Mexico has long been a destination for silver explorers, from the Conquistadors of Spain 500 years ago to the present day.
Silver accounted for over 70% of Mexico's exports from the late 16th century until the 1870s when under foreign rule and in this century the country has been the world’s leading producer of silver for several years, responsible for around 20% of global production.
Canadian firm Kootenay Silver Inc is well aware of that history and is actively engaged in the development of several major silver projects in Mexico, including the Columba and La Cigarra projects in Chihuahua, the Promontorio and La Negra projects in Sonora, and the Copalito high-grade silver-gold project in Sinaloa.
The company has one of the largest junior-owned silver asset bases in Mexico and a large generative portfolio of precious metals exploration projects.
Proactive sat down with Kootenay Silver president and CEO Jim MacDonald, to find out more about the lure of the silver explorer.
Proactive: On the Kootenay corporate website it says, “Quality Silver assets are scarce … we have several of them”. Can you tell us more about these assets?
Jim MacDonald: Yes, we do have several of them! When you look at Kootenay Silver you can see we have great leverage to the silver price due to our resource base, which is one of the largest in the junior space at 144 million ounces of measured indicated silver equivalent ounces and another 35.7 in the inferred category.
These are in two different deposits - La Cigarra, which is in the famous Parral district of Mexico and is the most prolific silver-producing areas historically. And then in the Promontorio property, our original discovery in Sonora. We have a third discovery, La Negra, which is on the Promontorio property, which does not have a resource estimate on it yet, but we're working on a geologic model for that.
The other assets we have that have really come to the fore, are particularly the Columba high-grade silver vein system that we've been drilling over the last two years with great success. Then there is a second high-grade vein system that we acquired a couple of years ago as well called Copalito, which is in Sinaloa state.
And we've got a lot of great results coming out of Copalito, which is a classic game system as well. It’s silver, gold, lead, and zinc, whereas Columba is pretty much a pure silver vein system. So we provide both the resource base and the real punchiness of the upside in new discoveries. And the Columba project has really come to the fore here in the last two years with some fantastic results and we now have several areas where we can see the size potential that that would be required. So next year's program is being designed now and basically it's going to be an aggressive large program where we're looking to drill define systematically all these different zones we have identified on the high-grade project.
You are focusing on Mexico, but you also recently unveiled plans to spin off your Canadian assets into a new company. What prompted that move?
Kootenay was originally started as a private company doing grassroots exploration in British Columbia, Canada, and we've been doing that exploration in the background for a long time now. We've developed some really good target areas of large land packages in geology that has the potential to provide true world-class discoveries. But we've never really had the resources to properly advance it because our Mexican assets have been our lead assets, for obvious reasons, and the money we have raised has been for advancing those Mexican assets.
So the Canadian assets are of value but that wasn't being reflected in our market cap at all. So we wanted to start advancing those now. We've brought them to the stage where we are going to develop some pretty exciting drill targets. We've got some joint ventures out on those projects as well. And so we want to spin it out so it could be a standalone company that would be raising money specifically to advance those assets.
You’ve said that Kootenay Silver is currently well-financed, so what's the current state of the finances and what length of time should they fund exploration for?
As of this date, the last stated financials are for the end of June 2021, and we're about to bring out our third quarters. We’re going to exit the year with about C$3 million after all the drilling and expenditures from this year. We’ve always been well funded along the way, it is one of the strengths of our company, and the depth of our board and experience come from that actual boot leather and hammer exploration stage all the way to building a mine and mining. So we like to keep ahead of the curve on the financing and generally our strategy is to finance when the opportunity is there, and then maybe go for a little bit more money than you need in the immediate future so that you are always coming in with a strong treasury.
The company recently expanded its land position at the Columba project, so are further expansions likely and could other project increases be expected?
We’ve made application for a large concession at Columba, over 10,000 hectares, and the reason for that is that we've come to recognize that what we see at surface is only a small part of the system and whatever is deposited there, it's just barely eroded. We're looking into a caldera, sort of a basin in the mountain top, so the erosion in that basin is just getting into the top of the veins. And we recognized during this year's exploration that those veins are extending laterally for quite a distance beyond what you can see in the exposed surface. So we noticed that the surrounding area was actually open to application for a large concession and wanted to grab that ground. So we think we are well covered there.
The other lead projects we have already have large land packages, so we don't anticipate adding to those currently. I will say, however, that we're constantly on the lookout for new opportunities in Mexico that have large-scale potential. So, as opposed to acquiring through staking or concession application, we may acquire something that is already there and owned by somebody else. That was the case for Columba and Copalito where we acquired the rights to earn 100% of those projects a couple of years ago when there wasn't much interest in the silver market. So that's kind of a contrarian strategy that we follow and we're always constantly in the background at the grassroots level doing exploration and looking for opportunity.
So what do you think you yourself bring to the company as its CEO?
That’s a good question. I am a geologist by education and I've been in the junior resource side of the game and starting up companies, financing them, executing and managing exploration for projects, since 1988. So I've got a lot of experience there, like our board and the rest of our management which has well-balanced experience all the way from the finance side to the exploration side and even operations.
I was one of the founders of National Gold Corp and we bought the Mulatos gold project from Placer Dome and Kennecott Minerals. It was a found deposit which had feasibility on 2.2 million ounces at the time, but it wasn't economic because gold was $280 an ounce. And so we structured a deal with them where they signed the deed to us for a $50,000 down payment and then we had a bunch of debentures to pay off. To help us execute on this, because nobody was interested in investing in gold at the time, we brought in Alamos Minerals with John McCluskey and Chester Miller to help us finance that. And then two and a half years later, that became Alamos Gold. I stepped off that board some years ago now, back in 2012, but that was my introduction to Mexico. I was also the president of an operating silver mine for a couple of years in Mexico.
So our whole team really has a broad breadth of experience in the industry, which is not that common for juniors. There are few juniors with that sort of depth of experience from grassroots discovery, mine building and mine operation, and in the financing of all those stages, which is very important as knowledge of the capital markets goes hand in hand with the business.
So what should investors in Kootenay expect in the near to medium term?
Well, we've got some drill results coming out from our high-grade Copalito project and there are also a few holes remaining to come out on the Columba project as well, so that's in the very near term. And coming up next year we're looking to do work on the La Negra discovery, with geologic modeling to get that prepared for a resource. And then on La Cigarra, over this last year we've re-logged every single hole to build a rigorous geologic model of the entire deposit with the belief that our current resource model is smearing and diluting the grade there. And if that's true, we think we'll end up with a higher grade deposit, which of course will improve the potential economics. That work has been ongoing in the background and we'll have some answers by the end of the year on whether that is the case or not, and if it is the case whether it justifies going into a PEA (Preliminary Economic Assessment) or not.
So, a few other things are coming on the radar for next year depending on the results of this work to the year-end. Definitely what's going to be happening is a very large drill program on our high-grade Columba project. Recent holes we have pulled are just fabulous, with one, hole 103, where we got 44 meters of 333 grams per tonne silver and with six meters of over 2,000 grams per tonne in that hole. Then what we just recently announced as well, on an entirely separate vein - the D vein and intercept – was 29.9 meters at 453 grams per tonne silver, and there was almost 18 meters of 650 grams inside that. So that property is looking very, very strong. On one of the veins that was historically worked we've got 40 holes into it defining a 700 meter strike length down the 200 meter depth, and it's very consistent high-grade hits across that vein. So we have enough holes there to know there's a resource that needs to be defined and estimated.
And in addition to that we've got all these other high-grade areas that need to be drilled. So next year's program is being designed and it's envisioned as a very large program of systematic drilling in all of these zones that we’ve found so that, if it works out, we can come out towards the end of the year with a meaningfully-sized resource estimate on Columba. So that's in the planning stages here. And then depending on what happens with La Cigarra and La Negra we may be advancing one of those projects or possibly both of those projects down the Preliminary Economic Assessment path.
That all sounds very exciting. So what about the state of the precious metals market?
Well, I think we're about to come into a very strong bull run in the precious metals market. There’s a lot of commentary of course on the macroeconomic side of that and I don't need to add to that as there are experts much more knowledgeable than me about that scenario. But the long and the short of that is we are certainly set up for a strong precious metal market here and looking at the chart formation and what's happening it looks like silver really wants to get going. As opposed to gold, silver really hasn't had a strong breakout. I mean, gold has hit new highs but silver's a long way from hitting its old highs. And it's our belief that silver will hit those old highs of $50-plus an ounce and extend beyond that at some point. So we're just looking at the way it's set up right now but we're expecting that this next year could be a very strong year on the silver price side.
Contact the author at jon.hopkins@proactiveinvestors.com