Cream is Born Again in Mexico
By Ted Niles
The turnaround in the fortunes of Cream Minerals demonstrates that what is undesired isn’t always necessarily undesirable. In the fall of 2010 the company was in possession of a promising silver-gold asset in Mexico’s Nayarit State, but it was—in President and CEO Michael O’Connor’s words— “chronically underfunded, with about $1.8 million in debt,” making any progress there nearly impossible. So when Endeavour Silver launched a hostile takeover bid in October 2010, it is doubtful that anyone at Cream was thinking of the potential upside. But not only did enough of the moribund company’s shareholders feel they were being low-balled that the bid was withdrawn two months later, Cream’s survival resulted in a $6 million bought-deal private placement. Suddenly its debts were paid, and it had a tidy sum of cash.
Cream was then able to initiate in February 2011 a 20,000-metre drill program on its flagship Nuevo Milenio project. Located 27 kilometres from Tepic, the capital of Nayarit, it consists of 2,560 hectares and has a 2008 NI 43-101 inferred resource estimate of 41 million ounces silver at an average grade of 251.1 grams per tonne and 271,482 ounces gold at an average grade of 1.7 g/t.
“The objective of the current drill program,” explains O’Connor, “is to produce enough data to do another 43-101 and upgrade as much of the inferred to indicated as we can.”
O’Connor continues, “When we move from the side and down to the floor of the caldera, there are four mineralized zones that we know of [i.e. Dos Hornos 1, Dos Hornos 2, Veta Tomas and Once Bocas]. Of those four, three are good exploration targets. The fourth one comprises part of the inferred mineral resource, so we’re drilling that infill at 25-metre spacing.” Exploration drilling will consist of a minimum of 6,000 metres at 50-metre spacing, which O’Connor anticipates will be sufficient for a new inferred resource.
Infill drilling at Dos Hornos 2, reported August 18, includes assays of 103.17 g/t silver and 0.97 gold over 17.5 metres, 115.18 g/t silver and 0.73 g/t gold over 8 metres, 73.24 g/t silver and 0.68 g/t gold over 10 metres and 42.67 g/t silver and 0.21 g/t gold over 13 metres. Step-out drilling at Dos Hornos 1 returned June 21 assays of 151.4 g/t silver and 0.39 g/t gold over 4.6 metres, 105.32 g/t silver and 0.65 g/t gold over 5 metres and 140 g/t silver and 0.83 g/t gold over 5.2 metres. Of the former results, O’Connor comments, “We’re happy with them. If people were to look at these assays and the 43-101 for Dos Hornos 2 and average them out, you’re going to be pretty close to what we reported in the 43-101.”
When you get up into the 150-million-ounce and higher range, with reasonably good grades and good metallurgy, these kinds of projects become attractive to larger producers —Michael O’Connor
The current resource is contained within only 600 hectares of the property. O’Connor points out that Nuevo Milenio offers a number of other as yet untested targets over its five kilometres of mineralized strike length. “If we go a little bit further to the west, further down the caldera floor, there are two zones,” he reports. And both present “blue sky” exploration targets.
As to the timeline for an updated resource at Nuevo Milenio, O’Connor presents two scenarios: “If we’re going to do a 43-101 on just the inferred, we’re probably looking at the end of October 2011. If we decide to do a 43-101 on everything—pull in the inferred and pull in the exploration data and just have a new project-life 43-101—I think that would push us towards the end of December 2011, early January 2012.” He relates, “A couple of geologists from ACA Howe are doing a property visit. They’re going to look at the infill work and the exploration work done to date. I’ll chat with them and we’ll make a decision as to whether or not we do two [resources] or one big one. We’re probably thinking about doing one big one.”
In the event that Cream does the “big one,” O’Connor expects that the next step would be a preliminary economic analysis. “At the same time we’ll map out another 20,000 metres of drilling,” he adds. “I think it might take 50,000 metres overall to get to where we’d want to be.”
Cream is keeping its long-term options open. The company’s metallurgical work suggests very positive recovery rates, and the project has good access to infrastructure—water, power, rail and the Tepic airport all within 14 kilometres—promising low-capital costs. O’Connor enthuses, “The capital costs could be under $200 million. But when you get up into the 150-million-ounce and higher range, with reasonably good grades and good metallurgy, these kinds of projects become attractive to larger producers. There is the possibility that we could put it in play, create an auction, and see what we can get, or somebody may just show up and make an offer.”
O’Connor concludes, “When we were flat broke and carrying $1.8 million in debt, we looked at auctioning off the property for $5 million cash up front and an additional exploration commitment. We had several companies looking at the project—Minco Silver, for instance. At the same time, Endeavour Silver launched its hostile takeover bid. Logically, what all that tells me is that Nuevo Milenio is a high-potential project.”
Cream Minerals has 152.2 million shares currently trading at $0.155 for a market cap of $23.6 million.