Near Term Production May Help Realize Yale Resources’ Long Term Goals
By Mary Steiner
For many junior resource companies the idea of advancing an exploration project to production is merely a dream. The cost of development—infrastructure, labor, material transportation, equipment, a processing mill, etc.—can easily reach into the tens of millions for the smallest of mining operations. It is at this stage that most juniors either begin courting a larger partner for take-over, or considering debt financing options.
But, for Yale Resources [TSXV: YLL], what’s ostensibly a fantasy for most seems a not too far distant reality. Yale’s Zacatecas Venture silver project, under option from Impact Silver Corp., lies in Mexico’s Zacatecas mining district, a region with a rich silver production history dating back to the Spanish Colonial era with past production estimated at 1.2 billion ounces. This same district is also home to Penole’s Fresnillo mine, ranked as the world's second largest primary silver mine in 2005.
Earlier this month, Yale released the results from its phase one drill program. Much of the results confirmed Yale’s expectations of an average 200-300 grams per tonne silver; however, to the surprise of everyone, including President Ian Foreman, one hole on the Mina San Jose property showed an intercept of 1,340 grams per tonne over 0.80 metre.
During the exploration stage, a junior company’s share price is naturally affected by news releases, particularly those pertaining to drill results. Although the 1,340 g/t silver intercept gave many at Yale something to smile about, “it's obvious that the market wasn't happy,” said Foreman. He admits the intersections were narrower than expected and the market’s reaction to the news placed downward pressure on the stock.
Nevertheless, Foreman remains optimistic: “You’re looking at a vein system that is 400 meters long and you're drilling with something that is 2.5 inches in diameter. At times, you have to be very lucky when it comes to a drill program. We all know that the distribution of minerals through vein systems is very irregular; so for us to be able to get a high grade intersect is tremendously encouraging. It means that we could do it again.”
Yale’s involvement with the Zacatecas project began last October when the company signed a letter agreement with Impact Silver Corp. [IPT- TSX-V]. The terms of the agreement require Yale to reimburse Impact the property purchase cost and perform a minimum of US$ 100,000 exploration work within 18 months in order to earn a 65% interest in the venture.
In just eight months, Yale has fulfilled most of the terms of the agreement. “I think the key thing now is that we've been able to advance the property really quickly,” said Foreman. Once the drill programs are complete, Yale will have earned its 65% interest in the property. “So that means then we're not going to be diluting shares through optioning and paying 100% of the costs to earn in. We'll actually be partners paying 65% of the cost and Impact—35%. And that's a really significant thing.“ He added, “Not a lot of companies get to the point where they're actually earning in their percentage; so, for us to have done that within 8 months is a real feather in our cap.”
Drilling on the San Sabino property has yet to commence. “The trench results are trickling in,” said Foreman, “It’s the only one [of the properties] that we didn’t drill because we’re looking at expanding our interest in the area. We were awaiting [trenching] results, and we just wanted to look at more information before we spent money on a drill program.”
The results from the San Sabino trenching program will soon be released. The management of Yale is planning further work in the fall, particularly on the Mina San Jose property. Phase one drilling of San Sabino is expected to be completed then, as well.
By partnering with Impact, Yale has aligned themselves with a respected silver producing junior company whose portfolio of advanced silver projects in Mexico includes two currently producing mines and a 500 tpd processing plant at Royal Mines in the Zacualpan Silver District. Yale chose Impact as a venture partner “along the same lines that someone would pick a company to invest in: we like their management, we like their projects, we like their ability to manage well-run programs,” said Foreman.
The fact that Impact has an option to purchase the nearby Veta Grande Mill is the icing on the cake. If further exploration work proves fruitful, the two companies are considering processing ore from the many tailings dumps on their properties at the Veta Grande. All four of the Zacatecas Venture properties are within ten kilomtres of the mill, greatly reducing the expenses involved in transporting ore.
However, the close proximity of the mill is not the only cost beneficial feature of the Zacatecas project. Each of the four properties Yale has optioned contains old workings, including a series of adits, left over from the days of the Spanish colonialists. Beside each of these adits are fortuitously located dumps with mineralization that Yale’s management assumes was uneconomical to the Spanish. “So we've gone in and sampled a lot of those dumps,” said Foreman, “and the average grades came back 200-300 g/t silver, which a lot of companies promote as being economical underground – and this is sitting on the surface!”
Unlike most other production-minded juniors, Yale will have no need for debt financing to move the project into the development and production stages. According to Foreman, “there’s no reason for us to go to the market to pay to go into production. Literally, we're talking about getting a small contractor with a couple of dump trucks and a backhoe to dig this [the dump mineralization] at the surface of the earth and put it in a dump truck and truck it to the mill. So, we don’t need to raise funds at all to put these materials through the mill.”
Foreman believes the upside for investors is that Yale would be able to generate revenue without diluting its stock. “This is money the investors don't have to give us for further projects, or on this project. That’s a huge advantage.”
This article is intended for informational purposes only and should not be considered as a recommendation to buy stock in any company. Although the author has made efforts to verify the information contained herein, the accuracy of all the information cannot be guaranteed. As always, it is recommended that you commit considerable time to completing your due diligence before buying stocks in publicly traded companies. A fee has been paid for the creation and distribution of this article.
