Hermosa - drilling update and geology review

We've got another batch of drill results from Hermosa (link and link).

Summary

• Majority of the new assay data is from infill holes (7 of 10 holes) that intersected similar grades to surrounding holes
• We see a lot of grade inflation - thick zones are in reality a much narrower high-grade zone, surrounded by low grade rocks (e.g. hole 403)
• NW DH looking for the continuation of Taylor weren't anything special:
• Deep, narrow, low grade CRD mineralization - it looks like the system is dying out in this direction
• Shallow, high-grade vein mineralization - maybe this should be their focus for future drilling in this area?
• Permitting - Arizona Mining are pushing shit uphill with this project, mate.

Technical junk

Here is the accompanying map for the first release, with my annotations to help you understand the maps a bit better.

Taylor deposit drilling - Jan 17th PR (Source: Arizona Mining website)

Here is a another version showing the location of the private (patented) mineral concessions and public (unpatented - i.e. where AZ can't drill) land.

Red hatched areas = can't drill here

and looking regionally

Green shaded areas = public land, unshaded areas are private land. Taylor deposit is at the bottom of the image.

Not many places for picking and poking with drilling

Arizona mining did want to drill in the public land, but unfortunately their recent application for 8 holes was cancelled (link), and they have another permit for 5-6 exploration holes that are on-hold.

You can download the enture permit application and maps from here (link).

A big thanks to LM for that info.

The Question is this:

Do Arizona management need to inform their shareholders and the market that their permits to explore on public land have been cancelled? Is this of material importance to the project?

I feel it is, but then again, I'm a geologist and know nothing

As I have mentioned before, if they cannot get a permit to drill on public land, how can they believe that they can obtain the numerous permits to build and operate a mine, where potentially a large portion of the infrastructure, tailings and mine dumps will probably be (like for the Central Deposit) on public land? 

This is going to make the PFS study very interesting. Will they:

1. Do a cop out - not have any plans for the surface infrastructure
2. Do a Central - have plans for the surface infrastructure in the optimal locations (i.e. a large portion on public land) where you know they can't do anything
3. Try and squeeze everything into the private

I'm 50:50 between (2) and (3).

Geology Crap

Here is a long section through an idealized CRD deposit (source - Pasinex Adana deposit (link) and Dr. Peter Megaw)



and here is an annotated long section through Taylor



It looks very similar to Peter's model, which is good, and you can see that there are 3 distinct styles of mineralization:

1. CRD horizons - black dashed lines - these are dipping to the left (NW), and individual horizons are very extensive and have been drilled over lengths of >1km with relatively consistent mineralization. These are a nice steak.
2. Chimneys - mineralization restricted to narrow (100m x 200m) vertical zones, with sharp grade contacts (i.e. outside of the chimney grade is very low). Think of these as a bottle of wine - all the good stuff is inside. 
3. Veins - narrow, very high grade vertical structures. Think of these are those thin sheets of chocolate that you get stuck in desserts in fancy restaurants. They are great, but there is never quite enough.

Thee zones are very different (grade, style, orientation) and if you use a 'generic' control (i.e. assume that all the mineralization is horizontal), you may be over or underestimating the amount of mineralization in chimney zones. This is where infill drilling really helps to define the extents to mineralization.

• Ante Mineralum

• Post Mineralum

Source (link) - Photo of Fault with Fault Breccia by James S. John - I know it is the wrong rock type (Taylor is in limestone), but it was such a good photo showing bedding and faulting.

The Press Releases

This is where the holes were drilled

Blue = Jan 17th PR holes; red = Jan 26th PR holes

19th Jan - assays released from 7 drill-holes.

• 4 holes (HDS-388, 397, 398 and 400) were drilling into the core of the Taylor deposit 
• These are infill holes (i.e. drilling between earlier holes that hit mineralization)
• Low risk drill-holes as the earlier holes surrounding them give you a good idea of what you will hit.
• 3 holes (HDS-384, 390 and 392) looking for the NW continuation of the Taylor horizons. 
• These are (relatively) high-risk holes, as the main Taylor horizon is very deep (>1000m) here.
• Deep = expensive drilling.
• Results were poor, the CRD zones are thin and low-grade. However, the holes did hit some shallow, high-grade vein mineralization.

26th Jan - assays from 3 drill-holes.

• All holes were infill holes designed to better understand the Taylor deposit mineralization and to convert inferred into indicated resources. They won't have much impact on the overall tonnage of the deposit.
• Holes intersected narrow high-grade zones, surrounded by lower grade mineralization - this could have an impact on reducing the overall grade and tonnes of the deposit.

NW Holes

Here is a section through the deposit. I've added scale bars so you can see how deep AZ are drilling.
Holes 390 and 392 hit mineralization at ~1100-1200m depth (it is probably costing them at least $200K/hole to drill to that depth).

CRD zones = red lines.

We can Also see that the 2 main Taylor CRD zones stop between holes 401 and 392. So it looks like resource expansion to the NW is limited as best. I can;t see them drilling more holes in this area, unless they are going to focus on the shallow, high grade veins.

Central Zone

Here we see the chimney effect, in the chimneys we get much thicker and higher grade material, and when you look at the results in more detail, we actually see that these thick zones are really several, narrower high grade (>5% Pb) zones surrounded by marginal grade rocks.

Please note - I've used lead to highlight the high-grade zones

Here we see the grade in the BEST HOLE EVER - look at how the upper high grade zone is essentially gone in the holes that are only 70m away. You can also see how there is drastic grade changes between holes as well - the narrow (10m wide) high grade zones appear to continue some distance (these are probably representing replacement of specific beds in the limestone - see images above) but the thick zones don't. So what do you do in this type of situation? You have 2 options:

1. Cram as many holes into that area as possible that may significantly reduce change the size of this high grade zone, but would give some spiffy PR headlines
2. Treat this area as a "Zone of Avoidance" - if we don't touch it, we won't break it approach - this leaves a nice chunk of inferred resources but preserves its virtue and make sure it stays nice and large (and relatively undrilled).

So, for me, I think Hermosa is a large base metal resource, but no more. The local communities have successfully prevented any mining or exploration activities from being conducted on public land (not just for Arizona Mining but for several other companies as well), and I can guarantee that the PFS and FS due in Q1 and the end of 2017, will show how robust the economics of the project are, but if you can't get permits, the zinc, lead and silver are going to stay in the ground.

3D model can be found here (link)