Defiance Silver (DEF-V) May 16, '14 that was recently published by Investor's Digest of Canada
When it comes to silver mining, the Mexican state of Zacatecas has bragging rights. With good reason. Not only is it one of Mexico's top regions for silver production, it's also one of the top-producing regions in the world. Over the past five centuries, for example, Zacatecas' mines are said to have yielded more than one billion ounces of silver. Which is obviously good news for Defiance Silver Corp, a junior mining play based in Vancouver.
Defiance has a purchase option for an extremely attractive property just minutes from the beautiful city of Zacatecas. The property, Veta Grande, encompasses the workings of a mine that was once in production, along a major structural corridor that's hosted several other mines. Zacatecas is built around major mining projects, while the 250,000 souls who live there have a strong mining tradition.
Defiance, of course, isn't the only foreign mining outfit to have set up shop in Mexico. Over the last decade, many non-Mexican companies have put down roots, fueling an exploration boom that's resulted in the discovery of several deposits in places once thought to be played out.
One of the first companies to strike pay dirt was Capstone Mining Corp. (CS-T), a Vancouver-based outfit, which restarted production at the Cozamin mine in 2006. Since Cozamin is just four kilometres down the road from Veta Grande, Capstone's success is obviously significant for Defiance. Meanwhile, to build a producing operation around an historic mining site, the company is committed to a similar business model.
And to outline the necessary new resource zones, Defiance can call on its team of experienced geologists - geologists who have an excellent track record. Indeed, the company's senior execs have played a part in the successful development of no fewer than 11 other mines.
Defiance's strategy for Veta Grande is twofold. Not only does it hope to identify remnant resource zones that can support new mining, it also hopes to keep exploring to find new resources that were overlooked beyond the historic mine workings. And it's a good bet the company will succeed on both counts.
In the past, mining companies at Veta Grande focused on shoots of ore that were very high grade, often using lower grades as backfill in the underground workings. About 720,000 tonnes of this backfill has now been outlined, with reported sample grades averaging more than seven ounces of silver a tonne. This is richer than the primary ore mined by some other silver producers.
Technology is key. With the use of modern mining and processing technology, this resource could supplement new mining at Veta Grande. In the meantime, Defiance has worked to outline a higher grade resource block that would be suitable for underground mining.
The company is also updating a resource estimate for this material that would be compliant with NI43-101 reporting standards. After that, it will look to expand the tonnage with subsequent work programs.
For their part, the project's geologists believe the vein system extends far deeper than the lowest developed levels of the old mines. Technology that was used in the past at Veta Grande was inefficient in dealing with sulphide ores lying below 200 metres, resulting in mining being halted when the rock transitioned to sulphide. But because a nearby mine working the same vein operated in the sulphides at much lower levels, there's a good chance Defiance may be successful as it starts exploring at greater depths in its own project area. There's also the potential for the discovery of parallel veins and offshoots that were overlooked by the previous operators.
For its part, the company is planning a comprehensive exploration program for later this year. Meanwhile, Defiance is applying for drill permits. It's also negotiating with local land owners to forge a deal that will allow for a full-scale drilling program - one with at least 2,500 meters of drilling in the first phase.
Admittedly, the last two years haven't been kind to junior mining plays like Defiance. Capital funding has been hard to come by. And many projects have stalled because of lack of money. But to its credit, Defiance recently raised $1.2 million in cash to move Veta Grande further along the value curve.
The company was also able to renegotiate the terms of its option deal, extending the time window before the full purchase price is due.
To sum up, Defiance has definitely covered its bases. For starters, it boasts an experienced and highly respected management team - no small advantage, given the difficult mining market.
The company also has an excellent package of properties in one of the best places in the world for successful silver mining.
Moreover, a significant resource has already been defined, while exceptional potential exists for increasing the total resources as exploration is completed.
In addition, Defiance has been able to scare up enough cash to move forward, although its capital structure is reasonable with about 50 million shares outstanding.
True, precious metals have recently been taking it on the chin. But the world is going to continue to demand a plentiful supply of raw materials. And a mining-friendly jurisdiction like Mexico provides a great place for investors to take advantage of this.
Eventually, conditions will transition to a more bullish state and I think juniors like Defiance Silver will do very well.
Mike Kachanovsky, who's based in Lindsay, Ont., is a freelance writer specializing in junior mining stocks. He can be reached at mexicomines@gmail.com.
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