Mexico Snapshot: Eight companies to watch

Orla Mining's Cerro Quema project in Mexico. Credit: Orla Mining.

Mexico is an attractive destination for Canadian miners with its mining-friendly policies, prospective mineral belts and well-developed infrastructure and legislation. Below, we provide an overview of eight companies with exploration, development and production-stage assets in the country. 

Americas Gold and Silver

LHD loader at Americas Gold & Silver Cosala project’s San Rafael mine in Mexico. Credit: Americas Gold & Silver

Americas Gold and Silver (TSX: USA; NYSE: USAS) is a precious metals producer with operations in Mexico and the United States. These include the Cosala operations in Sinaloa state as well as the Galena silver-lead complex and the Relief Canyon gold mine in Idaho and Nevada, respectively.

In February, Relief Canyon poured its first gold; the open pit heap leach operation expects to reach commercial production in the third quarter of this year. With a mine life forecast of six years, the 117-sq.-km site features proven and probable reserves of 27.2 million tonnes grading 0.75 gram gold per tonne for a total of 653,000 oz. gold. Over 80% of the holdings remain unexplored. The company expects Relief Canyon to churn out approximately 90,000 oz. per year at all-in sustaining costs (AISCs) around US$800 per ounce.

The wholly owned Cosala operations cover 194 sq. km and are 240 km northeast of Mazatlan, the closest major city. This site includes the San Rafael, El Cajon and Nuestra Senora mines with a central processing plant. In February, access to Cosala became restricted due to a blockade by a minority of the company’s unionized workers. In addition, at the end of March, the Mexican government temporarily suspended mining in the country. With this second restriction now lifted, Americas Gold and Silver anticipates a restart of mining at Cosala in the second half of this year.

At the company’s 60%-owned Galena complex (40% held by Eric Sprott), a revamp is underway, aimed at modernizing infrastructure, adding mining equipment and developing new stopes. This mine has been in production for over 50 years and has churned out over 250 million oz. silver as well as lead and copper byproducts. An additional 39,000 metres of exploration drilling is underway, targeting up- and down-dip extensions of known veins.

Last year, the company produced 1.2 million oz. silver, or 14,000 oz. gold-equivalent, at all-in sustaining costs (AISCs) of US$1,100 per ounce gold-equivalent. This number is expected to grow to 90,000-110,000 oz. gold-equivalent by 2021, at AISCs of US$850-$1,050 per oz. as Relief Canyon becomes a cornerstone asset.

Americas Gold and Silver has a $493.9-million market capitalization.

Minera Alamos

Minera Alamos’ Santana gold project in Sonora state, Mexico. Credit: Minera Alamos.

Minera Alamos (TSXV: MAI) is developing the wholly owned Santana open-pit heap leach gold project in Mexico’s Sonora state and holds the pre-development La Fortuna gold-silver-copper asset in Durango state.

As of June, the heap leach area at Santana was cleared; bypass roads around the leach pad were being built; and the company had selected an earthworks contractor. A 2,000-tonne per day mill for La Fortuna has also been purchased, and permits are expected in the second half of this year.

Construction activity at the 85-sq.-km Santana project started in January and mining is expected by year-end or the first quarter of 2021. In January, the company entered into a purchase agreement for a crushing, screening and agglomeration system, for staged payments of $1.2 million.

Minera Alamos estimates that the initial 25,000-30,000 oz. per year operation will require approximately $10 million in capital to build.

Since 2018, about 50,000 tonnes of mineralized material were mined at Santana on a trial basis, with recovered grades at over 0.67 gram gold per tonne.

The development project hosts prospective exploration targets, including the Divisadero and Nicho Norte zones. Minera plans to drill 6,000- 7,500 metres this year, with a maiden resource estimate for the property expected by year-end.

Minera Alamos also holds the 62-sq.-km La Fortuna project. A 2018 preliminary economic assessment (PEA) outlines an open-pit operation producing an average of 50,000 oz. gold-equivalent annually over a five-year mine life. With AISCs pegged at US$440 per oz. and a pre-production capital outlay of US$26.9 million, the associated project’s post-tax net present value estimate, at a 7.5% discount rate, came in at US$69.8 million.

In August, the company also announced that it had finalized an agreement to acquire a 100% interest in the Cerro de Oro gold project in Zacatecas state, which is surrounded by Minera Alamos’ existing holdings and boosts its properties within the Concepcion del Oro district to 65 square kilometres. Cerro de Oro features a disseminated gold system with 8,200 metres of historic drilling. The company will make total payments of US$2.9 million and issue 4 million shares to the vendor, over a 48-month period, in exchange for the acquisition.

Osisko Royalties currently holds 18.7% of the company’s shares.

Minera Alamos has a $269.1-million market capitalization.

Orla Mining

Orla Mining’s Camino Rojo gold property in Mexico. Credit: Orla Mining.

Orla Mining (TSX: OLA) is developing the oxide phase of its Camino Rojo project in Mexico’s Zacatecas state, 50 km southeast of Newmont’s (TSX: NGT; NYSE: NEM) Penasquito mine. Camino Rojo covers approximately 2,060 sq. km and includes an oxide gold-silver deposit as well as a deeper gold-silver-zinc-lead resource.

Orla has received one of the two permits required for the oxide operation at Camino Rojo — the second is expected in the third quarter. Once the two permits are in place, construction will be able to start.

A definitive feasibility study for the Camino Rojo oxide project completed last year outlines an 18,000-tonne per day open pit, heap leach operation with a mine life of over six years, producing an average of 97,000 oz. gold annually at AISCs of US$576 per ounce. With an initial capital outlay of US$123 million, the after-tax net present value estimate for the project came in at US$142 million, at a 5% discount rate, based on a US$1,250 per oz. gold price.

The 2019 feasibility outlined a mineral reserve of 44 million tonnes at 0.73 gram gold and 14.2 grams silver per tonne, containing 1 million oz. gold and 20.1 million oz. silver. These reserves are within measured and indicated resources of 353.4 million tonnes grading 0.83 gram gold and 8.83 grams silver, which includes 94.6 million tonnes of leachable material. Inferred resources add 60.9 million tonnes to the company’s inventory, at 0.87 gram gold and 7.41 grams silver.

In April, Orla closed a $75-million bought deal financing. Net proceeds are expected to be deployed towards the development and construction of the oxide phase of Camino Rojo.

In October 2019, the company entered into a commitment letter with Trinity Capital Partners for a secured project finance facility of up to US$125 million, for development of the oxide portion of Camino Rojo. The syndicate of lenders includes Pierre Lassonde and Agnico Eagle Mines (TSX: AEM; NYSE: AEM).

The company also wholly owns the 148.3-sq.-km Cerro Quema oxide heap leach project in Panama, with reserves of 19.7 million tonnes grading 0.77 gram gold, containing 488,000 ounces. A 2014 feasibility study of the asset suggests a 10,000-tonne per day operation, producing an average of 79,000 oz. gold annually, at AISCs of $555 per oz., with an initial capital outlay of $117 million.

Orla Mining has a $1.5-billion market capitalization.

Sierra Metals


An aerial view of Sierra Metals’ Bolivar copper-silver-gold mine in Mexico. Credit: Sierra Metals.

Sierra Metals (TSX: SMT; NYSE: SMTS) is a South American-focused zinc, copper, gold, lead and silver producer with mines in Mexico and Peru.

The company’s largest production contributor is the 82%-owned Yauricocha underground mine in Peru’s Yauyos province, with additional output from the wholly owned Bolivar and Cusi sub-surface mines in Mexico’s Chihuahua state.

While Sierra Metals has suspended its production guidance for this year due to coronavirus-related suspensions mandated by the Peruvian and Mexican governments, Yauricocha and Bolivar restarted in June, and the Cusi mine started back up in July.

In the first six months of this year, Yauricocha produced 34.5 million lb. copper-equivalent, while Bolivar generated 17.5 million lb. copper-equivalent, and Cusi added 286,000 oz. silver-equivalent, for a total of 54 million lb. copper-equivalent in the first half of 2020.

The Yauricocha mine has been operating since 1948 and lies within a 180-sq.-km land package. Exploration at this flagship operation is focused on near-mine targets as well as on district-scale open pit and underground opportunities.

The 5,000-tonne-per-day Bolivar mine in Mexico’s Chihuahua state derives the majority of its revenues from copper and sits within a 152-sq.-km landholding, with Sierra exploring and developing additional targets at the property.

The company’s wholly owned Cusi mine, also in Chihuahua state, has been producing silver, gold, zinc and lead since 2013. Exploration work within the 117-sq.-km site is focused on the Cusi fault and on the Santa Rosa de Lima vein complex.

In Mexico, Sierra holds a total of over 900 sq. km of mining concessions.

Sierra Metals has a $364.7-million market capitalization.

SilverCrest Metals

Workers at a portal at SilverCrest Metals’ Las Chispas gold-silver project in Sonora, Mexico. Credit: SilverCrest Metals.

SilverCrest Metals (TSX: SIL; NYSE: SILV) is advancing its wholly owned high-grade Las Chispas project in Sonora state, 180 km northeast of Hermosillo. The 14-sq.-km site produced approximately 100 million oz. silver and 200,000 oz. gold between 1880 and 1930.

The property hosts an epithermal silver-gold system, with indicated resources of 1 million tonnes grading 710.6 grams silver and 6.98 grams gold, containing 39.8 million oz. silver-equivalent and inferred resources of 3.6 million tonnes, at 332.5 grams silver and 3.32 grams gold, for a further 68.1 million oz. silver-equivalent.

A preliminary economic assessment (PEA) completed for the asset in 2019 defines a 1,250-tonne per day underground operation, with an eight-and-a-half year life, which would produce an average of 7.6 million oz. silver and 81,600 oz. gold — or 13.7 million oz. silver-equivalent — in its first four years of operations at AISCs of US$4.89 per oz. silver-equivalent. With an initial capital cost estimate of US$100.5 million, the after-tax net present value estimate for the operation stands at US$506.9 million, with a 91% internal rate of return; at a 5% discount rate and based on US$16.68 per oz. silver price and US$1,269 per oz. gold.

Underground development at Las Chispas is underway, with access completed to eight working faces to feed the high-grade stockpile on site. One ventilation raise has also been advanced.

Concurrently with the development work, a feasibility study is also underway, expected near the end of 2020. Basic engineering was completed in May, long lead equipment orders are scheduled to start in the coming months.

SilverCrest has the major permits for Las Chispas in place.

As of June, eight drills were working at the site, with 70,000-metres planned by year-end, to extend high-grade resources within the Babicanora, Babi Sur, and Babi Vista veins, among others. In addition, 27 of the 42 known epithermal veins at Las Chispas, have not yet been drilled.

As of July, the company estimated that it had approximately US$161 million in cash.

Also in Mexico, SilverCrest holds the Cruz de Mayo silver-gold project, in Sonora state, host to a near-surface, low-sulphidation epithermal deposit.

SilverCrest Metals has a $1.4-billion market capitalization.

Sonoro Metals

Sonoro Metals (TSXV: SMO) is a gold and silver explorer focused on Mexico, and holds the Cerro Caliche and San Marcial projects in Sonora state.

In 2018, Sonoro entered into an option agreement to earn a 100% interest in the epithermal low-sulphidation Cerro Caliche property, in exchange for total payments of US$3 million, payable over 72 months. The 14-sq.-km property hosts 17 known areas of gold mineralization.

Cerro Caliche is host to an inferred resource of 11.5 million tonnes grading 0.5 gram gold and 4.3 grams silver containing a total of 201,000 oz. gold-equivalent. According to Sonoro, the majority of the material is oxidized and is expected to be amendable to heap leaching.

In June, the company executed its third memorandum of understanding (MOU) for the finance and development of a heap leach pilot operation at the site. The MOU was signed with a China-based EPC (engineering, procurement and construction) company. Sonoro expects to now receive EPC and project finance proposals over the coming weeks as travel restrictions in China, and internationally, are relaxed.

In September 2019, Sonoro established an office in China, to introduce the company to EPC companies in the country.

The first phase of this year’s exploration program at Cerro Caliche includes 6,000 metres of drilling, with 20 exploration targets. Overall, Sonoro is aiming to drill 50,000-metres at Cerro Caliche between 2020 and 2021, to infill known zones and test undrilled mineralized trends.

The company’s wholly owned, 10-sq.-km San Marcial gold-silver project is 30 km southwest of Cerro Caliche. Over the past few years, Sonoro has completed a soil geochemical survey at the site and identified seven mineralized zones. The company plans to complete a first-phase, 5,000-metre drill program at San Marcial next year.

In July, Sonoro announced a $5-million non-brokered private placement, and added a $3-million overallotment due to investor demand, with net proceeds intended for exploration and development work at Cerro Caliche.

Sonoro Metals has a $12.3-million market capitalization.

Telson Mining

Telson Mining’s Tahuehueto project site in Durango, Mexico. Credit: Telson Mining

Telson Mining (TSXV: TSN) wholly owns two mineral projects in Mexico – Tahuehueto and Campo Morado – in  Durango and Guerrero states, respectively.

The company’s 74.9-sq.-km Tahuehueto project in the Sierra Madre mineral belt is under construction, to build a 1,000 tonne per day underground mine, with production targeted for the second quarter of next year.

Based on a 2017 prefeasibility study, the site features reserves of 3.3 million tonnes grading 3.4 grams gold, 41.8 grams silver, 0.35% copper, 1.19% lead and 2.24% zinc. The study outlined an underground mine producing lead, copper and zinc concentrates. The 21-year operation would produce an average of 16,100 gold oz., 177,100 silver oz., 900,000 lb. of copper, 3.2 million lb. of lead and 5.6 million lb. of zinc each year, at a pre-production capital cost of US$32.2 million. The resulting after-tax net present value estimate, at an 8% discount rate, comes in at US$77 million.

In February 2017, Telson finalized the sale of lead and zinc concentrates generated from an industrial-scale bulk sample extracted from the El Creston zone at Tahuehueto. According to the company, the successful mining and processing of this material led its management team to a pre-production program at this site, which started in June 2017 and continued through to the third quarter of 2019. As a result, last year, Telson generated 32,558 tonnes of mineralized material and shipped 12,316 tonnes to the Atocha toll milling facility, which churned out 436 tonnes of lead and 547 tonnes of zinc concentrates.

Construction work at the Tahuehueto site started in January 2018. As of the end of July, mill construction is estimated to be 60% to 70% complete, processing equipment has been installed and the grinding and crushing areas are ready for equipment installation.  In mid-June, Telson signed an updated term sheet with a Mexican bank, which could provide the company with a US$12-million loan to fund the Tahuehueto construction.

Telson also holds the 2,500 tonne per day Campo Morado underground gold-silver-zinc-copper-lead mine, acquired in April 2017. This asset achieved commercial production in May 2018 but mining was suspended by the summer of 2019 due to declining metal prices. With increasing zinc prices, the mine was re-started in January 2020 but suspended by late March due to the Covid-19 pandemic. Activity at the site started back up in June.

In July, the company closed a $1.4-million non-brokered private placement.

Telson Mining has a $42.1-million market capitalization.

Torex Gold

Aerial view of Torex Gold's ELG mine complex in Mexico's Guerrero state

Aerial view of Torex Gold’s ELG mine complex in Mexico. Credit: Torex Gold.

Torex Gold (TSX: TXG) holds the 290-sq.-km Morelos gold property in Mexico’s Guerrero gold belt, 180 km southwest of Mexico City. The site holds the El Limon Guajes complex, which includes a 13,000-tonne per day processing facility and an open pit and underground mine, as well as the Media Luna underground deposit, 7 km from the El Limon Guajes plant.

At Media Luna, targeted for production by 2024, Torex intends to deploy its proprietary Muckahi mining method, which is being piloted at the El Limon Deep underground deposit. Muckahi involves a redesigned mining scenario, with continuous conveyor transport of broken rock directly from the stope to surface. Steep ramps (at 30°) featuring an electrified and automated dual monorail system would require less underground development and smaller tunnels. The track-based infrastructure would also transport personnel, supplies and development waste.

Last year, the company completed its first blast using the Muckahi system and, in the first quarter of 2020, drilled, blasted and mucked another longhole stope as part of its Muckahi testing and training program.

This year, due to the Covid-19 pandemic, Torex suspended production at El Limon Guajes in April. Processing of lower-grade material restarted in May, and full production resumed in June as the open pit and underground came back online. The company’s updated production guidance for 2020 – reissued in August  – stands at 390,000-420,000 oz. gold at AISCs of US$965-$1,025 per ounce.

The El Limon Guajes complex achieved commercial production in April 2016. Open-pit operations extract ore from three open pits at the site, while the underground includes the producing Sub-Sill and El Limon Deep deposits.

Media Luna, across the Balsas river, features measured and indicated resources of 12.6 million tonnes at 5.55 grams gold-equivalent per tonne, containing 2.2 million oz. gold-equivalent and inferred resources of 33.5 million tonnes grading 4.23 grams gold-equivalent, for a further 4.6 million oz. gold-equivalent.

In the second half of this year, Torex plans to start excavating an access tunnel under the river to access the deposit. A 2018 PEA for Media Luna outlines a 12-year operation, selling a total of 3.9 million oz. gold-equivalent at AISCs of US$619 per oz. gold-equivalent. Based on a project capital cost of US$496 million, the after-tax net present value is US$582 million, at a 5% discount rate.

Torex Gold has a $2-billion market capitalization.


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