Gold has continued to showcase its resiliency in 2022 as risk-off appetite continues to ripple throughout the global economy as we see a continued slowdown in economic growth to coincide with fragile supply chains and surging global consumer prices.
In fact, the share of fund managers expecting the global economy to weaken is the highest on record, according to the Bank of America polling this month.
In March, purchases of gold exchange-traded products hit an all-time record as global net inflows into gold ETPs rose fivefold month-on-month to $11.3 billion, surpassing the previous peak of $9.4 billion in July 2020.
Inventories for commodities ranging from agriculture, energy and metals are very low everywhere as geopolitical uncertainty continues to ramp up.
This situation is not expected to be resolved anytime soon as numerous countries have been forced to halt commodity exports as a national security matter as inflation continues to worsen, notably in the food and energy categories.
Zacatecas Silver (TSX-V: ZAC)
A company I am incredibly excited to be covering is Zacatecas Silver (TSX-V: ZAC) which recently acquired the high-grade oxide Esperanza Gold Project from Alamos Gold which is located in Morelos State, Mexico.
The project is an exceptionally high-grade oxide gold deposit with significant upside.
The deposit has a historical measured and indicated resource of 34,352,000 tonnes at 0.98 g/t gold and 8.09 g/t silver for 1,084,000 ounces of gold and 8,936,000 ounces of silver and inferred resource of 718,000 tonnes at 0.80 g/t gold and 15.04 g/t silver for 18,000 ounces of gold and 347,000 ounces of silver.
The project hosts a near-surface deposit, which looks like it will be a conventional open-pit mine with gold and silver recovery via heap leach.
The company plans to prepare an updated resource estimate in 2022 and complete a current economic study on the Esperanza Gold Project based on the updated resource estimate.
To date, 389 drill holes for 69,716 metres have been drilled at the project with multiple high priority exploration targets immediately adjoining the deposit with at least six high priority exploration targets within adjoining mining concessions.
The company also owns the Zacatecas Silver Project, which hosts an inferred mineral resource estimate at the Panuco Deposit of 2.7 million tonnes at 187 g/t AgEq (171 g/t Ag and 0.17 g/tAu) for 16.4 million ounces of AqEq — mineralization open in all directions.
The project covers 19,338 acres of concessions hosting multiple, silver-gold-base metal mineralized, epithermal vein systems — and well over 10 strike km of largely untested veins at the Panuco, El Cristo,Muleros and San Manuel-San Gil vein systems.
The company recently made a new discovery at Panuco North which has defined near surface mineralization over a strike of 500 metres, open over 1 km along strike and at depth.
After the discovery hole which returned 2.17m at 823 g/t AgEq, Zacatecas reported additional drilling intercepts in early April at Panuco North including 1.25m at 1440 g/t AgEq and 4.35m at 375 g/t AgEq with more assays pending. The recent drill intercepts at Panuco North are promising because they have a higher silver equivalent grade than the current Panuco resource estimate, are near surface and are interpreted to come from the top of the mineralizing system.
This highlights the area’s exploration potential, which could add some serious ounces to the deposit if drilling continues to pull successful intercepts.
The project has multiple epithermal vein systems, and the company plans to actively drill the project for the remainder of the year and review the resource as drilling progresses.
Zacatecas presents investors the opportunity to be a part of a story with two highly advanced silver and gold projects. The company is fully capitalized to actively advance both assets this year.
The leadership team are proven mine builders. The CEO of the company is Bryan Slusarchuk, who is the former president and co-founder of K92 Mining, which is a rapidly growing gold producer located in Papua New Guinea. K92’s CEO John Lewins is a Zacatecas Director as is K92’s current Corporate Secretary, Nancy La Couvee. Dr. Chris Wilson, formerly with Ivanhoe Mines, is the COO.
Today I am pleased to be joined by Bryan to provide an update and an overview to the Gold Telegraph audience:
Hi Bryan, thank you for giving the Gold Telegraph readers an introduction to the exciting Zacatecas story.
The company recently announced the acquisition of the advanced stage Esperanza Gold Project in Mexico.
The project is high grade with tremendous upside. Can you provide an overview of the project alongside some milestones investors should expect over the next six months?
Thanks for giving us the opportunity to talk to you on Zacatecas.
As you mention, Esperanza is indeed a very high grade gold situation. In fact, it is one of the highest grade oxide gold deposits anywhere, at a development stage and having a historic resource in excess of 1 Moz M+I. The project came to us via a transaction with Alamos Gold, which is a multi-billion dollar NYSE and TSX listed gold company who now happens to be the largest shareholder in Zacatecas.
Our first order of business at Esperanza is to upgrade the historic M+I resource to a 43-101 compliant status and then complete an updated and current economic assessment of the project based on that resource. As you know, a now historic PEA published on the project contemplates in excess of 100,000 ounces of annual production at an all-in sustaining cost of approximately $750 per ounce. This is obviously indicative of the fact our target here is not only very high grade, but is also potentially a very high margin situation. We are treating everything as historic but will look to quickly move the process along onsite to develop a current snapshot of the perspectivity.
While the M+I resource currently in place would potentially support several years of initial high margin mine life, we will also seek to expand the resource near deposit while concurrently testing many of the undrilled or under drilled exploration targets within the regional land package.
This is an advanced stage gold asset and the news flow over the coming months will relate to advancing the project towards commercial production, with various permitting and technical catalysts along the way.
You and the entire Zacatecas team have an extensive and incredibly successful track record of unlocking value for shareholders through advancing projects.
Can you tell us about your incredible journey at K92 mining and maybe even the similarities in the early days of K92 and Zacatecas?
K92 has been an incredible journey, and its been a process that has created amazing benefit for all stakeholders involved in the process. I am a co-founder at K92 and was President, Director and a member of the Audit Committee from the inception of the company through to cash flow positive operations and commercial production.
The fellow that deserves an incredible amount of credit for K92 is, of course, the CEO John Lewins. John is a Director of Zacatecas Silver and it is a pleasure working with him again on something new and exciting. He has done an exceptional job developing and executing the business plan at K92 that has resulted in the share price moving from a micro-cap situation to now being valued in excess of $2 billion and his value as a Director on Zacatecas is very important.
K92 was a divestiture from Barrick Gold. When we acquired the project, we believed it had potential to be very high grade and very high margin. The purchase price was initially contemplated at approximately $60 million, with much of the consideration due on the back end and tied to progress towards production and with triggers in our control.
The size of the deal and the back end nature of many payments tied to commercialization is the same concept we used at Zacatecas when structuring the Esperanza transaction with Alamos Gold.
The big difference, of course, is that Barrick completely exited their position as equity participants at Kainantu while Alamos has decided to stay very much exposed to the potentially huge upside at Esperanza, by becoming the largest shareholder of Zacatecas itself.
The company also owns a large silver project.
Can you provide an overview of this exciting asset and touch on the results recently reported at the Panuco North and Panuco Central Veins?
While much of the attention as of late has been on Esperanza, and for good reason, we have been quietly advancing an outstanding silver property in Zacatecas, Mexico which of course is what the company is named after.
During the past several months, we have published our initial inferred mineral resource estimate of 16.4 million AgEq at 187 g/t AgEq at the Panuco Deposit including a higher grade zone of 5.1 million AgEq ounces at 235.25 AgEq.
This is a great foundation resource, but what has our technical team led by Dr. Chris Wilson, so excited about the asset is the recent discovery in a previously undrilled portion of an area known as Panuco North.
This discovery hole was very high grade (2.17m at 823 g/t AgEq) and we have now followed it up with multiple additional high grade hits including 1.25m at 1440 g/t AgEq. It seems like this discovery area has the potential to host much higher grade than the existing resource itself and in these early days of drilling seems to be holding together exceptionally well.
We are now drilling around the clock to follow up on the discovery and more assays are expected imminently. This looks like we could be on to something very high grade and potentially very big – and now we are eagerly awaiting more validation of that belief from the ongoing drill program.
Can you touch on some of your significant shareholders alongside the current share structure of Zacatecas?
In addition to Alamos Gold now being the largest shareholder in Zacatecas, we have also announced Eric Sprott as a large shareholder in the company.
We recently completed a $19.15 million financing, so we are very well funded to concurrently advance both projects and via this private placement added several of Canada’s most well known and successful mining entrepreneurs as shareholders along with some excellent institutional investors focused on the metals space.
Post the $19.15 million placement, we have less than 82 million shares outstanding so this is still a very small market cap given the size of the assets. The shares outstanding total 81,305,015, and there are 9,613,161 warrants issued in conjunction with the financing, and 4,717,500 incentive share purchase options.
In addition to shareholders noted such as Alamos Gold and Eric Sprott, management and employees are also very large shareholders in the company.
Finally, Bryan, I always like asking my guests about their outlook on the gold and silver market.
With gold trading near $2000 in addition to commodity shortages worldwide, do you think we are finally entering a supercycle?
Gold and silver are heading much higher in my opinion. Gold is a store of value, a hedge against uncertainty and a currency. During these times of quantitative easing infinity, reckless fiscal and monetary policy and growing geopolitical instability around the world, precious metals are an essential safeguard as a holding. While the printing presses of fiat currencies, of all sorts, are in hyperdrive, gold remains constant and therefore is inherently becoming more valuable versus the peer group of competitor or, better put, imposter paper currencies by the day.
The set up for gold and silver is, in my opinion, a once in a generation situation and we are headed higher in the near future.
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