Mexico Mike

EXMIN Resources has many irons in the fire.

On the subject of property, real estate investors are quick to tell you the sage wisdom: “They ain’t making it anymore.” Junior mining companies should take note. When an exploration boom hits a region, the best projects tend to get snapped up very quickly, and companies that are late to the scene will only have the option of either paying up to buy a property at heavily inflated prices, or arranging a joint venture agreement to earn an interest from a project controlled by someone else. 

The highly prospective Sierra Madre Mineral Belt, where it stretches through the western end of Chihuahua State in Mexico, has been a productive area for mining for several hundred years and it is once again on the front burner for exploration activity. But that does not come as news for the management team of junior explorer EXMIN Resources Inc.  

Company founders Karl Boltz (President) and Craig Gibson (VP of Exploration), two experienced veterans of the mining industry that had been formerly employed with Minefinders Corp Ltd at the Dolores Project in Chihuahua, were well aware of the wealth of prospects that were available throughout the region. The advantage of being among the first on the scene to lock up property acquisitions meant that they were able to select through many good projects and choose the ones with the strongest potential, at value prices.

I was able to visit several of these properties in December. The first thing that comes to mind when touring Chihuahua is just how rugged that part of the country is. The region where most of the best mineral prospects are located is often referred to as the Grand Canyon of Mexico. Narrow gravel roads service the region, winding through picturesque canyons, and climbing precariously steep ridges.  

But the remote location and limited infrastructure do not diminish the appeal of the prospects. Development is ongoing despite the logistical challenges in western Chihuahua, and perhaps a dozen different mining companies are now active in a cluster of projects. For example, Gammon Lake Resources recently commenced production at the Ocampo Project, a large mine working a rich deposit that is located in close proximity to several EXMIN properties. 

EXMIN now controls a combined property area larger than any other junior mining company in Mexico. The flagship project is the Moris Property, and the company gained control of the district surrounding the past producing Moris Mine in 2006.  After securing a joint venture agreement allowing the Hochschild Mining Group to earn 70 percent of this large land package, the mine property itself became available and the partners were quick to seize the opportunity, and maintain the same ownership split. 

It appears that Peru-based Hochschild has chosen to make Mexico a core area of operations to expand the scope of its producing assets. The decision to partner with EXMIN will have a positive effect on both companies. Hochschild is a well-funded player with strength on the operating side of the mining business. EXMIN contributes access to tremendous properties, and its exploration experience in Mexico. As Hochschild aggressively expands its interests, there is the potential that Moris will just be the first of many agreements for the relationship.

Moris appears to be a magnificent asset. The project includes a modern mill, a newly constructed leach pad with the capacity for many years of production, a recovery plant, heavy equipment and rolling stock, and a fully equipped maintenance shop with spare parts and service equipment.

A drill program to verify the historic gold and silver resources of the project was immediately launched, and the results came in above expectations. Three separate deposits suitable for open pit mining have been defined, enough to support a heap leach operation processing 3,000 tonnes per day. Based on the data from the former operator for ore grade and recovery efficiency, it is expected that the mine operations could yield $3 million in annual cash flow to EXMIN for many years. 

The mine will also serve as the anchor for the surrounding property, which are attractive and could each host numerous economic deposits within trucking distance of the processing plant at Moris. And Hochschild is committed to funding millions of dollars of exploration work on the property to earn their interest.

Joint venture partnerships have also been secured with other partners. Industrias Penoles, the largest silver producer in the world, inked a deal with EXMIN to earn up to a 75 percent interest in the Maguarichic Property, a project where over 30 historic workings have been identified, that were producing gold and silver from extremely high grade veins in a wide band of alteration. The first round of drilling has been completed to test the higher levels of the alteration, and a follow up program to depth is planned in 2007. 

At the Urique Project, Yale Resources Inc is working to earn up to a 75 percent interest on a large property where several historic mines were once in operation. Exploration is focusing on extensive vein systems at the northern end of the property, with encouraging sampling results already in hand after trenching work was completed last year. Targets are being defined for a drill program to commence in the months ahead. 

EXMIN has chosen to retain an undivided interest in some of their holdings. The Reyna de Oro Project is a large property that would probably represent an entire mining camp in other prolific mining districts, but the company was able to grab an undivided interest in the entire 140 square kilometre area. There are so many documented mineral occurrences and historic mine workings that the geologists are almost wondering where to start. A drill program completed in 2005 encountered high grades of gold and copper mineralization in several veins, validating the potential for the project, and this remains an attractive target for future work. 

But it is the presence of two large intrusives that have been mapped elsewhere on this property that is most intriguing. The conditions are favorable for the formation of large carbonate replacement ore bodies in the nearby limestone rock, or perhaps rich skarn deposits could be awaiting discovery at the contact zone to depth. Large tonnage discoveries tend to have the greatest asset value, so these targets will be of great importance for the future success of the company. 

The quality of the management team for a junior mining company will go a long way to determine its success. EXMIN’s management have done a lot of things right lately. They understand that in order to discover mineral resources, a company must take good care of the financial resources. And they have done so, by acquiring excellent properties at value prices, and then bringing in successful joint venture partners willing to commit the exploration funding. This ensures that shareholders are leveraged to discovery success at many projects without rapidly depleting the cash in the treasury. They have secured an ownership interest in the Moris mine to generate future cash flow. And they have been extremely diligent to limit the spending for all the other expenses that go with running a company.

With one producing mine in hand, and a realistic potential for development to advance to support several other mines in the years ahead, I think this company is a powerful vehicle for investors to participate in the mining resurgence in Mexico.  I buy $10,000 of EXMIN Resources for the Mexico Mike Portfolio.