Cylindrical brick stacks poking out of the barren hill sides can be seen from miles away. But curiously, they don’t attach at the base to any grand warehouse or factory.
The stacks were built by the Cornish miners who dominated Mexican mining from early part of the 19th century until early part of the 20th century. The Cornish were at the forefront of mining technology at the time, which included the construction of these tall brick stacks as ventilation pipes designed to bring air into the underground tunnels.
Fortunately for Excalibur Resources (XBR-V) such crude ventilation units by today’s standards, only let the miners go so deep, leaving many ounces behind.
The company’s modern plan is to tackle the vast assortment of mineralized veins with a micro-mining technique. Excalibur has begun to mine numerous shallow, high grade veins that run across its Catanava Gold project — a property that spans 1.43-sq km. at the northern end of the mineralized series of veins that make up the Pinos Bonanza Gold district near Zacatecas Mexico.
The plan fits well with the current investor climate that is especially wary of excess risk as Excalibur is offering a low capex project, in a political stable country, in a region with plenty of historic gold deposits.
Catanava is host to five distinct mining areas over a 1-km strike with the most important veins on the property being the San Jose Bautista, Carmen and San Gil veins on the eastern flank of the property, and the Cinco Estrellas, San Miguel, Tanous and the Guapo veins on the western flank of the property. All of those veins mentioned have historic shafts dug into them.
“There is much work to be done especially since we are starting at surface and expect there to be at least 500 metres of mineralization,” Hector Gonzales, chief geologist at the project says.
The projection of mineralization carrying down to a depth of 500 metres is based not only the typical depth of epithermal systems in the region but also on the fact that Cornish miners, in select places, mined down to 300 metres before their air stacks forbade them from going any further.
“Really we are an exploration-mine,” Gonzales continues. “We are trying to be a self-sustaining junior miner that is not dependent on ongoing equity financings.”
But planning on generating cashflow from mining to fund further exploration is one thing — executing on the strategy is another.
On that front Excalibur has been taking some significant steps, with the most integral one being the construction of a fully permitted mill on the site.
The 150 tonne capacity facility cost $2.7 million to build and was completed last fall. The circuit is made up of a primary and secondary crusher, a cone crusher, a ball mill and gravity tables.
As with most new mills this one has suffered its share of set backs. The most prominent being the intermittent malfunction of the cone crusher. To get a better handle on the operation Excalibur brought in Jose Luis Vigil as plant manager in late January. Vigil, a metallurgist by training, formerly worked at Goldcorp’s (G-T, GG-N) Penasquito mine amongst others over his career.
He inherits a mine that has stockpiled roughly 1,360 tonnes of ore and produced roughly 2,000 kg of concentrate as well as a small three oz. test Dore bar.
The mill has been processing ore from the Camino, San Gil and San Miguelito veins where underground development began in earnest last October. Since then Excalibur has advanced 130 metres on three adits as it has blasted 40 metres into El Camino, 60 metres into San Gil and 30 metres into San Miguelito.
Mining at the veins is being done at a rate of two blasts and one shift per day. Enough to get production up to 40 tonnes per day.
Tim Gallagher, Excalibur’s chief executive officer, says the goal is to expand to three shifts per day which will help the mill reach commercial production in June of this year.
Commercial production would involve the production of gold concentrate rather than Dore bars initially.
Getting to commercial production would be an important landmark for the company given the deal structure that allowed it to get in on Catanava.
The company’s Mexican gold mining adventure began in earnest in September of 2010 when it signed a deal with Minera Apolo to form Minera Catanava. The deal gave Excalibur 49% of the company with Minera Apolo holding the rest.
To earn that 49% stake, Excalibur agreed to fully fund exploration and mill construction up until two months of commercial production are achieved. After that the two companies will share expenses according to their ownership share.
And while the project lacks a prefeasibility study, Gallagher says the goal is to produce 1,000 oz. per month which, at today’s gold prices, would generate $1.7 million per month in profits.
While that sort of production level won’t overwhelm investors, the idea is to keep things intentionally small to mitigate cost overruns and operational risks. The relatively small but tidy cashflows Excalibur plans to generate would then be pushed out into a dividend for shareholders.
Currently the company’s burn rate is $100,000 per month and as of November of last year it had roughly $980,000 in cash on its balance sheet but then raised $1.45 million in late December through a non-brokered private placement.
Looking for more
Given Catanava’s rich history it isn’t surprising that Excalibur’s recent exploration program would focus on mapping and sampling the old mines and re-logging the drill holes cut by previous operators.
At the past producing El Camino Mine high grade gold veins were expanded and new high grade silver and gold mineralization was found both at surface and underground. Sampling in the old mine workings returned 13.2 grams gold and 28.2 grams silver per tonne over 0.5 metres and 6.7 grams gold and 47.8 grams silver over 0.66 metres.
Vein-channel samples at El Camino and San Gil returned values up to 457 grams silver and 1.23 grams gold over 0.8 metres.
At the San Miguelito Mine high grade gold was found at Levels 01 and 02 of the past producing mine, roughly 10 to 25 metres below surface. The San Miguelito vein belongs is part of the Cinco Estrellas and Tanous vein system, a major mineralized trend that extends over a 5-km in total, of which the Catanava property hosts 700 metres. Highlight assays from San Miguelito included 0.97 metres grading 7.69 grams gold and 32.6 grams silver.
An Illustrious past
Gold and silver were discovered at Pinos back in 1575 and the area was mined by the Spanish until 1821. The Mexican Civil War, however, decimated the mining industry and in an effort to revive it after the war the government turned to the English for both financing and mining know-how.
The most distinguished miners in England were the Cornish and by the middle of the 19th century thousands had made the long sea voyage to Mexico, bringing with them the tools of their trade. They continued to be key cogs in the Mexican mining industry right up until the Mexican Revolution shut things down again in 1910.
One of the highlight periods in those earlier days was the 1871 gold rush at Pinos which came after high-grade gold and silver were discovered in the foot hills. The find resulted in four separate small-scale roasters being built in the area.
As mentioned earlier, the historic mining didn’t go very deep, with most of it stopping at the water level — roughly 110 metres down. Pumps were installed only in a few especially high grade zones allowing the miners to go down the 290 metre level.
Despite its illustrious past exploration in the 20th Century was sporadic at best with more modern mining exploration techniques coming only in 1960 with the arrival of Canadian Tanous.
Then in 1975, Bethlehem Steel arrived on the scene thanks to Don McLeroy — who is the founder and president of Excalibur’s joint venture partner at Catanava, Minera Apolo.
McLeroy oversaw the acquisition of land in and around Catanava after the country’s former minister of mines, who held the key claims, died and the claims were allowed to lapse.
Along with Industrias Penoles, Bethlehem Steel launched an exploration program and rehabilitated some of the old shafts. The work led to a non-compliant resource of some 4.9 million tonnes grading 3.86 grams gold and 36.6 grams silver down to the 250 metre level.
On top of that, Bethlehem estimated there was still 300,000 tonnes grading 1.54 grams gold and 64.5 grams of silver in surface dumps, and 500,000 tonnes of tailings grading 1.7grams gold and 20 grams silver.
Much of than information came out of an economic study done on the ground back in 1981. Before it could pursue matters further, however, Bethlehem went bankrupt and eventually sold the claims to Pinoles for just $3 million.
While Bethlehem was done, McLeroy wasn’t. In the early 1990s he began buying claims back from Pinoles and in 1994 he sold an option to All-North Resources, which went on to refurbish the San Gil shaft and explored the San Gil vein structure.
Then in 1996, Hecla Mining (HL-N) arrived nearby at Pinos and drilled 27 reverse circulation holes south and east of the southern boundary of the Catanava Gold Property with the closest drill hole coming within 20 metres of the boundary. That hole hit 3 metres grading 2.2 grams gold and 13.5 grams silver at 202 metres down hole.
Eventually Hecla left, but McLeroy’s dogged determination to consolidate the area continued unabated, and by 2003 he took hold of a final claim which gave Minera Apolo 99% of the property he fell in love with back in the Bethlehem Steel days.
With the land locked up a period of quite descended on the picturesque landscape until Romarco Minerals (R-T) took an option on the property in 2006. The Company drilled eight holes with vein intersections in seven of them highlighted by 6.05 metres grading 5.16 grams gold and 19 grams silver.
Romarco also extensively sampled underground workings at the Tanous and San Miguelito shafts. At the Tanous shaft, values ranged to 7.2 grams gold and 142 grams silver, while at the San Miguelito shaft, values ranged to 6.94 grams gold and 43 grams silver, interval widths, however are unknown.
That past work combined with the work being done today by Excalibur has the company confident that the narrow veins gold and silver veins at Catanava are related to compressive and extensional phases associated with the early Cretaceous Laramide orogeny within a back-arc environment in the accretion of the Guerrero Terrane against ancestral Mexico.
Catanava is a low-sulphidation epithermal chalcedony-ginguro deposit with veins averaging 1.2 metres to 1.5 metres wide with stringers and veinlets in an immediate clay-altered wall rock alteration zone.
The mineralized area sits in the Rio Santa Maria and San Luis Tepehuanes Fault Zone, which marks the boundary between the Guerrero Terrane and the Santa Maria Occidental Volcanic Province.
It’s a rich geological story, mirrored by a rich mining history. Now Excalibur is looking to guide it into a rich future gold yield for its shareholders.
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