Wednesday, June 6, 2018

Ermitaño - a low key resource

We got a rather low-key PR from Evrim about the maiden resource at Ermitaño (link), which was surprising as there have been several PRs with some very good drill results recently (link).

Realistic metal prices....not!
This equates to approx. 3.5Mt @ 4.0 g/t Au and 68 g/t Ag or 4.93 g/t AuEq (358 g/t AgEq), which represents 95% of all new inferred resources found by First Majestic.

It looks very interesting, especially for an initial resource. However, there isn't  much information on the project, all we get is a simple plan map...

and a long section..

Low grade zones always are on a diet, whereas high-grade area (like small dogs) expand to fill as much space as possible...
These holes are very widely spaced (>100m), and have First Majestic inflated the tonnages by using a very big search radius (i.e. using all of the drill-hole data no matter how far apart they are)?

Here is a Leapfrog view of the data (link). I had to use trigonometry to estimate the hole lengths and dips, and so they will be a bit out.

My long section (looking north - east to the right). Showing DH intercepts and 50m, 100m and 200m radius buffers.
Drill-hole spacing to define a resource varies by the deposit style and metal distribution, so here are some examples for similar (Epithermal) deposits to see what they used for inferred resources:

La Guitarra - First Majestic

Los Gatos (Sunshine Precious Metals)

San Jose (Quintana Resources)

San Martin (First Majestic)

Santa Elena (First Majestic)

We can see that there are many different criteria, but in general we get:

  • Indicated Resources ~50m sample/drill-hole spacing
  • Inferred Resources >50m (but anything massively over 100m is unrealistic).

So First Majestic do seem to be pushing the limits for the resources limits at Ermitaño, nothing major, but a hole drilled between 06 and 10 would be a good idea to increase confidence, especially in the western area where the few, high-grade holes are >100m apart.

The fact that First majestic plan to drill 18,000m at Ermitano is very positive, it shows that they are confident in finding new zones and expanding on the known resources, but it would be nice to have a bit more information (e.g. where the heck is the Aitana vein located) showing targets and proposed exploration areas.


  1. Couple if things. First shouldn't the resource be independent? Maiden resource? Is this open pit or UG? Where's the pit constraint or ug shapes. No crown pillar?

    1. It will be an underground operation similar to the Santa Elena mine.

    2. Where did you see a resource estimate?

    3. Hello Bill, it was mentioned in a Evrim PR and mentioned in the First majestic q1 summary PR, where they report their inferred resource figures

    4. Webahead - many large mining companies often do resource estimates internally and I doubt that a 40Moz Inferred resource will be material to them.

  2. It'll be underground. The real issue here is the relationship between EVM and AG with regards to the terms of the earn in, remembering EVM only retain an 2% NSR if AG serve a production notice, which they already state they have...

    However, a production notice must be..."supported by the required permits, a detailed mining and construction schedule and forecasted economics"...

    This could get interesting.

    1. I was intrigued by this in the Evrim PR

      "The Company also announces that First Majestic has initiated arbitration proceedings in connection with its purported exercise of the option pursuant to which First Majestic can earn a 100% interest in the Ermitaño property, subject to the retention by Evrim of a 2% net smelter return royalty interest. It is expected that the arbitration will deal with the requirements under the option agreement for First Majestic to exercise the option and not the relative interests of the parties in the Ermitaño property."

      It would be nice to have a bit more explanation on this.

  3. The press release was dated April 5, but it referenced one by AG on March 29th. The March 29th press release only gave this a very brief mention. Don't look for an NI 43-101 report any time soon.

    1. It probably is an internal 43-101 by AG. As it is an inferred resource, I don;t think it will be material for AG. However, maybe a 43-101 will appear on Sedar.

      As I stated in the post, it would have been nice to have seen where some of the exploration targets are located. It is an interesting resource, which unfortunately, EVM isn't able (can't) to maximize its value.

    2. If you're a TSX listed company and you publish a resource estimate you must publish the report that led to the estimate. First Majestic hasn't yet posted anything on SEDAR and it's well past the required date for posting. This is simply bad reporting on the part of First Majestic, and they should be reported to the SEC.