Mine visit report: Exmin Resources (V.EXM)

I am still jet lagged from my 4-day trip to Mexico, and not quite sure where to start, but I do want to make sure I can post as much information as possible tonight, and I will follow up on the weekend. I have about 20 pages of notes to review, and I wil be distilling that down for a Mexico Mike article in January, but I have the luxury of presenting the entire commentary on my visit here.

The Moris Mine is located in a large claim block in southwestern Chihuahua, about 6 hours of driving from the airport. Much of that trip is along gravel roads, which are typical of rural Mexico in that they are full of potholes and very narrow. One error in judgement will often end in a long, fatal plunge of several hundred metres into a valley. The locals there are quite used to driving under those circumstances, and heavy trucks make their way along the same routes. At least scenery of the area is spectacular.

Moris is a small town of about 2,000 people. Our JV partner Hothschild has an office in town. There are very limited services, and the hotel was a dump, but people are friendly enough and the town is benefitting from the resumption of activity of the mine, located just a few kilometers down the road.

The mine is quite an impressive operation. A large hill rises above the entire project, and the largest deposit is located on the side of that hill. The upper layers have already been mined, and the slope is stabilized by benches that step down about every 10 meters or so. The current open development is about 50m deep and runs the length of the hill, about 100m or so of the strike of the vein.

Numerous piles of stockpiled ore remain to be processed, both on the slope of the mine, and in various dumps around the property. The ore is striking in that it is honeycombed with vugs, a sign of intense hydrothermal alteration and silicification. This altered rock is embedded with gold averaging 2-4 grams per tonne. There is also a wide zone of brecciated rock adjacent to the vein structure that is also enriched in gold. Silver is associated with the mineralization, averaging about 8 grams per tonne.

The vein itself is clearly visible in the upper layer of exposed workings, measuring about 10m across and dipping parallel to the slope of the hill. This is an ideal operating environment for the mine, since most of the material that is excavated is ore, there is a very low strip ratio of waste rock.

About 60-80m of ore remains above ground to be processed, which could last for about a 4-year mine life when the mine resumes operations at capacity. There is a higher grade zone below the floor of the valley which Hochschild has identified with a few drill cores from the last round of exploration, but more work will need to be done to prove this resource up. Once the limits of the open pit have been reached, an underground operation is possible to process higher grade gold.

The vein system continues on to an adjacent hill about 200m along strike, where another ore body has been identified by the previous operator of the mine, and work is currently underway to confirm the resource. And then a third, smaller ore body has been outlined further along strike from that.

There are workings at the top of a large hill behind the known veins, and a possible parrallel vein system may exist there, but only limited work has been carried out so far. Nonetheless, it underlines the intense alteration that is evident throughout the region. There is a huge potential to continue to prove up new resources for this project, since only limited exploration has ever been completed despite some excellent results from the isolated drilling that has been done in the area over the last decade.

The infrastructure in the area is superb. The crushing mill is a three stage operation, and the equipment is in very good condition. The fine crushing circuit is almost brand new, since the Barmac unit was discontinued by the previous operator to save time and money. This may have been a contributing factor the closure of the mine. Kappes Cassiday Consultants have reviewed the operations, and they believe that the failure to crush the ore down to a fine mesh would have lowered the recovery efficiency for the entire project. (You may have heard of Kappes Cassiday: They were the group that did the metallurgy and feasibility work for Gammon Lake at Ocampo). Some refurbishment and maintenance will be necessary but overall the expensive equipment is in very good condition.

Two leach pads are set up alongside the mill, and one is brand new and unused. The ore on remaining on the original leach pad was not crushed to optimum fineness and may be potentially reprocessed to generate additional production, but a great deal of sampling and testing will be necessary to confirm that. An extensive system of conveyors is rigged to efficiently transport the ore from the crushing circuits to the leach pad, and from my observations it looks to be in excellent condition and fully operable.

A carbon in columns recovery circuit sits adjacent to the pregnant cyanide pond. I asked if any gold was in the pond to be extracted but it is unlikely. The company is reviewing recovery options and they may go with the idea to scrap the current recovery unit and build a more efficient and modern operation. The current unit could be sold for salvage if they choose to do so. I did not get an idea of the capacity, but I would estimate 30-50,000 litres per day.

The shop and garage is in excellent condition. Rolling stock, including two large dump trucks, two loaders, a crane, an excavator, and several bulldozers, were in a line along the lot, where they had been parked since the mine closed 5 years ago. The equipment looked good, but management is not counting on the reliability and service standard of the vehicles without a thorough maintenance program.

There is a modern office at the edge of the property with plenty of room to allow for administrative functions. A guardhouse is situated at the main entrance, and the entire property is surrounded by a security fence.

My overall impression is that this project is a first class asset and EXM has landed a gift for its shareholders with the deal. If they exercise the purchase option, and I believe they will, EXM bougth the project for $6 million, shared 30% for EXM and 70% paid by Hothschild. I would estimate that just the value of the current equipment that came with the deal is worth more than the total purchase price for the entire mine. They get the ore stockpiles, the entire data set of exploration and development work, at least a 4-year resource to run the mine, and the surrounding property with numerous propective targets to add to the resource... for free.

I met many of the senior management for Hothschild, and the relationship with our JV partner is excellent. This arrangement will work very well for both companies. I was also told that other companies stepped up to offer more cash to earn into the Moris project, but EXM went with Hothschild because they have strong operating capabilities, and area that is essential to make money restarting operations at an old mine, and that expertise is not on hand among the EXM team. So its a great deal for both partners.

This project is absolutely the best deal that a junior like EXM could dream to participate in. I think it will become the foundation for a much larger exploration program, and along the way EXM will become entrenched as the exploration arm for Hothschild. Mexico is the place to be for growing mining companies, and Hothschild is going to become a powerhouse in that country. Add in the good relationship that EXM has with Penoles, and I am very, very optomistic for the future.

cheers!

COACH247