Capitan Mining (CAPT.V) has released the assay results of an additional five drill holes completed on its fully owned Penoles gold-silver project in Mexico. The five holes the company reported on were meant to drill-test the western and eastern limits of the Main zone where previous exploration results had not proven the continuity of economic-grade mineralization as only a handful holes were drilled in those areas.

The company has provided a detailed breakdown of the five holes in the table in its press release, but Capitan has also summarized the results and importance of the holes:

Adding more higher grade tonnes to the resource estimate will be very important for Penoles. The project currently contains 331,000 ounces of gold and 17 million ounces of silver on both the El Capitan and Jesus Maria areas but both zones have very distinct features as the former is very gold-heavy and the latter is very silver-heavy and only has low amounts of gold.

Although 0.46 g/t gold at El Capitan would work for a heap leach operation, the higher the grade, the better (obviously), as we need to keep a close eye on the gold values considering the recovery rates for silver in a heap leach operation will be very low (that being said, the technical report is encouraging and indicates the silver recovery rates could be higher than at similar operations elsewhere as the resource estimate was based on a 45% recovery rate for the silver) and result in negligible amounts of silver actually being recovered. Gold should be in focus, and investors should zoom in on the gold values rather than the gold-equivalent values whenever Capitan Mining provides more drill results. At the Jesus Maria zone, we see the opposite results: using a sulphide flotation circuit the silver recovery levels reach 85% while only 75% of the gold was expected to be recovered.

Of course, more metallurgical test work is needed but investors should clearly keep an eye on the gold values at El Capitan while at Jesus Maria the silver grades will be important as well.

Disclosure: The author has a long position in Capitan Mining as part of the Riverside spinoff. Please read our disclaimer.

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