Precious Metals Exploration

Manipulation, inflation and opportunity

On January 28th, 2021, a Reddit subgroup called WallStreetBets sent out a call to buy silver after the Robinhood trading platform announced it would limit purchases of a number of stocks including GameStop (GME). This ‘short squeeze’, that caused retail investors to pile in en masse and drove up silver by almost 20% in just three trading days, was different to the GME phenomenon for two reasons.

First, silver has solid fundamentals, whether as a safe-haven monetary asset that follows the price of gold, or as an industrial metal used in the production of solar panels and cell phones. Secondly, and more ominously for silver bugs, a short squeeze on silver pits retail up against the likes of JP Morgan, rather than Melvin Capital.

Despite manipulation of the precious metals markets, illustrated by the US$920 fine handed to JP Morgan in September 2020 for the illegal practice known as spoofing, the outlook for silver remains bullish. A steady price appreciation in response to the impending government stimulus packages and increasing demand for physical silver would surely serve the industry better than any boom and bust mania inspired by Reddit and Twitter.

A new junior poised to take advantage of silver’s momentum is Tier One Silver (TSLV), which was spun out of Auryn Resources in October 2020, and went public on June 9th, 2021 (TSXV: TSLV).

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“Geologically speaking, Recuperada is a big epithermal system that has been mined at a modest scale for silver, lead and zinc since colonial times. We believe that modern exploration and production techniques will bring the district back to life, making it the next major silver mining district in Peru.”

José M. García, CEO, Silver X

The company’s flagship asset, Curibaya, is an 11,000-hectare property that sits in a copper porphyry belt hosting some of Peru’s largest deposits, including Cerro Verde, Toquepala and Quellaveco. TSLV’s second project, Emilia, sits next to Tía María and could be described as an analogue to Cerro Verde – a massive porphyry system outcropping along the coast of Peru that has seen limited exploration work, according to co-founder and co-chair, Ivan Bebek.

Elaborating on the mineralization at Curibaya, Bebek described it as a fully preserved precious metal target on top of a large porphyry intrusion, with early exploration results including 80 samples on surface that run over 500 grams silver up to 298 kilo silver, over a 20 km2 alteration system, as well as about 60 samples that run over 2 g/t gold up to 934 g/t gold.

Expanding on the potential he sees, Bebek stated: “This is one of the largest exploration opportunities for a precious metal system that I have seen in my 21 years in this business in terms of abundance of high grade, scale identified through geophysics and proximity to world-class deposits on a major mining trend.”

Latitude Silver was a private company founded four years ago, which eventually found a home in the Recuperada district of Huancavelica, and renamed it Nueva Recuperada. On February 11th, 2021, Metals Trading (Peru) PLC (commercially known as Latitude Silver) and Oro X announced a business combination agreement, resulting in the creation of Silver X. The team, led by CEO José M. García, executive chairman Luis Zapata, and lead advisor Paul Matysek, intends to ramp up production and grow the resource at its Recuperada mine, as well as developing the Coriorcco and Las Antas projects owned by Oro X. “The idea with Silver X is to grow through exploration, development and production, but also through M&A activity, because we want to create a mid-tier silver producer in Latin America,” stated Garcia.

Garcia detailed that the Recuperada mine, which is a former Buenaventura operation, comes with a processing plant, infrastructure and all the social licenses to operate. Summarizing the company’s near-term plans for the asset, he added: “In other words, it can be moved back into production quickly and cheaply. We see great potential for expanding the resource and scaling production at the mine, and to do this we have an aggressive drilling program of 30,000 meters planned in 2021.”

“By listing on the Lima Stock Exchange (BVL), we want Peruvians to have the opportunity to invest in a Peruvian exploration company. To illustrate how rare this is, the last time a Peruvian gold player was listed in Peru was 10 years ago with Rio Alto.”

Steve Zuker, President and CEO, Pucara Gold Ltd

Gold-focused juniors

Peru has lacked a leading gold-focused junior in recent years, which is regrettable now, as the dwindling reserves of producers in the country has coincided with robust metal prices. This does, however, offer excellent opportunity for a well-funded junior in a land of rich geology. Thus the positive market reaction to Pucara Gold’s hotly anticipated IPO (TSXV: TORO) in October 2020, saw the company trading at C$0.83 out of the gate. However, as is the risk with greenfield exploration, underwhelming drill results from its maiden campaign at its Lourdes project in January sent the share price crashing. Reflecting on the results, Steve Zuker, president and CEO, said: “We always knew there were multiple systems and in touching the edge of one of the systems we got three promising intercepts, but the market expected better. I believe that we will get the results that we are looking for in the future.

Despite the disappointment, Pucara has two flagship assets and, in 2021, the company will be concentrating the bulk of its activities on field and permitting work at the Pacaska gold-copper project. The team is in Peru, working to obtain the necessary permits at Pacaska to carry out a drill campaign before the start of the next rainy season, and Pucara has also partnered with a number of high-profile companies to develop other assets in its portfolio. “Over the course of the next 12-18 months, six of our eight projects will be working towards making a world class discovery,” stated Zuker, referencing the interest of Solaris Resources (TSX: SLS) in Pucara’s Capricho (porphyry copper) and Paco Orco (carbonate replacement deposit) assets, and IAMGOLD’s (TSX: IMG) ongoing drilling at Los Tambos. “If all three optioned projects are carried to fruition, our partners will invest C$43 million into the ground and make payments to Pucara of roughly C$3.5 million,” he added.

Another player in Peru’s junior gold segment is Winshear Gold (TSXV: WINS), a company that arose from a predecessor company called Helio Resource Corp. that had worked in Tanzania for approximately 15 years. Winshear pivoted and decided to purchase two Peruvian assets from Palamina Corp: the Gaban gold project and the Tinka iron oxide copper-gold (I.O.C.G) project. Mark Sander, Winshear’s president, elaborated on what drew him to Gaban: “The Gaban project is the closest upstream gold project to the giant Madre de Dios goldfield in the Amazonian alluvial plain, and we believe that at least some of the gold at Madre de Dios came from here.”

Further upstream there are multiple gold projects of significance, including Minera IRL’s Ollachea gold project, which currently has approximately 1 million oz of reserves at feasibility stage, as well as the Crucero deposit with approximately 2 million indicated oz of gold. Comparing the potential of Gaban to the more advanced assets in the region, Sander said: “Ollachea is still awkwardly held and not amendable to acquisition or merger, but the Gaban project is very close and very similar geologically. I have the expectation that the Gaban project will grow to at least a similar size deposit as the Ollachea deposit.”

Image courtesy of Tier One Silver