People have been mining gold and silver in Mexico for hundreds of years. The Rosario mine in Sinaloa Mexico operated from the 1700s to 1944 on the western edge of the Sierra Madre Occidental. A few kilometers away, Goldplay Explorations (V.GPLY) is looking for gold and silver at its El Habal and San Marcial projects. The San Marcial project has a historic 43-101 compliant silver resource with upside opportunities for expansion. The El Habal is at drilling stage with recent attractive results from trenching supporting exploration potential.
There is very little question that the entire Rosario District is highly prospective. There are artisanal mines all through the area and, on a rather larger scale, First Majestic is exploring more or less next door to San Marcial. There are roads, power and a workforce within a few kilometres. Infrastructure is not an issue.
The challenge which confronts Goldplay CEO Marcio Fonseca is how to explore and develop the properties the company has in the district. It’s a challenge he’s looking forward to.
As well as being a qualified professional geologist, Fonseca held senior management and director positions with Macquarie Metals and Energy Capital. “For ten years I worked for a bank,” said Fonseca. “When I worked for the bank I was always asking, “Is this a mine?”
In 2013, Fonseca left the bank to become VP Corporate development for Silvercrest Mines, a company which he financed while at Macquarie Bank since its early days in 2006. Two years later Mr Fonseca played a key role in completing the sale of Silvercrest Mines to First Majestic for $150m. The experience gave Fonseca a real appreciation for what a major would be looking for in a junior explorer and how to successfully identify, explore and develop mineral assets towards highly accretive exit strategies for investors.
“I restructured Goldplay,” said Fonseca. “I needed optionality. And I wanted the company to have more than one asset”, providing investors more than one opportunity in the Rosario Mining District.
On July 5, 2018 Goldplay put out an “Update” press release which focussed on El Habal and San Marcial, after also releasing successful wide trenching results on June 05, 2018 In this release, the company outlined its progress and its plans for the two properties.
At El Habal, which is primarily a gold property, Goldplay has trenched and completed a modern geophysical study of the property. “We also reopened some of the historical workings on the property,” said Fonseca. “We identified drilling targets and ran a Phase 1, 2000 meter drill program in July.”
The plan is to wait for the results of the Phase 1 program with assay results flowing in over the next few months. Once all the results are in Goldplay will plan and execute a Phase 2 drill program. The company is also in the process of developing a 3D model of the mineralization and is continuing its trenching and mapping program in the 6 kilometre by 1 kilometre prospective zone.
At El Habal there are old shallow mines which are excellent pathfinders for the exploration program. The target definition efforts of the company will be focused in those areas.
Fonseca knows what he is looking for. “We want oxidized mineralization which would work as an open pit target for low capital intensity development.”
Goldplay acquired an option on its San Marcial silver/zinc/led property in April 2018 from SSR Mining. The terms of the option call for Goldplay to undertake $3 million in exploration over the next three years.
In the press release announcing the San Marcial option, Fonseca states, “The near surface high-grade historical resource allied with preliminary historical metallurgical data encourages the Company to continue exploration aiming to expand the resource along the 3.5 km trend. The historical exploration results delineating 14 targets for precious metals explorations represent an upside exploration potential in San Marcial for future discoveries.”
Along with the right to explore the San Marcial property, Goldplay gained access to a great deal of data from previous exploration efforts and a historical 2008 43-101 Resource Estimate. “There were 30,000,000 ounces of silver equivalent in that historical estimate,” said Fonseca. “We’re working through the old data and drill results. After due diligence, we realized that the 2008 43-101 Resource Estimate was completed with 30 drill holes and in 2010 the previous exploration company completed 22 holes, representing an immediate opportunity for sampling- re-sampling and update the resource.”
At San Marcial, Goldplay is committed to updating that historical estimate and drilling along a trend which runs 3.5 kilometers.
“We’ll use a portable diamond drill rig,” said Fonseca. “In Mexico we are able to drill at a cost of ranging from $75 to $100 /m for shallow drilling , due to the location of the projects with good infrastructure and moderate topography”.
Keeping costs down and moving San Marcial towards the Preliminary Economic Assessment stage will be Goldplay’s focus for the next year or two. “We may need to raise capital,” said Fonseca. “But right now, we have enough money to last for two years.”.
At the PEA stage, Goldplay would be looking to provide investors with successful exit strategies at San Marcial. Fonseca’s investment banking experience and his business exposure to majors like Phelps Dodge and Vale (CVRD INCO) provides extensive experience in project and corporate development. Other important aspect to note is that First Majestic has a development /exploration stage project only 5 kilometres away from San Marcial, which Fonseca knows well. He knows what majors are looking for in development properties.
Fonseca is also very aware of the need to avoid dilution and to have Goldplay’s shares in strong hands. “We have 38 million shares outstanding. 22% of those shares are held by management or insiders, Sandstorm Gold hold 7.9% and, after the San Marcial transaction, SSR Mining holds 3.3%. And I have a lot of skin in the game because I personally hold close to 10%,” said Fonseca.
Fonseca knows that as soon as Mexico is mentioned the question of security has to come up. “We’ve seen an improvement in security. Rosario City is very quiet,” said Fonseca. “My group has not run into safety issues. This area is relatively safe.”
Fonseca’s overall strategy in this richly prospective mining district is driven by determining mineralization, grade and whether or not a particular deposit is feasible. As Goldplay trenches, maps and drills, its shareholders can look forward to a steady news flow. With each release Goldplay will be a step closer to answering Fonseca’s banker’s question, “Is that a mine?”