Orko Silver (CVE:OK), is developing one of the world’s largest silver deposits at the La Preciosa Project in Mexico in joint venture with Pan American Silver (NASDAQ:PAAS, TSE:PAA), who are earning a 55% interest by sole funding the completion of a feasibility study and construction of production infrastructure.
La Preciosa is located in Durango State, which envelops the heart of Mexico’s prolific Sierra Madre Mining Belt, and includes large silver deposits such as Fresnillo and Pitarrilla. The area produced a total of 104.7 million ounces of silver in 2009, and is known as the world’s second largest producer of silver. La Preciosa is close to the city of Durango and is surrounded by a paved highway, national power grid, rail lines, and access to a local smelter that is 2 hours away by both road and rail.
The Joint Venture ground covers 32,400 hectares or about 80,000 acres, and currently hosts a NI 43-101 Compliant Indicated Resource Estimate of 10.64 million tonnes grading 0.27 g/t Au, and 185 g/t Ag, for a Silver-Equivalent grade of 201 g/t at a cut-off grade of 100 g/t Ag; and an Inferred Resource Estimate of 12.0 million tonnes grading 0.25 g/t Au and 185 g/t Ag for a Silver-Equivalent grade of 200 g/t at a cut-off grade of 100 g/t Ag. That equates to an Indicated Resource of 68.9 Million Silver Equivalent Ounces, and an Inferred Resource of 77.6 Million Silver Equivalent Ounces.
This resource estimate was completed in February of 2009, and covers part of the strike line on the Martha Vein, within a conceptual open pit area of approximately 1,250 meters, measuring only a small part of the resource potential of the entire strike line.
Orko Silver discovered the main Martha Vein, while drilling on the property in March of 2007, and delineated a relatively flat lying vein that dips 20 degrees from surface to depth. This vein is not typical of vein systems and should allow for low cost mining methods for ore extraction, over its average width of 10 meters, and represents approximately 74% of the current resource. The current estimate for precious metal content is made up of 95% silver and 5% gold, with very little base metal content.
In 2010 the Joint Venture Partners confirmed the completion of over 245,000 meters of drilling that covered 717 holes, and initiated geotechnical, metallurgical, petrographical and environmental studies, and also launched processing plant design studies.
This drilling now covers a strike extension of at least 4,000 meters, with recent highlights including hole BP10-539, which yielded a true thickness of 7.71 meters in the Gloria vein grading 0.646 g/t Au and 648.0 g/t Ag for a silver-equivalent grade of 686.8 g/t. This included 3.59 meters grading 0.894 g/t Au and 986.7 g/t Ag for a silver-equivalent grade of 1,040.3 g/t. Pattern drilling has already been completed at LP resources, Bartina South, along with Martha East and South.
Additional identified targets include Cerro San Juan, El Vaquero, La Plomosa, Nancy and Dany that lie along an 8 kilometer strike line that runs parallel and is approximately 1,000 meters west of the La Preciosa resource outline. The property also contains four more large targets that are located up to 12 kilometers to the northwest and northeast of La Preciosa at Esmeralda, Flores Magon, Javier Mina and Mesa de los Panuquenos.
Snowden Mining Consultants were recently retained to examine various mining scenarios for La Preciosa, and AMEC were contracted to Orko to provide an independent technical review of project engineering. Snowden Mining Industry Consultants is on track to issue both the Preliminary Economic Assessment as well as an updated NI43-101 compliant resource estimate near the end of July, 2011, with a strong probability that this estimate will define a larger resource.
Recent studies confirm that a combined open pit, and underground mining operation is the most attractive development option. Positive results have allowed Pan American to approve an additional expenditures to complete a bankable feasibility study by the end of April, 2012.
Additional ongoing studies include finalization of the open pit and underground modeling, detailed metallurgical testing, geotechnical work, condemnation drilling, tailings and waste rock disposal, community relations, environmental studies, water sourcing and dewatering, land acquisition and road construction.
Pan American Silver is the ideal Joint Venture Partner, it is world’s fourth largest primary producer of silver, operating seven mines in Mexico, Peru, Argentina and Bolivia, that currently produce 21.2 million ounces of silver per year.
The Joint Venture Partners have also established an additional Joint Venture with Canasil Resources (CVE:CLZ) over the Carina Project, which is located 6.5 kilometers southeast of the La Preciosa Project. The Partners will be able to acquire up to an 80% interest in the venture and incorporate that interest into the La Preciosa Joint Venture.
Prior mapping and sampling at Carina defined an area measuring 500 meters by 800 meters that hosts multiple quartz vein structures with anomalous silver, gold and base metal values in surface samples that are characteristic of a high level epithermal system. The large claim area covers 3,100 hectares and has potential for additional mineralized zones and for bulk tonnage disseminated mineralization.
Orko Silver currently represents a pure silver play on one of the world’s largest primary silver deposits that has only been partially explored, and has substantial upside for further resource definition. The Company is fully funded for its 45% equity interest.
Joint Venture Partner Pan American Silver reported cash generation of $39 million in the March quarter along with cash reserves of $397 million, and certainly has the financial muscle to buy out its minority partner. Both Byron Capital Markets and GMP securities agree that Orko provides a unique opportunity to gain exposure to an undervalued silver play.