“We started working with our joint venture partner, Intrepid Mines, back in 2006 on the Taviche Property. Intrepid Mines have an option with Pan American Silver on these properties—East Taviche, West Taviche and Alma Delia, a property acquired after that agreement—and Intrepid asked us to come in and be a joint venture with them. We started to do some significant drilling back in 2008 in an area called Higo Blanco, and that year we released the first holes. And that’s what propelled the stock. Since that time we’ve had very good holes, and we’ve been continuing to deliver more.
“This is a system that is approximately two kilometres long. If you’ve got two kilometres of fairly decent mineralization over wide widths, you have a mine. So what we’ve been doing is trying to step-out from those initial holes and determine two things: how far does the mineralization go, and where’s the source. At this stage we have not found the source, although in hole 35 there seems to be some indication that we’re coming closer to it. However we have identified that with the mineralization close to surface—from surface to 200 metres—we have this continuous stratified layer of silver and gold mineralization that is quite exciting. In the last press release we showed a couple of holes that we did—28 and 29—that had lower grades, but over an extensive width. Which according to our geologist is very important. We’re getting over 100 metres of gold and silver mineralization. We’ve got 57 metres of over 90 g/t silver, and then we have the gold-bearing side.
“It’s an ongoing process. After hole 35 we’ll be regrouping. I’ll be flying down to Mexico next week, to take a look at the geology, figure out exactly where we want to go in terms of the next drilling program.
“We have to put a resource estimate together before September 1. That’s a requirement of the option agreement with Pan American. They have to see that resource September 1, and then they can make a decision whether they want to continue with their 30% or allow us to dilute them down. We have diluted Intrepid down to a point where if the JV was exercised today we would own over 46% of the entire property, Intrepid 23% and Pan American 30%. So we do have to put the resource together. At this stage, we don’t know. We basically have to sit our geologists down and have them compute the numbers and see what we have. My guess is that Higo Blanco will not be huge yet—because we haven’t got enough drill holes in the ground. But we’re excited about the prospect. When you get 300 grams, 500 grams, 600 grams, and there was one interval that had 2.5 kilograms of silver over a reasonable width—there’s something there. And it’s something that no one can walk away from. We just have to continue to drill.
“We are not production people. We don’t have miners in our management. Unless we make a conscious decision to bring people in who understand how to mine, my guess is we’ll enter into partnerships with established miners. In my discussions with Pan American Silver—and we have a great relationship with them—they’ve told us that once we’ve put the resource together, once it becomes mineable, they would like to be operators. And, quite frankly, who else would you want to operate a mine but Pan American? And I’d be happy to be a partner with them. The quid pro quo is they would like us to develop other properties that they have as operators. So there’s going to be a working relationship going forward with Pan Am.
“Where we are in Mexico is great. We have not had any problems at all. The bad guys tend to be further up north. It’s basically a rural community where we are. Our office is in a very small town that’s very supportive of us. There’s been no violence in our area—well, in 2005, there was a teachers’ strike in Oaxaca where a few people were injured, but that was negotiated away. Since that time there has been no violence, no threats. The towns love us because we have an ongoing policy 1) to employ people, and 2) to help them out with infrastructure in their area in terms of road building, bridge building. And we’ve helped with the purchase of computers for some schools. That’s the type of relationship we want with the communities. And we’re becoming well known in the Oaxaca State for being a community-friendly company.
“Moreover, the first time I went down there—we were doing a lot of trenching to determine what the grades were—and the locals were doing the work. They were great workers; the trenches were impeccable, they did a fabulous job.
“We’re going to have a mine there. I firmly believe we’ll have a mine there. The geology, as anywhere in Mexico, is difficult. Where we thought we would find the source of this close-to-surface silver we went empty; now we think the whole system dips to the southwest, so we’re changing our drilling pattern to try to hit that dip. But it’s a very positive gold-silver district, and it’s going to work out.
“The other thing to think about, is that our West Taviche concession surrounds Fortuna Silver’s San Jose Mine. The San Jose Mine will be operating by Q3 this year. It has a reserve of 25 million ounces silver—that’s silver equivalent, which includes gold—and they have an inferred resource of another 25 million ounces. And we surround it. San Jose’s resource butts-up against the boundary between ourselves and Fortuna, and it’s obvious that their resource goes onto our property. We’ve yet to get approval from the community to drill on that part of our property, but we’re coming very close. We’ve had great discussions with the Mayor, and they do want to work with us. I think we’ll be drilling there in a couple of months, which means we’ll probably find the other half of Fortuna’s San Jose Mine resource.”
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