At the recent Beaver Creek Precious Metals Summit Igor Gonzales, CEO of Sierra Metals (T.SMT) had quite a story to tell. On the one hand, Sierra has three producing mines, two in Mexico and one in Peru. At each of these mines, Sierra is upgrading its operations and increasing the throughput. On the other, Sierra is engaged in significant “brownfield” exploration to extend the resources it already has. “Brownfield exploration,” said Gonzales, “is a cost-effective way to grow. At Beaver Creek, there was a very positive reaction to what we’ll be doing next.”
When we spoke to Gonzales at the beginning of October, Sierra had just released the results of its drilling at its Yauricocha Mine in Peru. In that release Gonzales is quoted as saying, “Today’s results represent the existence of high-grade polymetallic mineralization at Cuye, and suggest the possibility of even further mineralization to depth. Additionally, these results represent some of the widest sulfide intercepts drilled at Yauricocha since the discovery of the Esperanza Zone in 2016. The Company has made a strong commitment to brownfield exploration in 2017 and results such as the ones released today continue to demonstrate that this investment is paying off with the potential to further grow our mineral resources.”
The great advantage of brownfield exploration is that the structure and geology of an area is already known to some degree. Plus, and this is a huge cost saving, drilling can be done from a drill station underground. In the case of Yauricocha, Sierra drilled from the 870 level of the existing mine.
“We focused our exploration efforts to the north,” said Gonzales, “We were looking at an area where three major faults intersect. The Cuye copper ore body used to be one of the richest structures on the property. It was mined to level 920 and was one of the largest cash flow generators at the Yauricocha mine. But, ten years ago, the then operators of the mine lost the structure. We found it.”
“We delineated our targets based on geo-technical work. We were looking at the area between 1000 meters and 1200 meters.” said Gonzales.
Sierra also found that the Cuye and Catas zones may merge at depth and that the mineralization widens at depth. “The Catas zone contains five metals. High copper, high zinc and significant gold and silver. Cuye is predominantly copper.” said Gonzales.
“We could take the existing shaft to 1270 meters and deeper. We have the capacity to go deeper. We’d mine it and then raise the rock to the 720 level and then on to the concentrator,” said Gonzales. “It would increase our capacity and our resource.”
The next step for Sierra at the Yauricocha property is to prepare a revised 43-101 compliant resource estimate.
“We’ve increased the tons,” said Gonzales. “And we have also increased the grade. We see a big increase in the amount and grade of both copper and zinc. Which means that the per ton value of the ore is higher.”
All of which changes the economics of the Yauricocha property. “Right now the projected mine life is 4.6 years. We expect these new results will increase the mine life. It will go up a lot.” said Gonzales.
Sierra’s Mexican operations are undergoing significant shifts. At the Cusi mine, Sierra is looking at going deeper to mine a significantly higher grade ore body. “We’ve completed a 30,000 meter drill program and all the holes hit ore and defined the structure. By going deeper we’re getting better grade.”
In its October 16th press release the company updated production figures and Gonzales is quoted as saying, “The Company has successfully completed two sequential drill campaigns totalling 29,500 meters at the Santa Rosa de Lima zone which saw average silver equivalent grades of 372 grams per tonne and average widths of 3.8 meters. These results will be included in a mineral resource update for the Cusi Mine expected in the fourth quarter of 2017.”
At the company’s Bolivar mine, the emphasis is on updating equipment and increasing throughput. In the same October 16th press release Gonzales commented, “We continue to work to increase tonnage at Bolivar through the commissioning of newly acquired equipment, which has arrived and been commissioned and expect the remaining 3 underground loaders to arrive and be commissioned in Q4 2017. We continued to define higher grade ore sources through further development which are expected to come into the mine plan next year.”
All of which means that Sierra’s metal production figures should rise and continue to rise through 2017 and on into 2018. For investors, the activities at three mines mean that Sierra will have a steady news flow with drill results, equipment commissioning and 43-101 resource estimates all keeping the market’s attention focused on this productive company.