SilverCrest Metals aims to repeat success in Mexico

A worker at SilverCrest Metals' Las Chispas property in Sonora, Mexico. Credit: SilverCrest MetalsA worker at SilverCrest Metals' Las Chispas property in Sonora, Mexico. Credit: SilverCrest Metals

VANCOUVER — The ink has now dried on a $154-million agreement that has seen First Majestic Silver (TSX: FR; NYSE: AG) snap up and merge with SilverCrest Mines and its Santa Elena silver-gold operation in Sonora, Mexico, but president and CEO of the newly minted spin-off SilverCrest Metals (TSXV: SIL; US-OTC: SVCMF) Eric Fier is already talking about building the next mine.

The companies completed the merger in October, with SilverCrest Mines shareholders receiving 0.2769 of a First Majestic Silver share, plus $0.0001 in cash per share. SilverCrest Mines shareholders ended up with a 23% stake in First Majestic Silver and 0.1667 of a share in the SilverCrest Metals’ spin-out vehicle, which has two gold-silver exploration plays.

CEO Fier, who was formerly chief operating officer at SilverCrest Mines, concedes during an interview that, “our challenge always involved our discount in the market, based on the fact that we were a single-asset company. We were considered higher risk, despite Santa Elena proving to be a great mine. I had a lot of difficulty over the past two years trying to find our next opportunity.”

As far as picking a company to go into business with, he says “we thought First Majestic was a really great fit. I want to emphasize the future here, because it is essentially a deal where we are becoming major investors. We want to see the rising tide because we all believe in the cyclical nature of the business. This wasn’t a desperation deal, but more of a strategic move for our shareholders.”

Fier is quick to point out that SilverCrest came away with a team composed of production and geological personnel from Santa Elena, which this team is eager to get to work on opportunities in Mexico.

The company also ended up with $5.3 million in cash after the takeover, and raised $2.3 million in an over-subscribed private placement, where it issued 16.7 million units at 15¢ each. A unit consists of a share and half a warrant exercisable at 20¢ within two years.

Some of the money will be spent at SilverCrest’s new Las Chispas property, which lies 180 km northeast of Hermosillo along the northern end of the Santa Elena trend. Several mines in the area produced 120 million oz. silver and 200,000 oz. gold between 1880 and 1930.

Geologically, Las Chispas holds a Late Cretaceous–Early Tertiary low sulphidation epithermal system. Host rocks are volcanic tuffs, rhyolites, agglomerates and rhyolite breccias. Andesite dykes are noted in underground workings subparallel to mineralized structures.

“We’ve worked on securing the deal for Las Chispas for the past two years, and it will be our flagship opportunity. You have to think of it as a historic gold-silver district,” Fier says. “It wasn’t available during the past silver rushes into Mexico, due to a property dispute we’ve now resolved. Our strategy was that certain properties in our portfolio were simply not going to be part of the deal with First Majestic, and this was right at the top of the list.”

“There’s a ton of targets and smoke here in the form of attractive grades at surface and over 5 km of underground workings. We’re in the middle of prioritizing our targets, and looking for that low-hanging fruit. It all revolves around 14 epithermal veins, of which two have been mined. Plus there’s another part of the property with five separate veins, so there is plenty of opportunity for discovery,” he says.

The historical producing areas include Las Chispas, Guillermo Tell and Babicanora.

Mineralization occurs in 0.5- to 5-metre wide veins, with adjacent stockwork and breccias trending northwest–southeast for over 1 km, with an estimated 300-metre depth from surface of known mineralization.

SilverCrest is permitting the site for exploration, and hopes to mobilize drill rigs before March 2016. Fier says the budget is pegged at $750,000, which will help the company target near-surface vein extensions and the low-hanging fruit.

SilverCrest will also finish a smaller drill program at its greenfield Huasabas property, 190 km northeast of Hermosillo.

Previous field sampling at the target has returned anomalous gold, silver, mercury, antimony and barium occurring in veins, stockworks and breccias, across 1 km of strike length.

Fier says that Huasabas “tastes and smells” a lot like Santa Elena, and that since the target is easily accessible by road, it can be drilled relatively quickly and at a lower cost.

SilverCrest will apply what it calls a “drill to kill” mentality, where it culls projects quickly if it cannot make a discovery.

“Exploration is one half of our plan … [we’re] trying to get our market capitalization up so we can get excited about acquisition opportunities,” Fier says.

“We’ve revived our due diligence initiative in light of asset prices coming down yet again. Things look a lot more amenable to a deal now, and this would be advanced exploration to development properties. We want an opportunity where we can apply the staged-build, Santa Elena success model,” he says.

SilverCrest Metals shares have moved between 14¢ and 20¢ since trading in October, and closed at 16¢ per share at press time.

The company has 23.2 million shares outstanding for a $4-million market capitalization.


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