“We’re in the meat and potatoes”, says Ralph Shearing of Soho Resources. “The upside at Tahueheuto is huge.” For anybody who’s not yet picked up on Soho’s steady progress on the Sierra Madre belt in Mexico, Tahuehueto sits on a classic epithermal mineralised structure which contains significant amounts of gold, silver, copper, lead and zinc. It’s well advanced, too. At the end of last year Soho delivered a preliminary economic assessment which confirmed the potential viability of an 11 year operation processing a million tonnes of ore annually at peak, and mining at average grades of 1.64 grams per tonne gold, 28 grams per tonne silver, 0.18% copper, 0.87% lead, and 1.64% zinc. And this year, work has continued apace.
Pre-feasibility work is well underway, as consultant engineers Knight Piésold have been hard at work since February gathering geotechnical data and collating information with a view to putting together one or more mine development concepts. “We’re hoping to be able to deliver this pre-feasibility study at the end of the first quarter or beginning of the second quarter next year”, says Ralph. “Our goal is really to drive it to full feasibility and then drive to a production decision.”
But before that Soho needs to firm up a few resource numbers, and to that end it’s just about to drill the first 2,000 metres of a proposed 6,000 metre drill programme. The resource around which the preliminary economic study was based was delivered in 2009, and showed just under 7.4 million tonnes in the measured and indicated categories to give 498,000 ounces of gold, 8.3 million ounces of silver, 45 million pounds of copper, 172 million pounds of lead, and just under 330 million pounds of zinc. But if the inferred total is also brought in the resource total grows by 40 per cent. Moving those ounces is up so they can be incorporated into the pre-feasibility and subsequent feasibility studies is just what Soho is proposes to do now.
But what about that “huge upside” that Ralph spoke of earlier. Well, that’s some way down the tracks. As for the programme that’s about to get underway, he says simply: “it may add ounces, but it’s really just infill drilling.” Establishing a greater resource at Tahuehueto is a job for another day, given that the economics for a viable operation have already been laid out.
And in the immediate term, there’s the pressing matter of funding. There’s enough money in the bank to pay for the first 2,000 metres of the planned programme at Tahuehueto, but more will be needed to complete the work. With that in mind the company is just closing off the first stage of a C$1.5 million financing that may yet get bigger. “We’re working on an over-subscription allowance to take it up to C$1.8 million”, says Ralph. He makes no bones that markets have been choppy of late, but Ralph’s no stranger to the world of mining finance. “They’re tough markets out there for the little guys at the moment”, he says. “But we’re getting very strong interest. There’s a lot of money coming out of Europe.”
One reason that interest remains strong is surely that the company’s share price has risen by virtually 100 per cent over the past 12 months, in spite of the tough summer. That 12 month price rise, coupled with sky-high gold, silver and copper prices, is certainly an attractive combination, and not just to equity investors. Given that there’s lots of metallurgical data in the public domain now, following the publication of the preliminary study, it would hardly be a surprise if Soho hoved into the view of some acquisition-hungry larger company before too long. Still, even if that did happen, you’d expect Ralph to drive a very hard bargain before letting go of all he’s achieved so far.
In the meantime, as the studies and drilling at Tahuehueto continue, Soho is also making great strides with its other main project, at Jocuixtita in Sinaloa. A drilling programme is just being wrapped up. “We’re pulling out to analyse the data”, says Ralph. “The rainy season’s upon us. There are two zones we’re testing, separated by 700 metres. We’re hoping to get some decent numbers and bring in a new silver project.” That’d certainly be a nice additional fillip to the shares, as silver continues to ride high.
So all-in-all, it’ll be interesting to see what happens to Soho’s share price in the autumn, given that plenty of analysts expect the Moms and Pops to re-enter the Canadian markets after a prolonged absence, boosting volumes and liquidity. And any renewed interest in Soho from retail investors could turn out to be perfectly timed, as the latest drilling at Tahuehueto gathers momentum, and as the potential at Jocuixtita becomes apparent.