Sierra Madre Gold & Silver (TSX.V: SM) is is pleased to announce that it has entered into a purchase agreement with an option to joint venture for the La Tigra Project, located 148 kilometres north of the Company’s flagship Tepic Project in the state of Nayarit, Mexico. The La Tigra Project consists of seven Mining Concessions, totaling 357 hectares, covering most of the historical mines in the Distrito Minero Del Tigre. The agreement is with the property’s owner, Industrial Minera Mexico S.A. de C.V. (IMMSA).
“We are thrilled to be able to acquire the La Tigra Project,” said Alex Langer, CEO and President of Sierra Madre. “The location and infrastructure of La Tigra fits seamlessly with Sierra Madre’s strategy of consolidating high value projects with production potential. With a history of past production and a significant amount of historical data, our technical team is very keen to apply modern exploration techniques to this highly prospective project.”
“I’d also like to thank IMMSA for their professionalism and trust in Sierra Madre as we form this alliance focused on progressing La Tigra forward.”
History of La Tigra
According to reports published by Servico Geologico Mexicano (SGM), a department of the Mexican Federal Secretaria de Economia, gold and silver were mined in the La Tigra area by the Cora peoples and villagers prior to 1900. SGM reports state that between 2,500 and 5,000 people worked as gold panners in the area.
The SGM reports further state that in the early 1900s John Cleary acquired the mining rights and developed the La Tigra mine and associated workings. The La Tigra mine was exploited by an incline shaft on two principal levels with development begun on three lower levels. Production apparently ceased during the Mexican Revolution of 1910 to 1920. Beginning in 1927, Compania Minera Unida Oriente SA de CV is reported to have invested $500,000 (U.S.) in rehabilitating the mines and building new processing facilities. SGM reports that 13,110 tonnes of material grading 10 grams per tonne gold and 358 g/t silver were processed at this time.
The most recent mining occurred between 1983 and 1991 when Compania Minera Nayoro SA installed a 250-tonne-per-day flotation plant. SGM reports the grade of material derived from the La Tigra mine was 10 g/t gold and 300 g/t silver. Operations were said to be restricted to pillars and stopes above the water table. There has been little exploration work done in the district since Nayoro ceased operations and sold off its equipment. The information from the SGM reports is historical in nature, and a qualified person has not verified this information and has not completed sufficient work to treat these data as current. The historical data should not be relied upon.
Currently, there are a small number of families that are engaged in artisanal mining within the concession. The company plans to immediately commence an exploration program on the La Tigra project, which will include compilation of historical data, surface mapping and sampling of the principal vein structures, which have been exposed by previous mining and trenching. This work is designed to prioritize drilling targets with phase 1 drilling expected to commence within the next six months. The project has excellent infrastructure and is road accessible, located 10 kilometres off of the paved highway.
The Company plans to immediately commence an exploration program on the La Tigra Project which will include compilation of historical data, surface mapping and sampling of the principal vein structures which have been exposed by previous mining, and trenching. This work is designed to prioritize drilling targets with Phase 1 drilling expected to commence within the next six months
Agreement terms and obligation
The purchase agreement calls for payments totalling $1.5-million (U.S.) over a period of three years. As part of the agreement, Sierra Madre is required to provide a National Instrument 43-101-compliant technical report containing a resource estimation before the end of the three-year period. The company must also inform IMMSA at least 90 days before and not sooner than 180 days before the last payment is made of its intention to exercise its option to acquire the property.
Upon exercise of the option, IMMSA is assigned a 2.5-per-cent NSR (net smelter return) royalty. The company can elect to purchase a 1.5-per-cent NSR portion of the royalty for $1.5-million (U.S.) at any point in the future. If IMMSA does not elect to exercise the joint venture clause the company will acquire 100 per cent of the project subject to the NSR.
Potential joint venture
In the event that the NI 43-101 technical report has gold resources estimated at one million ounces or more, IMMSA, at its sole discretion, can elect to form a joint venture for the purpose of placing the project into production. The joint venture company will be 51 per cent owned by IMMSA and 49 per cent by the company. IMMSA has 60 days from the time it receives the NI 43-101 technical report to notify the company of its intent to form the joint venture.