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Jan 08, 2024

Sierra Madre Gold & Silver aims to resume production at shuttered Mexico mine

All the permits required for resuming operations at the Guitarra, Coloso, and

All the permits required for resuming operations at the Guitarra, Coloso, and Nazareno mines are up to date

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Sierra Madre Gold & Silver (TSXV: SM) is aiming to resume production of its recently acquired La Guitarra mine, which has been in care and maintenance since 2018.

The company closed the acquisition of the La Guitarra mine in the Temascaltepec mining district from First Majestic Silver (NYSE: AG) (TSX: FR) (FSE: FMV) on May 25.

The company's production schedule includes resuming production at La Guitarra and the Temascaltepec mining district within 18 months through a comprehensive strategy consisting of three main components.

The first part involves the company conducting a reserve and resource estimate, including completing a NI 43-101 resource estimate using the existing database. The data from La Guitarra will be used to determine potential reserve estimations, which will help the company put together a detailed mine plan and schedule for restaring the Guitarra, Coloso and Nazareno mines.

With that in place, the next step involves upgrades to the processing plant and mining operations. This involves rebuilding the existing existing mining equipment and refurbishing the flotation plant to transition from two parallel circuits to a rougher-cleaner configuration. Additionally, the company will implement repairs on the fourth ball mill on-site to get to the desired capacity of 550 tonnes per day.

The company will also initiate the permitting process for ore leaching. Once the leaching permit is obtained, they will explore the potential to construct a leaching circuit and commence reprocessing of existing tailings alongside ore extracted from the mines.

Lastly, the company will undertake exploration activities in the Eastern Temascaltepec District. This will include conducting a district-scale mapping program, undertaking trenching and surface sampling, and conducting underground mapping and sampling of historic mines. Based on the results of these work programs, the most promising targets will be identified for drilling.

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All the necessary permits required for resuming mining operations at the Guitarra, Coloso, and Nazareno mines are up to date and valid, and the underground workings have been well-maintained. Similarly, the processing plant holds all the required permits to recommence its operations. Moreover, the project has obtained approval for an environmental impact permit to construct and operate a new tailings impoundment with a significant capacity of 5.8 million tonnes.

"The mine's all ready to go. It was in production when it shut down, so we can go back into the same stopes and bring them into production," Greg Liller, the chief operating officer and executive chairman of Sierra Madre Gold & Silver in a YouTube interview with Crux Investors.

"Now we’re looking to go back to those same deposits that were defined in that feasibility study and preparing it for underground mining."

Furthermore, the company possesses a comprehensive project database that encompasses 1,407 drill holes, production records spanning 27 years, survey data, a 3-D model of the underground workings for all three mines, detailed operating cost data and extensive metallurgical recovery information and test results.

Located in the southeast end of the Mexican Silver Belt, La Guitarra is an underground mine that was operational until August 2018. During its active years from 2015 to 2018, the mine consistently produced an estimated annual average of 1.0 million to 1.5 million silver equivalent ounces, including approximately 610 thousand to 945 thousand ounces of silver annually. The current infrastructure of the site comprises three underground centers, a 550 tonnes per day flotation mill, a permitted tailings facility, various work buildings, equipment and supporting infrastructure.

The exploration efforts in the eastern district have resulted in the mapping of more than 40 kilometers of mineralized veins and breccias, indicating significant mineral potential. Building upon the positive community relations inherited from First Majestic, the company has maintained strong ties with local stakeholders.

La Guitarra Property Map. Image via Sierra Madre Gold & Silver.

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First Majestic left the mine in care and maintenance prior to selling the property to Sierra Madre and now the mine is ready for a swift resumption of operations. Furthermore, there is untapped exploration potential along over 15 kilometers of known structures. First Majestic also remains Sierra Madre's largest shareholder.

"Compared to most every other project, it's very low risk. The mill is already built. The underground mine is already developed. We’ve got the production records and the costs associated with that from 2012 to 2018," said Liller.

"The only thing that's going to change is the cost of the materials, and we already have a contract in place with the mining union so we know what those costs are going to be."

Prospective time to production is 12-18 months. The overhead for the mine is expected to be minimal, and the company is hoping to purchase the ball mill and mill expansion out of cashflow. The remaining time will be spent getting all the equipment together, completing a resource update within six months, preparing a two year mining plan and then starting construction.

"The mine plan is going to be very simple, because Guitarra already has kilometres of underground workings. All the development's been done. We’ll have to do a little bit but it's not like you’re developing a mine from scratch," said Liller.

Located in the Temascaltepec mining district, the La Guitarra Property is situated approximately 130 km southwest of Mexico City and can be accessed via road. The property encompasses three underground centers, namely La Guitarra, Coloso, and Nazareno, all of which are currently in a state of care and maintenance.

Sierra Madre Gold & Silver shares dipped 6 per cent to $0.47 on Tuesday on the TSX Venture Exchange.

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