Silver districts in Mexico aren’t just discovered, they’re consolidated, Michael Konnert tells me as he sips his Calm Chamomile tea.

The stories of the work that Eric Fier did to consolidate the Las Chispas district have become stuff of legend. When First Majestic came knocking for Santa Elena during the first iteration of Silvercrest, as the story goes, Eric was open to selling the company but in the spinco would go Las Chispas. He and his partners had worked too long and too hard to compile that land package and it had to be drilled first – not just for himself – for his shareholders. First Majestic must have been puzzled when Eric saw that as the sticking point that almost blew the deal up. Silvercrest in its newest iteration is a $750 million-dollar company, based on the discovery of 100+ million ounces of silver at 714 g/t AgEq at Las Chispas. Sometimes you just know what you’ve got – even if the street doesn’t.

Vizsla Resources gets that feeling about Panuco, a brownfields exploration project they just optioned. With 75 kilometers of vein strike currently defined Panuco compares favourably with some of Mexico’s most important silver districts.

Within that impressive vein strike exist some pockets of exceptional grade. You see this project isn’t totally new to the Canadian markets. Capstone held roughly 40% of Panuco in the mid-2000’s.

Highlights of Capstone’s drilling across two veins include:

  • Hole CC-06-26 intersecting 4.23 meters true width grading 2,235 g/t silver and 9.5 g/t gold from 46.5 meters downhole at El Muerto,
  • Hole SC-07-72 intersecting 11.33 meters true width grading 288 g/t silver and 1.65 g/t gold from 22.5 meters downhole at Clemens-El Muerto, and
  • Hole SCC-07-09 intersecting 2.0 meters true width grading 1,634 g/t silver and 10.38g/t gold from 22 meters downhole at La Colorada.

Other than a small campaign back by Capstone, this has seen very little drilling. Just intermittent small-scale mining since the 16th Century. Sinaloa wasn’t always simply the agricultural hub that it is today - Francisco De Ibarra settled in Copala back in 1564 after hearing legends of the mythical golden city (they called it Cibola). One would wonder how for so long a project like Panuco could see so little proper exploration.

Four and a half centuries later, enter Vizsla Resources (TSX-V:VZLA).

Since Vizsla’s inception, about two years ago, Michael has become an enthusiastic collector; a collector of people and ideas. For a guy putting together his first public vehicle, the people he’s managed to surround himself with is impressive.

Simon Cmrlec is President of Ausenco engineering and a metallurgist by trade. He’s a proven mine builder and has worked on some of the world’s largest mines – from Olympic Dam with Western Mining Corp to sitting on the project steering committees on projects like Lihir and Cadia East for Newcrest and Kestrel Coal for Rio Tinto. He’s a man with a plan. While most in the exploration industry are focused on finding orebodies, Simon’s sole concern is how mines and orebodies old and new can produce profitably and how to put together a team to make that happen. It takes a mix of imagination and hard science - a skillset that will be critical to Vizsla’s success at Panuco.

VP-Ex Charles Funk has had a history working for companies both senior in Newcrest and junior in Evrim Resources. For both former companies, Charles has spent nearly a decade visiting projects all over the world, doing deals on projects and pitching them to investors and prospective companies. A mix of geological understanding and also a talented communicator.

Advisors Bryce Roxburgh and Yale Simpson are a couple of industry legends who don’t need much introduction. With several tier one discoveries together in South America, they have a habit of finding and selling major deposits –Cerro Morro and Caspiche, just to name a couple. They’re on as strategic advisors and have a wealth of experience and knowledge to draw from.

Vizsla’s Chairman Craig Parry is a man that seems to attract big projects. I guess that’s what happens when you spend 10 years as a geologist mine-finding at Rio Tinto then become a founding shareholder of, and senior advisor to EMR Capital – a fund that just successfully executed the sale of Martabe for US $1.21 billion (including assumed debt) in 2018. Craig was a founding director of Nexgen Energy, discovering Arrow – a project that will do a billion dollars a year in after tax cash flow and should produce roughly 21% of the world’s uranium. Craig’s main role currently is running Nexgen’s spinout Isoenergy, which could be onto another discovery at Hurricane in the Athabasca basin. These are all home run shots and his batting average looks good these days.

Out of all this, it’s possible that Craig’s most important new discovery is Vizsla CEO (and his Partner at Inventa Capital) Michael Konnert. He’ll tell that to anyone who will listen. He backed those words up with a $400,000 investment in Vizsla’s last financing, putting his faith squarely on Mike to execute and close a major transaction.

Mike had already shown Craig an ability to uncover project ideas that others miss, and the junior mining industry is built on that ability.

Mike, alongside Vizsla’s partner Canam, delivered Panuco – Copala.

That the project carries two names is quite fitting – it’s a marriage long in the making.

When Capstone held this project it held just the Silverstone claims, with most of the veins crossing claim boundaries, sometimes more than once.

“Nobody had ever tried to put this whole package together – it took someone like [Canam] who was willing to put in a couple years of work to get both sides to the table.”

Understanding future financing requirements, Canam sought to bring in a partner and Vizsla CEO Michael Konnert jumped all over an opportunity that seemed almost too good to be true.

Michael and Canam spent the next year working with Mexican lawyers and both vendors to finally get a definitive agreement over the line.

"Panuco is one of the best opportunities I've seen in my career. We have an option over one of the largest, most important historic mining districts in Mexico – consolidated for the first time ever in its history.” ~ Craig Parry

For a guy putting together his first public vehicle: the quality of project he managed to land, unheard of.

The terms of the option are:

This amounts to essentially two years of exploration for Vizsla to figure out what they have at Panuco, with $1.15m in payments and $3.423m in work commitments.

After the two years the payments become more serious, and they can buy down the eventual $41.85 million in staged payments or spend the full amount and take over operations immediately. The option would include: a 500 tonne per day mill, a permitted tailings facility, the mining permits and Eijido agreements, power and roads running all through their site and all mining equipment on site.

If after that period they & the market don’t believe they have the resource necessary to exercise the option, the vendors and Vizsla part ways. Bye-bye Panuco, no $41.85m payment. The only inevitable cost to Vizsla is money they spend in the ground and the $1.15 million in cash payments.

In acquisition of this option, Vizsla also issued 6 million shares to Canam upfront. If Vizsla proves successful in putting out a resource of 200,000 ounces AuEq they’ll issue another 6.5 million shares. If they exercise the option on this project, they’ll issue a final 5 million shares – a total of 18 million. The payment shares are subject to quarterly pooling restrictions.

Vizsla Resources currently has 33 million shares outstanding for a basic market capitalization of C$9m at a last trade of C$.27. 5.25 million of those shares are currently pooled and ~8 million shares held by declaring insiders. That leaves a float of roughly 20 million shares.

After their most recent payments to complete the transaction with Panuco’s vendors, Vizsla should have about $400k in the bank. Presumably Vizsla will need some money, but they’re going to let the market decide their fair value after announcing such a fundamentally important deal.

The big question here really isn’t whether there is silver and gold to be mined at Panuco. We know there is, it’s being mined. The question is whether they can build enough critical mass in a quick enough time period to then finance its outright purchase. How much shareholders stand to make on this exercise would depend largely – like any mine build – on what their equity value looks like when it’s time to write the check and exercise the option.

Of course, debt or a stream could prevent dilution, which might make sense if they believe that Panuco has the margins to pay back that debt quickly or pay out a stream.

They’ve outlined an aggressive path to an initial resource, expected late 2020. Once drilling begins you can bet Vizsla will be putting out a constant flow of results, beginning with a comprehensive mapping and sampling program, followed by surface then underground drilling – like the 2015/ 2016 “phased approach” that Silvercrest laid out. They won’t undergo the same underground rehabilitation program at the start as they have 35 kilometers of underground workings and can focus their efforts on easy to reach areas. Assuming October 2020 is the cut-off for results in their first resource that leaves them exactly a year to make a good first impression on the market.

Here, first impressions will be important.

I love how this lays out.

A quick and crude junior mining checklist:

Silver ✅

I mean I’ve looked as hard as anyone to find a good silver story. They always carry a premium maybe because there’s so few of them. I guess people prefer the “torque” of silver and good silver projects are hard to come by.

Tee up a Keith Neumeyer quote of silver hitting triple digits, any which one will do.

Capital Structure ✅

33 million shares/ 47 fully diluted is tight. And because Vizsla has a reasonably good idea at where to poke holes I don’t see that structure getting too blown out.

Grade ✅

We all went through that devastating bear market together. It sucked. What worked? Grade. That’s it, that’s all. Wesdome, Silvercrest, Great Bear Resources, Westhaven Ventures. Show me high grade at mineable widths that string together, and I’ll show you a winner. In the limited drilling Panuco has seen they’ve reported multi kilogram intervals and on separate holes intervals up to 11 meters.

Size ✅

We’ve talked about Panuco, you know it’s big. 75 kilometers of vein strike. An estimated 35 kilometers of underground workings. 10,500 hectares or 15 by 8 kilometers littered with mineralization.

Speed ✅

They’ll be moving fast, supplying the market with results (hopefully) that keep people interested. It’s rare to find a junior that has the ability to supply news bi-weekly, that seems possible here with the extensive underground sampling they’ll be doing and condensed drilling. Given that their deal comes with permits, a mill, power, roads and Eijido agreements, the pace at turning Vizsla from explorer to developer to miner could also be rapid, and substantially shorten the “orphan period” of the Lassonde Curve.

(Above) The Lassonde Curve

People ✅

They’ve been involved in major discoveries and have built and financed the purchase of major mines.

Early results ✅

The market loves a story that can probably deliver some good results early. This might be why HighGold (TSX-V: HIGH) is trading as well as it is. Traders like to get in front of good news.

Price ✅

I look at a lot of C$9 million market cap companies. I don’t know of many that have this sort of upside that also have such a reasonable chance of success. You usually must pick one. I think that makes this a good speculation here.

It ticks a lot of boxes.

Discovering major districts these days requires a lot of patience and a lot of money, for that reason they say all the easy gold and silver has been found.


Disclosure: The author of this article has been compensated for marketing and promotional services by Vizsla Resources Corp. and intends to buy VZLA shares on the open market within 48 hours of publishing this article. 

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