Precious, base metals primed for a rebound
By Jason Smith
• Potential slowing of U.S. Fed rate hikes and a growing global economy argue for higher prices
• Silver Bull Resources owns Sierra Mojada, a large silver-zinc project in Mexico
• South32 has signed on to earn up to 70 per cent interest in the project
Both precious and base metals have experienced downticks in pricing in recent months.
Analysts point to a steady round of rate hikes by the U.S. Fed as the explanation for the bearish action in gold, and its sister metal, silver. On the base metal side, despite a growing global economy, trade war fears stoked by the Trump Administration have largely kept the bulls on the sidelines.
In this economic environment, a slowdown, or a cessation, of rate hikes would have a beneficial impact on gold prices, and likely silver prices as well. With the Fed projecting 2019 as the year it will begin to bring those hikes to a close, there’s a definite argument for long-term upward pressure for precious metals prices.
Combine that with an economy that has so far demonstrated resilience in the face of trade war fears — and you have the makings of a rebound in the metals markets that would impact both precious and base metals. Both markets could use the boost, as a downturn in metals that’s lasted seven years has resulted in very little real exploration to replace lost reserves.
“We think there’s something more exciting out there and that’s validated by our agreement with South32. Sierra Mojada already has a big resource. We’re testing for something even better.” — Tim Barry, CEO, Silver Bull Resources
Silver Bull Resources’ Controls a Large Silver-Zinc Resource
Silver Bull Resources Inc. (TSX.V: SVB)(OTCQB: SVBL) is aiming to buck this trend and leverage a positive pricing environment for both precious and base metals by pursuing expansion of its Sierra Mojada project in Coahuila State, Mexico.
The 100 per cent owned project spans 4,715 hectares and is home to a plethora of past mining infrastructure. Over 54 historical mine shafts lie along the mineralization strike at Sierra Mojada.
The project contains one of the largest, undeveloped silver-zinc resources in Mexico, with an NI 43-101 compliant global resource of 5.35 billion pounds of zinc and 87.4 million ounces of silver. Included within this global resource is a high-grade zinc zone of 3.3 billion pounds of zinc (13.5 million tonnes at an average grade of 11.2 per cent zinc) and a high-grade silver zone of 56.3 million ounces of silver (15.2 million tonnes at an average grade of 114.9 grams per tonne).
The project’s location in northern Mexico puts it in an excellent mining jurisdiction with all needed infrastructure to support a mine. That infrastructure includes on-site rail and power and five permitted water wells. The area’s history of mining means there’s an excellent talent pool to draw upon.
Silver Bull CEO Tim Barry commented on the project, “It’s in an old mining district that’s been continuously in production with local miners for the last 120 years, and yet it’s only recently begun to have proper, modern exploration done on it.”
The mineralization in the global resource is an oxide resource, meaning it is contained in weathered rocks. The system appears to be underlain by a large sulphide resource, and it’s that potential that has attracted Silver Bull’s attention. Barry notes, “The sulphide resource is where the true value of the company will ultimately lie.”
South32 Option on Sierra Mojada Ensures Exploration News
An endorsement of Barry’s enthusiasm for Sierra Mojada’s sulphide resource came recently in the form of a joint venture agreement with South32, which has a market capitalization of $17.2 billion.
A spinout from BHP Billiton, South32 is focused on capturing value for the mining behemoth’s base metal portfolio. That focus has led to joint venture agreements and takeouts on base metals projects, the most prominent of which has been South32’s US$1.3 billion takeout of Arizona Mining.
In Silver Bull’s case, South32 has taken an option on a 70 per cent stake in Sierra Mojada in exchange for an aggregate investment of up to US$100 million. That deal includes an initial US$10 million in spending on exploration during the first four years of the option.
The first year of the companies’ joint exploration program is just getting started, with an airborne electromagnetic survey followed by targeted drilling. Silver Bull will manage this initial US$3 million program. The idea is to do mapping and sampling to formulate targets that will start getting drilled in early 2019.
Sierra Mojada Primed for Growth
With that large oxide resource acting as a backstop on Sierra Mojada’s valuation, the aggressive program envisioned by Silver Bull (TSXV: SVB)(OTCQB: SVBL) and South32 on the sulphide portion has the potential to add several new chapters to this project’s story. Thanks to a recent US$3.79 million financing, Silver Bull is well positioned to deliver news flow over the initial term of the South32 option.
Barry sees the potential to see zinc up to 25–30 per cent and silver up to 1,000 grams per tonne in the sulphide mineralization. The company will have ample opportunity to test that theory, thanks to the exploration expenditures agreed to by South32.
The overall goal in the next 12–18 months is to locate that sulphide mineralization and follow it to its source. That work will begin to outline just how large that potential resource may be. Barry comments, “We think there’s something more exciting out there and that’s validated by our agreement with South32. Sierra Mojada already has a big resource. We’re testing for something even better.”