GR Silver Mining Ltd. considers Plomosas and San Marcial the most important projects in the Rosario mining district. The company controls key concessions adjacent to important projects in the Rosario Mining District and is therefore well placed for continued growth and to take advantage of future business opportunities. The company possesses all exploration licenses and permits required for exploration on both projects and, in the case of Plomosas, it also has necessary permits for exploration.
Matt Gordon caught up with Eric Zaunscherb, CEO and Chairman, GR Silver Mining. Mr. Zaunscherb is a Canadian geologist with over 32 years and six cycles of experience as a mining analyst. He most recently served as Managing Director, Research - Metals & Mining Analyst at Canaccord Genuity where he coordinated the firm’s global mining equity research team. He has enjoyed experiencing best practices in capital markets at several leading firms and reviewing and evaluating hundreds of exploration, development, and mining projects globally. He embraces new technologies and industry initiatives in diversity and socially responsible investing, ensuring that local communities receive lasting benefits from mineral resource development.
Company Overview
GR Mining Silver Ltd. has advanced-stage silver and gold assets in Mexico. It has a district-scale portfolio and resource expansion in a prolific mining district. The company is focused entirely on advancing the Plomosas silver project in Sinaloa, Mexico. The company was founded in 2012 and is headquartered in Vancouver, Canada. Marlin Gold Mining Ltd., Mineral Matatan S.A. de C.V., Goldplay De Mexico S.A. de C.V., and Compania Minera San Marchia S.A. de C.V. are the company’s subsidiaries.
The company has been focused on the Plomosas project, which has 2 main areas, namely the Plomosas mine area and the San Marcial area, which is about 5km to the south. Based on the exploration over the past few months, the company is now focusing on the cross-structures. The evolution of the geological model and the exploration model that has been promulgated by Marcio and the geological team has a strong emphasis on the impact of cross structures that are seen in both the Plomosas and San Marcial areas.
Notably, the Plomosas project is a 430-square-kilometer land package that is core to the company. Within this land, package are two key areas, namely the Plomosas mine area and the San Marcial area. These two areas are located 5km apart, which opens up the possibility for a synergy moving forward.
The company put out a resource update at Plomosas in August 2021. The material grades average between 40g/t-45g/t silver, which wasn’t ideal from an economic perspective. The results ended up pushing the stock prices back substantially. Despite this, the company wanted to publish the data in the public domain.
GR Silver recognized that there was a huge disconnect between the 45g/t grades in the resource on average and the average historical mined grade of 190g/t. The huge delta comes down from the fact that the vast majority of the holes in the historical database were selectively sampled and assayed. This was because the asset was previously considered a base metal mine. The historical operators did not sample outside of the sphalerite (zinc) and galena (lead) mineralization. As a result, the company immediately launched a surgically-targeting infill drill program at Plomosas in order to ascertain the true grade. Over the past year, the company has drilled over 5,700m across 126 holes and has published several news releases on the results.
The intersections demonstrate a much higher grade than the average grade published for the resource. The company found some promising results. It found that the secondary and tertiary cross structures cross-cut the original hydrothermal breccia, elevating the precious metal content. The structures featured continuity in both the hanging wall and the footwall, leading to grades of 41.4m of 518g/t of silver equivalent. The company intends to focus on this mineralization.
GR Silver Mining is looking to deliver the mineral resource update for both the Plomosas and San Marcial assets in the first quarter of 2023. In the meantime, the company acquired the La Trinidad database that featured information from over 1,000 drill holes along with extensive litho-geochemistry, geochemistry, geophysics, and more. The company is looking to compile the data digitally in order to develop an appropriate exploration model for the region.
The Market Landscape
The current market has been one of the worst in 40 years, especially in terms of performance for small caps. Companies are either selling things off or are choosing to enter capital preservation mode, which can cause a further drop in stock prices. GR Silver Mining’s strategy is to continue drilling and delivering ounces as promised. The company raised capital in March and August 2022. It was successful in raising CAD$13M in one of the worst markets in decades. The company achieved this by ensuring that a clear message is conveyed to the capital markets in terms of ongoing work and delivering on the additional ounces.
In July 2022, the company’s stock was trading at USD$0.41 per ounce in the ground. In comparison, the company’s broader peer ground was trading at around USD$1.76 M&I (Measured and Indicated) ounces in the ground. Since then, the company’s stock has grown to USD$1.04 per ounce, while the peers’ share prices have remained relatively flat. This serves as an indicator that the market is appreciative of the company’s operational strategy, resulting in an increase in the value of the existing ounces. In the first quarter of the next year, the company is looking to deliver more ounces at higher grades, which, in turn, will lead to a higher valuation in terms of enterprise value per ounce in the ground.
GR Silver Mining is focused on the exploration side of the operation along with the delivery of resource updates. At the same time, the company is in discussions for a potential strategic investor at a 9.9% interest, which would help further validate the ongoing operations. The investment can be in the form of a silver producer, or by bringing in a well-known name in the space.
Notably, the company already has First Majestic Silver as a strategic investor at over 9%. First Majestic Silver got its position by vending one of its properties into GR Silver’s land package. The former has been supportive of the company and has been highly active in the market. GR Silver Mining is looking to bring in another party to provide validation along with some competitive tension.
GR Silver Mining is also looking at royalties as the land package is the amalgamation of several project areas that individually consist of multiple concessions. The company is seeking a royalty that can consolidate the land package and deal with the purchases available to provide some additional funding. This would be a less dilutive or non-equity form of capital raise that would be beneficial for the company.
It is looking to continue drilling into December in order to cover the remaining holes. Once complete, the company will publish news flow into January based on the final drill holes. Notably, the assay turnaround time in Mexico has improved significantly from 7-8 weeks to 3-4 weeks. By the mid-to-end of January, the company will have all the required assays, which will then be plugged into a model in order to generate a resource update.
Based on the historic market data over the past 40 years, December is the ideal time to invest as it's the end of tax loss selling. The investments that start in December run into January and the months of January and February are the best windows for company financing as the positive momentum plays out in the market. The company’s number one priority is to deliver the resource update to the market.
GR Silver Mining has been carrying out extensive marketing in order to prepare the market. A few weeks ago, the company’s representatives were in Europe for marketing, receiving strong responses from Zurich, Amsterdam, and London. The market is now aware of the company’s operations as it continues to focus on delivering the resource update.
If the company is successful in identifying grades higher than the current average of 40g/t-45g/t, it could lead to a significant rerate, potentially increasing the valuation to $1.75 per ounce in the ground. The company anticipates that the market will be highly receptive to an upgraded resource.
The San Marcial Deposit
In May 2022, the company recognized San Marcial as a deposit featuring hydrothermal breccia that is in contact between the upper volcanics and the lower volcano-sedimentary package. The company has identified up to 7km of the contact that trends to the southeast. A litho-geochemistry survey highlighted all the silver anomalies at surface. It noticed a really strong deflection along the contact.
Detailed mapping showed that the cross structures are running across to the northeast. There’s a structural corridor present that deflects the contact. Hole number 10 was drilled into this area, leading to a blind discovery located about 250m to the southeast of the main San Marcial area. The company intersected 101.6m of 308g/t silver. It is important to note that this is silver, not silver equivalent. This feature distinguishes the Plomosas deposit from San Marcial, the former being polymetallic. The majority of the deposit’s value comes from the silver, which is highly attractive for silver producers.
The cross structures have provided the structural corridor that features additional silver mineralization. It led the company to an intersection with 1m over 35g/t gold, indicating that high-grade gold mineralization is floating within the deposit. The company would need to carry out additional drilling in order to determine the extent of gold presence. It is important to note that just north of Plomosas is a private concession run by a Mexican mining company that is operating a gold mine. The 430 square kilometer land package is part of the system and the company anticipates that it has a lot of potential.
At the San Marcial deposit, the preliminary metallurgy suggests between 90% and 93% silver recovery. The mineralization here is around 550m-650m above sea level or 100m-150m below the surface. Since it is located on a slope, the company has the option to run a half-pit operation to gain good access to the mineralization. By the end of 2022, the company would have drilled around 12,000m split equally between the Plomosas and San Marcial deposits.
GR Silver Mining is focused on delivering the updated resources by the first quarter of 2023. The company has demonstrated that the geological model has vastly increased the hit rate on high-grade mineralization. Once the resource updates are delivered, the company intends to make a decision.
Following the resource update, the company is looking to carry out a PEA (Preliminary Economic Assessment), which is expected to be concluded by the end of 2023. It is looking to raise capital in the first quarter to deliver a full year of drilling along with a technical study.
GR Silver Mining anticipates that by the first quarter of 2023, the market landscape will be significantly different. The company considers silver as half precious metal and half industrial metal. On the precious metal side, the company anticipates that it is closing in on a pivot in global central banks in reducing the rate, eventually leading to a plateau, which would be a positive development for precious metals.
Silver is more volatile than gold. As a result, silver has a very good chance of performing well through 2023 in a positive precious metals market. From an industrial perspective, around 12%-15% of the total silver demand comes from solar panels, which is good news for silver. The physical inventories for silver have collapsed, and this is expected to have an impact on the material pricing. In the case of a positive market, investors should seek exposure to silver.
From the company’s perspective, investors should have a barbell approach where they have the highest-quality producers on one end, and on the other hand, they have a basket of exploration stocks. GR Silver Mining belongs in the basket as a company that is delivering growth along with an increase in ounce-based valuation.
