Zacualpan report Part 3: explorationLets move on now to the exploration side of the ledger for IPT. While it is important from an investment perspective to know that a company has access to capital, stable or growing operations, a favourable outlook for profits, and a clean balance sheet, most of the emerging junior producers are still considered extremely risky by the mainstream investment community. These companies then do not necessarily trade based on the same criteria that one would investigate for stocks. Junior miners are still largely selected based on speculative considerations.
The biggest gains for a speculative mining company come at the discovery level. Money flows into a junior miner, not on the basis that a company will remain stable, but because there is speculative appeal to find new resources, or grow the scope of operations. That is reasonable, considering that all producing deposits are wasting assets, and the very process of extracting the value in a mine accelerates the inevitable day when the resource will be exhausted and the mine will close.
So the discovery potential for any project is critical. New discoveries will create excitement and encourage new money to flow into a story, and new discoveries also build increased security for investors, because a larger mineral inventory extends the life of a mine. A premium is placed on higher grade resources as well, since the increase in grade implies improved financial results for an operating mine.
IPT management appears to have balanced the priorities both for operating results, and for exploration initiatives. Most of the resources that have been outlined at Zacualpan occur within narrow vein ore shoots, and therefore, in order to increase production the company must have a focus to continue to outline new economic zones that can be accessed in the mines. It is important to consider that even the current average daily production rate of about 240 tonnes still represents a very large volume of rock that must be extracted.
Perhaps the greatest exploration strength for the company is the close association and shared management personnel with Energold Drilling. This assures IPT access to a modern drill rig and a trained crew, a luxury that most other junior miners cannot count on. Impact owns one underground drill, which they employ to define resources adjacent to currently active stopes. Through Energold, the company is able to secure preferred pricing for both surface and underground rigs that can be dedicated to search for entirely new resources.
The second big advantage for the company is the employment of individuals who have been at the Royal Mines project for decades. These people are the best in the world at what they do, with the full understanding of the nature of the mineralization at the mines, and knowing where to look to find it. For example, the senior Mexican geologist at the mines, Hector Salas, is considered to be one of the best qualified in all of Mexico. Hector is responsible for many of the recent exploration successes for the company, and has been personally involved in sampling and mapping of many of the old mines. The data generated from this work has contributed to a large inventory of drilling targets that will be enough to keep IPT busy for many years.
The primary exploration targets for the immediate future include drilling below the lowest levels that were developed in the historic mines, since past activity rarely extended below the water table, but the productive veins have been proven to extend to far greater depths. Some very high grade former producing mines are therefore expected to host additional resources that could not be exploited using the technology available in the past.
The nature of the veins is that they extend for very large distances in many cases, but they tend to pinch and swell along the strike. Where veins converge, wider zones of stockwork mineralization often occur. So exploration is directed towards intersections between veins, and for the intervals within each vein system at which wider minerals zones are found.
For most epithermal vein systems in Mexico, about 30-40% of the entire vein lengths are found to be mineralized and economic for development. This is important to consider when reviewing the exploration results achieved so far by IPT. A number of extremely high grade intervals have been reported over widths of less than a meter. Many of these zones are in fact economic due to the high concentration of recoverable metals hosted in the veins, but it is even more important to understand that a drill core is only an inch or two wide. As drilling is completed along a vein structure, some of the drilling will hit narrow vein zones, and further along the same vein, wider zones may be encountered. Mine development proceeds based on assumptions from the narrow samples that are extracted in drill cores, and access points through workings will be completed to reach the higher grade zones that are economic.
Investors may tend to underestimate the importance then of the narrow intervals that are sometimes included in a batch of results. Case in point: Near the eastern edge of the property area, the Oscar Prospect was recently drilled and assays were reported across a narrow width (0.30m) of more than 82 ounces silver per tonne, plus 7.8 gpt gold, and more than 10% combined lead and zinc. Even assuming that that no other wider vein intervals are encountered near this intercept, a width of about 1.5m would be extracted to mine that section. The ore would be blasted out along with the waste rock to open access to the vein, and it would all be blended and processed, with an average grade of about 16 ounces of silver and 1.5 g/t gold. This intercept is therefore economic even considering the limited vein width, and if extensions of the zone can be outlined with further drilling. The potential exists that wider intervals will be encountered further along this vein system.
Encountering the economic zones is often in part due to good planning, and in part due to good fortune. But an experienced mine engineer will be able to interpret the data from exploration drilling and combine that with underground definition drilling, to ensure that all areas with economic potential to be mined are accessed efficiently. As long as the veins are accurately mapped, and development advances to the ore shoots that represent the productive zones of each vein, then the exploration work is successful and contributes to the success of the project.
The sheer number of veins that have been mapped on the project is also worth noting. There will be no shortage of new exploration targets on this property for many years into the future. And it is still only a relatively small part of the total property area that has even been explored so far.
At present, work is continuing to outline new economic zones from several past-producing mines within trucking distance to the mill and recovery plant. This includes the recently activated Salvadore Mine where a decline ramp has been driven to reach a newly discovered vein intersection zone that is expected to yield 20,000 tonnes of ore (representing more than 3 months of production for the entire project at the current rates, from this one access point).
The company also plans to test an extension of one of the most productive former mines on the property, the Cuchara Mine that had been extensively developed and remained in production until 2004. The mine itself has since been flooded at the lower levels, but the vein systems of the mine have been traced to the other side of a narrow river canyon, and it is believed that similar high grade resources may be encountered as drilling tests the new targets along strike and to depth.
One other silver target that is of interest is the vein extensions beyond the historic Chontalpan Mine, which was once one of the richest mines in all of Mexico. This mine lies in a small property concession that is not controlled by IPT, but the vein structure is the same as the Cuchara Mine and it continues for more than 4 kilometers to Chontalpan. Company geologists are thus very interested in what resources may exist in the interval between those two very productive historic mines and are working to define drill targets to find out.
The area that represents possibly the best discovery potential for the entire project however could be a completely unexpected gold-copper rich horizon at depth. Typically, the lower elevations of an epithermal vein system will become more base metals enriched. This is due to the processes involved in the formation of these veins, where metals are dissolved in fluids that are heated and circulated through an intrusive, and then are injected into cracks in the surrounding rock. As the fluids rise closer to the surface, the temperature and pressure drop, causing the heavier metals to precipitate out first. Closer to the surface, further cooling causes the lighter metals to fall out of solution, as the fluids boil off. As a result, one would expect copper to be found at depth in the veins. The presence of higher levels of gold is a bonus, which could be caused by increased acidity of the superheated fluids.
IPT recently reported some very high grade assays from drilling and samples taken from the lower levels of old mines, that indicate elevated gold levels along with economic copper grades. The samples came from the southwest area of the property near dormant workings and shafts of old mines known as the Pacheco prospect, and from another old adit further southwest known as the Cobre (copper) prospect. The sampling results revealed higher copper levels well above what has been reported from the other areas of the mines and significant gold grades. Considering these samples were taken from areas at the lower end of the workings, this could be an early indication that the system is transitioning at depth to a more gold-copper rich deposit.
Applying that potential further, very limited exploration to depth has been completed at any of the areas of interest at Zacualpan, and further confirmation will reinforce the working model. The Alacran Mine is another southern past producer on the property that has yielded higher grade gold and copper values from sample material that was believed to have been sourced at depth. This could in itself represent a very high value resource that would make IPT far more interesting and add an entirely new dimension to the entire story. It bears watching.
Between the various high priority silver zones, and the intriguing potential for an entirely new gold-copper camp focusing on the resources untapped to depth, Impact has outlined quite an inventory of exploration targets. A drill that is currently working the JV holdings at Zacatecas will be deployed to Zacualpan later this spring, and a minimum of 5000 meters drilling is already budgeted. However, management believes the drill will remain at the project for the rest of the year and they may end up completing more than double that.
Given the exceptional success that has been achieved on the property in prior drilling programs, and the very high grades that could be encountered in the months ahead, there are reasons to be optimistic. The market has demonstrated on a number of recent occasions that high grade discoveries are rewarded with premium valuations. New silver discoveries will help to support the growth objectives for the next year. If the potential for the gold-copper district at depth is confirmed, it could form the basis for IPT to become an entirely new discovery story that would catapult the stock to a higher trading range altogether. And with the tremendous property area controlled by the company, there will be no shortage of future targets to continue keeping the geologists busy for a long time into the future.
Cheers!
COACH247
Voluntary disclosure: IPT paid my direct travel expenses as a guest to visit the project. I have not received or been offerred any form of compensation for my time or to provide my commentary. I own shares in the company that I purchased at prices below 30 cents in the market, and I have continued to increase my position over time, and may buy more shares in the future.