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Best Drill Interceptions In The Metals Mining Sector For The Week Ended November 3, 2019

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Includes: PAAS, WDOFF
by: Gold Panda
Summary

Pan American Silver releases more impressive interceptions from skarn target below the current production levels at La Colorada.

Drilling with bonanza gold grades at Peaks.

Wesdome extends 303 Lens at Eagle River by another 300m down plunge.

(Source: Exploration Insights)

Introduction

If you're into investing in the mining sector, you should know the above chart very well. This series covers the three projects with the most significant drill interceptions over the past week, as well as the prospects of the companies which own these projects. I will use data from the weekly bulletin of Opaxe, which can be found on their website. Note that the drill interceptions are converted into grades of gold equivalents using the following formula:

(Source: Opaxe)

Opaxe has chosen gold as the metal equivalent for all conversions, as it considers gold to be the most widely used and best-understood benchmark to determine or appreciate the grade tenor of a drilling intercept.

(Source: Opaxe)

1) La Colorada silver project in Mexico

On October 30, silver major Pan American Silver (NASDAQ:PAAS) released the quarterly drill results from its La Colorada project, and the best intersection was 252.9m at 67g/t Ag, 0.19% Cu, 3.84% Pb and 6.56% Zn from 501.4m in hole U-66-19. This is equal to 1,612(AuEq.)m, and the company has now completed over 52,400 meters of drilling on the skarn target starting 300 meters below and adjacent to the current lowest production level of the mine.

(Source: Pan American Silver)

American Silver plans to provide an initial resource estimate of the skarn discovery by the end of this year.

La Colorada produces a silver and gold dore and silver-rich lead and zinc concentrates and is the largest silver producing mine in Pan American Silver's portfolio.

(Source: Pan American Silver)

In 2018, Pan American added 11.1 million ounces of new silver reserves to La Colorada.

(Source: Pan American Silver)

In 2017, the company completed a $137 million expansion of the mine which included a new 618-meter deep mine shaft, a new sulphide processing plant, further development of the underground mine, as well as a new 115 kilovolt power line.

2) Peak Gold Mines polymetallic project in Australia

On October 31, Aurelia Metals released an update on exploration activities for the Kairos area at the Peak Gold Mines project and the best interception was 6m @ 0.1% Pb, 0.1% Zn, 196g/t Au and 13g/t Ag from 139m in hole UD19PP1563. This is equal to 1,178(AuEq.)m and additional drilling is now underway to test the gold potential along strike.

(Source: Aurelia Metals)

Peak is located in the Cobar region in NSW and is expected to produce between 52,000 and 59,000 ounces of gold in FY20:

(Source: Aurelia Metals)

Aurelia is currently upgrading the processing plant to be able to operate at up to 800,000 tpa on high-grade base metal feed thus unlocking the value of the Chronos lead/zinc resource.

At the moment, Peak has a mine life of just four years, but the mining inventory indicates a potential for a mine life of around a decade.

(Source: Aurelia Metals)

3) Eagle River gold mine in Canada

On October 29, Wesdome Gold Mines (OTCPK:WDOFF) released an update on the underground exploration drilling program at its Eagle River project and the best interception was 11.1m @ 92.8g/t Au from 356.7m in hole 925-E-104. This is equal to 1,030(AuEq.)m.

(Source: Wesdome Gold)

Following the recent drill results, the 303 Lens was extended another 300m down plunge to the 1,300m level. The results will be included into the existing resource and reserves base at the end of 2019.

Eagle River is the company's main producing asset, and the cash flow from it is funding a C$27 million exploration and development program at the Kiena project. Eagle River consists of two central deposits feeding an 850 tpd mill, and it has proven and probable reserves of 404,000 ounces of gold.

(Source: Wesdome Gold)

In 2019, the mine is expected to produce 85,000-89,000 ounces of gold at AISC of around $985 per ounce.

(Source: Wesdome Gold)

Conclusion

Pan American Silver released another set of outstanding drill results from the newly discovered wide zones of mineralization below the current production levels at La Colorada, and I expect this system to significantly improve the mine reserves and mine life. However, I think that the company is overvalued from a discounted cash flow perspective just like pretty much every silver producer in the world.

Aurelia Metals announced more great results from Peaks and the gold grades were particularly impressive. The company looks overvalued at the moment as the mine life of its key operations is just four years, but I think it has good chances to double the life of mine of Peaks. If you want to get exposure to Aurelia, you'll have to go to the ASX as the company is not listed in the US.

Wesdome has been doing wonders at Eagle River, and the 300-meter extension of the 303 Lens will undoubtedly boost reserves and resources by a lot. However, the company is already valued at close to $850 million, and I think that even three million ounces of reserves at Eagle River wouldn't make it look cheap.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am not a financial adviser. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading.