More Notes - Other Properties (EXM-V)

I was only able to visit the Urique and Moris projects during my tour, but we did an overflight of the Maguarichic Project from a light airplane on the way back to Chihuahua, and I noted that the property occurs along a remote slope, with a large area of alteration clearly visible. Outcrops had been exposed by erosion from a creek running across the property. Penoles controls a property in close proximity to Maguarichic, and they had been interested in our holdings for a long time, so they closed the JV deal with EXM. This is a similar type of deposit to what we are exploring at Moris, and that is why Penoles opted to drill the near surface extensions first, and why they do not expect to hit high grade intervals on the first pass. The upper levels of these alteration zones are typically silica rich zones where the gases and heated fluids boil off, and there is no way to be sure exactly how high up in a system you are without drilling. Further down the vein structure is where the enriched zones of silver and base metals are likely to be found. Penoles has been exploring and developing this type of structure for a long time, and they know how to advance a project. The terms of the JV ensure that EXM is carried for their interest while Penoles operates the exploration and fully funds the work. Thats a good deal.

Back at the EXM office in Chihuahua, Craig Gibson showed me the geologic maps of the Reyna de Oro Project. This info was of particular interest to me, given the close proximity market on that map for the DiaBras Bolivar Project. Bolivar is a large scale copper-zinc deposit of skarn and replacement ore, that was emplaced as a result of mineralizing fluids circulating through a nearby intrusive. Craig showed me the geology of Reyna, including two large intrusive structures on our holdings. Large zones of limestone at the edge of the intrusives suggest the potential for a carbonate replacement type system, where acidic fluids react with the limestone to replace the host rock with potential high grades of silver and base metals minerals. Such a discovery on Reyna would be huge, and Chihuahua has hundreds of years of mining history exploiting such deposits.

The early work completed by EXM at Reyna has so far defined high grade vein structures rich in copper and gold. This work has defined a limited tonnage so far, but Craig thinks that the zones could ultimately amount to a million tonnes or more. One option this available in the short term is to initiate small scale production on the near surface vein material, which could be economic given the higher grades they have encountered. The longer term strategy is to complete some more geophiz work to define larger target areas that could be the feeder zone to the high grade veins. This is a huge property that could easily be subdivided to allow at least one JV partner to tackle one or more target areas, and still leave a big chunk for EXM to own 100% of.

The new acquisiton surrounding MAG's Batopilas property is also of note, since this area has produced an estimated 300 million ounces of silver in its history. This will be yet another prime property to parcel off to a JV partner in the future, and allow EXM shareholders to participate at the discovery level with a carried interest.

I am surprised that there has not been more discussion about the Guanojuato property acquisition. This was announced while I was touring Moris, and Craig pointed out to me that EXM holdings are on the edge of the productive geologic trend that also hosts the GPR project. Despite the presense of several historic workings, it is yet another region that has seen little in the way of modern exploration. It is still amazing to me that such properties are available in these districts to be had at this stage of the cycle, and the companies like EXM with the vision to acquire them cheaply now will be the big winners later when the boom is in full flight.

I think Moris will be the primary focus for EXM for the next few months until they have the project in produciton and generating cash flow. Craig tells me he still looks at new acquisition opportunities all the time and still wants to add more projects where they can realize strong value. He told me about one project where the vendor asked for $1 million in cash, and Craig offerred him $10,000. I found that hillarious because it pretty much sums up in a nutshell the negotiation process in Mexico, and underlines that the company will not overpay for a project.

The future looks very bright to me. Combined with the cash flow that should start rolling in from Moris, and the exploration funded by JV partners, I think EXM will be able to complete a great deal of work in the next few years with minimal dilution going forward.

cheers!

COACH247