.
Silvercrest’s share price has climbed from around $0.15 at the start of the year to a recent high of $4.09 as the company made progress at its Las Chispas project with encouraging high-grade drill results and channel sampling.
With more drilling on the way plus a resource estimate and a 100,000-tonne bulk sampling planned for 2017, there’s certainly potential for the stock to climb higher.
Head Start
The company had a head start out of the gate, born out of First Majestic Silver’s $154 million takeover of Silvercrest Mines that closed in Oct. 2015. The freshly created Metals version of the company snagged Silvercrest Mines’ exploration properties, plus First Majestic’s Guadalupe exploration project in Durango State and C$5.25 million in cash to get it off the ground.
Crucially, much of the management that had built Silvercrest Mines into a takeover target came on board as well.
Leading the team is Eric Fier, a geologist and mining engineer and 30-year veteran of the industry who co-founded Silvercrest Mines and helped shepherd it into a producing company as chief operating officer.
Joining him on the small team are Barney Magnusson as chief financial officer, another 30-year vet who also helped found Silvercrest Mines; Michael Rapsch as vp of communications, a role he played at the old company; and Bernard Poznanski as corporate secretary, a founding partner of Koffman Kalef LLP.
Helping oversee the broader picture, directors include Ross Glanville, P.Eng. and Dunham Craig, P.Geo., with decades of experience, while Graham Thody, a chartered accountant, and George Sanders, a mining entrepreneur, help guide the corporate and financial side.
Together the whole team is focused on advance Silvercrest Metals’ most promising exploration property – Las Chispas in Mexico’s Sonora State.
Las Chispas
The 1,300 hectare project sits about 180 kilometers northeast of Hermosillo in a prolific mining area that includes Yamana Gold Inc.’s (currently being sold to Premier Gold) Mercedes mine, Grupo Mexico’s La Caridad mine, and the Santa Elena mine that Silvercrest Metal’s management put into production and is now controlled by First Majestic.
As with many mining districts in Mexico, Las Chispas has seen extensive historic work with upwards of 100 million oz. silver and 200,000 oz. gold thought to be produced from the area over a few decades in the early 1900s.
Silvercrest has been working to regain access to those historic mined stopes and drifts and has been pulling impressive channel samples along the way, while more recently it is also been releasing early drill results.
Publicly disclosed information suggest at least 14 known veins at the main Las Chispas target, with the William Tell and Las Chispas veins, running about 120 meters apart, the main focus of exploration. The Babicanora target (with the Babicanora vein), about a kilometer east, has another five known veins.
Yet, historic production only came from those three veins, the Las Chispas vein, the William Tell vein and the Babicanora vein. Supposedly, the Babicanora vein is credited with producing at least 80 million oz. of silver.
The Chispas veins, starting about 300 meters below surface, occur in 0.5 to 5 meter wide veins with adjacent stockwork and breccias trending for 1 to 1.5 kilometers. They consist of multiple mineralized zones containing epithermal quartz veins, quartz and calcite stockwork, and breccias associated with rhyolitic to andesitic dikes in Tertiary volcanic tuffs.
Channel results from William Tell, include 0.7 meter of 7.8 g/t gold and 1,160 silver; 1.4 meters carrying 3.1 g/t gold and 207 silver; and more recently 1.1 meters averaging 3.23 g/t gold and 518 g/t silver, or 760 g/t silver equivalent over a continuous 21-meter strike length.
On the Las Chispas vein, channel sampling has returned results including 1.1 meters of 2.93 g/t gold and 1,270 g/t silver, and 2 meters grading 4.28 g/t gold and 545 g/t silver.
Recent drill results have given even more concrete evidence of promise at the project.
Significant intercepts from the initial surface drill program at Las Chispas vein include a 4.6 meter cut averaging 4.56 g/t gold and 621.5 g/t silver – including a 0.8-meter section grading 18.55 g/t gold and 2,460 g/t silver – while a separate drill hole hit a 7.2-meter intercept averaging 2.41 g/t gold and 311.5 g/t silver.
“The initial Las Chispas drill hole results received to date are impressive,” said Eric Fier, CEO, when the results were released.
“These first results have exceeded our expectations and appear to confirm that historic mining completed in the early 1900s has left behind substantial unexplored, unmined and easily accessible high grade mineralization.”
More recently the company also released initial surface drill results targeting the William Tell vein, which hit two previously unmapped veins as well as mineralization on the main vein.
Results at William Tell included 1.5 meters grading 2.03 g/t gold and 683 g/t silver, and 0.9 meter carrying 2.4 g/t gold and 229 g/t silver, while an unidentified vein yielded 0.8 meter averaging 4.79 g/t gold and 364 g/t silver and a second hole hit 0.9 meter grading 6.57 g/t gold and 395 g/t silver.
Dunham Craig, who has temporarily stepped into the role of CEO while Fier is away on medical leave, said the discoveries point to great potential on the project.
“The discovery of two new vein intercepts grading above 700 gpt AgEq, combined with all of the results received to date from drilling and underground channel sampling, reiterate a possible discovery of a district-wide area play,” said Craig.
The company is already working to get a phase II drill program going this fall after completing the phase I program, which it more than doubled from the initially planned 3,000 meters to 6,400 meters.
Of the 22 holes completed as part of phase I, 19 targeted William Tell and Las Chispas, while three holes drilled in the Babicanora area and 800 metres southwest fo the main Babicanora vein, showed only low grade mineralization.
The company is also working to move forward on an underground drill program that will delineate a potential 100,000-tonne bulk sample and infill drilling in preparation for a maiden resource estimate on the project. The company wants to launch the 2,000-meter underground program soon and has been waiting for permits to go forward.
In the meantime, Silvercrest continues to rehabilitate the 11.5 kilometers of historic workings, building ladders and bridges and removing infill to prep the tunnels for further exploration. The Company has gained access to about 5.5 kilometres of the existing underground workings.
The Financials
The company estimated the 2016 exploration program at about $1.2 million before the additional 3,400 meters of surface drilling were added.
But with $6.5 million in cash when it started the year’s exploration, it has more than enough funds for more drilling down the line, with about $4 million on hand in August.
Much of that money came from the initial cash handed over as part of the First Majestic deal, but the company also topped up its coffers last November with a private placement of 16.7 million units at $0.15 each for $2.25 million in proceeds.
Since then, the company’s share price has been on a tear along with the price of silver, climbing from around $0.15 cents in early February to just over $4 recently.
A jump in silver prices from under $14 an oz. to over $20 this year has certainly been a boon to the company, but Silvercrest is also well-placed to reap any upward momentum in the market.
With only about 40.8 million shares out, or 51 million fully diluted, the company’s share price has been able to respond well to price swings in the market. It also means there is still breathing room for further financings down the road.
Silvercrest should have little problem raising more money if it wishes, with its last placement oversubscribed, including almost 4 million units sold to insiders.
Management and the board now control about 14% of the company, with institutional holdings of 21% including Sprott Asset Management, AGF, and Donald Smith & Co.
Looking Ahead
With several potential exploration properties Silvercrest could ramp up spending, but for now looks to keep a restrained budget and focus on Las Chispas.
Earlier this year the company tested its wholly-owned 800 hectare Huasabas property located in the same region of Sonora as Chispas, but a 1,100-meter drill program came up short.
The five drill holes did identify what looked to be a large epithermal system with up to 225 meters of drill intercepted breccias, stockwork veining and banded veins in Tertiary volcanics, but with drill results returning intercepts ranging from 5 to 10 meters wide grading 0.1 to 0.3 g/t Au and 5 to 15 g/t Ag., the company has decided to focus its efforts on Las Chispas for the time being.
Along with Huasabas, Silvercrest also controls the 452 hectare Cruz de Mayo project and the 619 hectare Silver Angel property that sit in the general region of Las Chispas, while the company’s 2,400-hectare Estacion Llano property sitting a little further afield in Sonora. The company has no plans to explore these properties, but notes that upkeep costs on them are quite low.
Finally, the company also has its 4,760 hectare Guadalupe property in Mexico’s Durango State that it received from First Majestic. The company has no plans to drill the property, but Santa Cruz Silver Mining recently discovered the Gavilanes deposit immediately adjacent to the property and Primero Mining’s San Dimas mine sits about 20 km southwest.
But the clear focus is on Las Chispas with it’s proven historic riches and promising early results. Drill results show high-grade potential and continuity, while further underground rehabilitation and upcoming follow-up drill programs will move the company towards an initial resource estimate by H1 2017 and a clearer picture of just how quickly the company might transition to a small high-grade underground operation.
For the time being though, the company is cashed up, has an intriguing property in politically-stable Mexico, and a proven management team that knows the area. The market has already taken notice of the company’s potential, it’s now up to management to deliver. The tremendous success and wealth created by long-time investors like myself in Silvercrest Mines’ team already gives me big confidence in the continuation of their exploration and development achievements with Silvercrest Metals and deliver investors a strong encore (share) performance!
- Peter Spina, President of SilverSeek.com
Silvercrestmetals.com
(TSX-V:SIL | OTC: SVCMF)
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