Southern Silver Exploration (SSV.V) has now reported on fourteen of the 22 holes it has drilled on the Puro Corazon claim, in the middle of the flagship Cerro Las Minitas silver-zinc project in Mexico. The drill results have surpassed our expectations as the grade came in higher than we had anticipated, which strengthens the view that Puro Corazon could be an important piece of the puzzle to develop Cerro Las Minitas.
The results of the drill program (together with all additional data gathered since the previous resource calculation) will be incorporated in a resource update which in turn will be the starting point for an updated preliminary economic assessment.
Our expectations for the latter are quite high. Not only will this be the first time the higher silver price will be incorporated (the base case in the 2024 PEA used a silver price of US$23), the higher grade nature of the Puro Corazon mineralization could further enhance the economics of the Greater Cerro Las Minitas project depending on the mine sequencing and the access to the high-grade rock.
Recent assay results highlight the potential importance of the Puro Corazon claims
The company has been able to release assay results from the Puro Corazon drill program on a pretty continuous basis, and a recent update, which was published earlier this month, once again highlighted the prospectivity of the new claims.
The bullet points above only show the highlights of the assay results, but taking a step back and looking at the bigger picture, the recent assay results continue to extend the known mineralization to depth, below the holes the company previously reported on.
Additionally, the mineralization is now also extending towards the southern edge of the claim, and in its management commentary section, Southern Silver appeared to be very pleased with the continuity of the high-grade replacement lens as it has now extended the mineralization to a depth of in excess of 360 meters below surface.
Earlier drill results contained pretty wide intervals as well, with highlights shown below.
The company is wrapping up its drill program (earlier this month Southern Silver was completing its final hole and we expect that hole to have been completed by now), and assays are pending from the final eight holes.
Additionally, Southern Silver’s technical team has completed an underground sampling program at the historical Puro Corazon workings, and we are looking forward to seeing more details on that as well.
Sitting down with Robert Macdonald
Cerro Las Minitas
You have recently published several updates with assay results from a drill program conducted on the Puro Corazon claim in the heart of the Cerro Las Minitas project. Although you obviously have more insight in this area as you likely (hopefully!) did due diligence as part of process to enter into an option agreement to acquire the project, but for an outsider like us, the drill results appear to be strong, better than expected, and even better than what the ‘greater’ Cerro Las Minitas project has yielded so far. Thoughts?
We too are very pleased with the results to date from the Puro Corazon drilling and are impressed with both the thickness and grades of the mineralization that have been returned to date. As part of our due diligence on the property, we re-logged and re-sampled the historical drill holes which tested the Puro Corazon claim in the early 2000s. So, we had a sense that we should expect some nice results. But, I think that overall, we are seeing better results than what we expected.
The most recent drill update confirmed the presence of high-grade mineralization at depth, deeper than the previously encountered mineralization. As this is just a first phase of drilling to figure out whether or not you should exercise the option to acquire Puro Corazon, will you drill deeper holes in a next drill program? Or is that just something you’d like to deal with later?
This first phase of drilling is designed to test the entire Puro Corazon target area around the current historical workings at a nominal 100 metre spacing, which should provide resource confidence to an indicated category for the entire target. This is to allow incorporation of the results into a Mineral Resource Estimate update that in turn can be incorporated into an updated economic assessment for the project planned for early Q3 ‘26. Further drilling at Puro Corazon could:
- test for mineralized zones outboard of the historic workings that were missed by the artisanal miners; and
- further de-risk the project by upgrading mineral resources to a higher confidence level through infill drilling
You are in the process of completing the 22nd and final hole of this drill campaign at Puro Corazon. What’s next? Will the assay results be included in a resource update for Cerro Las Minitas?
Southern continues the work of derisking the project in preparation for a financial investment decision. This includes filling engineering gaps in the current mine plan and economic assessment, continuing with baseline studies and clearly defining a permitting pathway for when the company, with or without partners, is in a position to make a production decision.
We don’t want to jump the gun here but given the substantially higher grade nature of the Puro Corazon, do you expect the PC mineralization to end up early in the Cerro Las Minitas mine plan? Do you see any technical issues doing that? Ore are you envisioning keeping the mine plan as is, and just ‘supplement’ the CLM rock with high-grade Puro Corazon material? Of course, readers are cautioned this is just a casual discussion, and the updated Preliminary Economic Assessment will be the only document that matters.
Based on the distribution of mineralization outside the Puro Corazon claim, our previous mine modelling (in the 2024 PEA) accessed shallow lower-grade mineralization in the early years of the proposed mine life, and a significant capital expenditure was required to access deeper higher-grade mineralization on the western side of the Cerro. This is inefficient. From what I have seen from our current drilling and internal work completed to date, mineralization on the Puro Corazon claim will be targeted early in an updated mine plan, replacing previously modelled, lower-grade mineralization, which will increase both the capital efficiency of the project and metal throughput in the earliest years of the mine life.
The other important aspect is that being able to access higher-grade, near surface mineralization early in the mine life, creates an optionality that does not exist in the 2024 mine plan. That is, an increased potential to start a smaller operation at lower initial capital costs and scale production upward over time.
In hindsight, which of course is easy, why wasn’t the Puro Corazon claim added to the Cerro Las Minitas land package in the past decade? Was it just not for sale? Or are the good drill results an eyeopener for you as well?
More of the former. Over the last several years, it wasn’t really for sale and in the past, we were less able to take advantage of a strong silver price (and associated stock price appreciation) to fund the acquisition.
Corporate
What’s the current approximate cash position, and how much of a runway do you have?
We currently have approximately C$5M in the treasury and we also have a significant number of outstanding warrants; most, if not all are in the money at this time. It leaves us in a pretty good position moving forward.
As the silver price has made some crazy moves, have you seen some renewed interest in your silver project?
The short answer is yes. Over the last several months, we have had renewed interest in the project including a number of recent site visits to the project. We hope that the current buoyancy in the silver price continues which will help maintain further interest in the project through 2026.
Southern Silver’s balance sheet
Rob Macdonald mentioned a C$5M cash position which means the company has spent C$15M since the end of October on what likely will be drilling and a property payment for the Puro Corazon claim but it’s perhaps also interesting to keep an eye on the warrants as warrant exercises could provide a somewhat continuous inflow of cash.
At the end of October, the company had 62.4M warrants outstanding at an average exercise price of C$0.43. As per the footnotes to the Q2 financial statement, approximately 3.5M warrants were exercised in November and December for total proceeds of C$1.1M. This leaves about 47M warrants outstanding and in the money (the 12M warrants with an exercise price of C$0.75 are currently out of the money).
Although there is no time pressure on the warrants that are currently in the money, we could reasonably expect some of the 2027 and 2028 warrants to be gradually exercised. Should all warrants (except for the C$0.75 strike price warrants) be exercised, Southern Silver would receive approximately C$15M in proceeds. That being said, as there is no time pressure on the warrant holders to effectively exercise these warrants, Southern Silver will likely have to go back to the market to top up its treasury in anticipation of a very busy 2026.
Conclusion
The stars are aligning for Southern Silver Exploration. Not only is the silver price currently trading at in excess of three times the price used in the base case scenario in the 2024 preliminary economic assessment, the option to acquire the Puro Corazon claim could add tremendous value as well. And that’s not just because the company is pulling high-grade mineralization out of the ground, but perhaps it would make the job easier in terms of sequencing and figuring out the development of Cerro Las Minitas. We can imagine it’s easier to not have a ‘donut hole’ in the middle of a land package.
2026 will be the year of the truth for Southern Silver. We expect to see more drill results and the assay results from an underground sampling program in the next few weeks, followed by an updated resource estimate by the summer.
And it goes without saying we have high expectations for the updated Preliminary Economic Assessment. While we expect double digit increases for the capex and opex, the higher metal prices in combination with the higher grade material on the Puro Corazon claims will/should likely offset that.
Disclosure: The author has no position in Southern Silver. Southern Silver Exploration is a sponsor of the website. This post is for educational purposes only; be mindful investing in junior mining stocks is risky and you may lose your entire investment if things go wrong. Please read our disclaimer.