Please note, I was compensated to prepare and disseminate this material on behalf of Oceanus Resources. This document contains forward-looking statements.
GJ: Hello, Peter. Thanks for giving me a chance to share an update on our El Tigre Project.
PB: You are welcome, Glenn. I've got lots of questions, but I will hold onto them for now and listen up to what you have to say. The resource estimate for the Main Deposit is scheduled to come out any time now and I know lots of people will be watching. Thanks for taking the time to speak with me before the resource estimate is announced. I look forward to talking with you again afterwards.
GJ: Great, thanks Peter. You and I had an interview in January of 2017 that covered the basics of the company and we have made great progress since then along the path that I described to you. I will bring you up to speed there, but first I would like to provide a summary for those who may be hearing about the company for the first time.
GJ: The El Tigre Project is a very large gold-silver project in Sonora, Mexico, and we have focused our exploration activities for the last year and a half at the historical mine in the heart of the property.
GJ: We decided to do our own resource estimate to focus on the halo of mineralization around the veins rather than the high-grade veins themselves. At the El Tigre Mine, the veins have been largely removed and we are interested in the mineralization around the veins. We chose to start our exploration there because our company is built around a technical team that has successfully developed open-pit, heap leach mines in the past. The mineralized material we are looking at here generally starts at surface and is oxidized to depths of approximately 170 meters. Over the first 18 months of work on the project, we did a fair amount of work to prepare our maiden resource estimate for this area around the old mine, which we call the Main Deposit. The results should be out in the next days.
GJ: El Tigre is located in Sonora, which is a mining-friendly state in Mexico that includes many large gold, gold-silver, and copper mines. Our El Tigre Project is located on the Sierra Madre Occidental, which is a mountain range that hosts some of the largest gold-silver mines in Mexico like Mulatos, Pinos Altos, Palmarejo, and others. We are the most northern of the deposits on the Sierra Madre Occidental and are approximately 100 kilometers from the US border.
GJ: As I said, the El Tigre Project is a very large land package, extending approximately 35 kilometers north-south and covering almost 22,000 hectares. To help put that in context, the historic mine on the property extended for 1.6 kilometers along strike and it was one of the richest mining operations in the area at the time.
GJ: We have a map that shows the shape of the package in yellow and it includes a squiggly little line running down through the middle. That line marks the north-south trending fault that goes through the Sierra Madre, regionally, where the large deposits I mentioned to the south are located. That fault runs through our property and is highly prospective.
GJ: So far, our exploration efforts have mainly focused on a small area in the middle of the package around the historical El Tigre Mine. The red circle on the map shows the area where we have been working, which is about 1.6 kilometers long. We want to explore along the full extent of our land package over 35-kilometers, but we chose to start work at the El Tigre Project by drilling over the old mine and determining if there is a substantial resource as an open-pit, heap leach project. Again, this company was built around a technical team that has experience building mining companies around open-pit, heap leach projects.
GJ: We acquired the El Tigre Project in 2015 from a public company based out of Vancouver called El Tigre Silver and we were initially interested in the project largely because of the old mine, which was a high-grade, underground silver mine operated at the turn of the 20th century by American interests. It has a very rich history, both in terms of the ore grade and the information that is available to us today. You may recall that the historical production records and stope maps from the El Tigre Mine have been stored safely at the University of Wyoming for many years and we have used them to assist in creating a geological model of the deposit.
GJ: The project is also very accessible. We have road access right to the project from Hermosillo, where our technical team is based. The guys can jump in the truck in the morning, drive to the site, and be there by early afternoon. That is important. There are high-voltage electricity lines only 18 kilometers to the west of us, which are used to power some of the large copper mines located in Sonora like El Chanate. That access to an industrial power system will be important if there is a mine built at El Tigre. There is also a large reservoir of fresh water, which is 30-40 kilometers long, located about 15 kilometers away. We are not using these sources of water or power, but they may become more important down the road.
GJ: We wanted to tick the boxes and make sure these aspects of infrastructure are available and accessible. For the near-term, we have lots of water onsite for the exploration and drilling that we have done and continue to do.
GJ: One question that always comes up is the drug trade. We are about 30 kilometers off the transportation corridor and there is no transport through our land. It is dry, arid land and no crops are grown there either. Those two things can cause problems for projects, but they are not significant issues at El Tigre. We have been in Mexico for a long time and this is a very safe project.
GJ: Please note also that this land package is owned by us 100%. El Tigre Silver, the prior owners, did a great job consolidating the concessions first as a private company and then as a public one. Usually, large land packages like this in Mexico have several different prior owners, each with different deals. We have none of that here. We own this 100% and there are no royalties payable at El Tigre, which is going to be very helpful as we develop the project.
GJ: Also, it is important to note that there are no ejido at our El Tigre project.
GJ: The historical mine at El Tigre was a major reason why we decided to acquire the project in the first place. The old underground mine had very high-grade silver ore. You can see from some of the old historic mine records that there were almost 70M ounces of silver produced and 353,000 ounces of gold produced from 1.87M tonnes of ore. I'm sure you are crunching the numbers right now, Peter, but we have it in the presentation deck there for you: the average grade of mined material was approximately 1.3 kg/t silver and over 7.5 g/t gold. That is 1.3 kilograms of silver per tonne or 1,300 g/t silver. This was a very high-grade underground mine.
GJ: The high-grade mineralization at El Tigre interested us from the start, but we wanted to start by approaching the deposit at the historical mine site for it's potential as an open-pit, heap leach project. As you know, Peter, I believe the way to build a successful junior is to start with the right people and then find the project. We believe El Tigre was the right project partly because it provided us an opportunity to leverage historical exploration work as we reinterpreted the deposit around the historical mine as a bulk tonnage project.
GJ: As you know, Peter, El Tigre Silver had done about 10,000 meters of drilling in 2010-2013 when we first looked at the project. They had focused on the narrow, underground silver component of the deposit and left large amounts of core un-assayed. They were concerned with finding new veins rather than characterizing the halo of mineralization around the veins that had been mined historically. Right out of the gate, we approached the deposit differently, focusing on a 43-101 resource estimate for this deposit as an open-pit, heap leach deposit.
GJ: We assayed the core from El Tigre Silver in our infill sampling program in the first half of 2016 and then started our own drilling. We announced the start of our drilling on June 28, 2016. Today is June 26, 2017 and we are on the verge of announcing the resource based on 62 diamond drill holes totaling 11,923 meters that we drilled in 2016-17, the infill sampling results over the 59 El Tigre Silver holes totaling 9,411 meters from 2011-2013, and detailed historical information. We have now come a long way in one year.
GJ: The historical El Tigre mine had 14 levels, down 450 meters. The old-timers followed that high-grade clavos to great depth, but we started by focusing on the open-pit, heap leach potential of the deposit rather than drilling at depth. Ultimately, we believe there is potential for more mineralization to be identified at depth below the underground workings but that is not our focus at present.
GJ: When we started to re-assay the old core left for us by El Tigre Silver, we had some spectacular results right off the bat. All the details are on our website but the first hole we looked at was Hole ET-13-051, which was drilled by El Tigre Silver in 2013. When we assayed that core in 2016, it came out at 127 meters of 2.16 g/t gold equivalent. To see mineralization over 100-meter widths with that grade was a good sign for our hypothesis that the Main Deposit had potential as an open-pit, heap leach project.
GJ: After these encouraging early results, we went to work and drilled almost 12,000 meters in our infill drilling program at the Main Deposit. As I just described, we finished that drilling campaign in Q2-2017 and then provided all the information to our independent geologist, P&E Consultants. They are a reputable firm based in the Greater Toronto Area. They have completed their site visits and they have all our data. Our hope is that we will come out with our initial 43-101 resource estimate by the end of June 2017. We believe this resource estimate will be a significant milestone for the company.
GJ: Although we initially focused on the Main Deposit, we have always been aware of the broader potential of the project. Our land package is 35 kilometers long and the Main Deposit is approximately 1.6 kilometers long. We have already started drilling to the north and south outside the historical El Tigre Mine. I am very pleased with how much drilling our team was able to accomplish in a little more than a year. They did a large amount of drilling at the old mine site, which will be included in the upcoming resource estimate. They also did some significant drilling outside the old mine, which I will describe here briefly. These areas to the north and south of the old mine are very exciting because they are less-explored and have not been mined. Whatever high-grade mineralization that is present there, is still in the ground.
GJ: As our drill program was winding down in May 2017, we were drilling south of the old mine at Gold Hill. We expected the mineralization to pinch off, but results from Hole 133 suggested that was not the case. We stepped out a bit with that hole, away from the clavos where the old mine was built, and expected the widths and grades to be lesser than elsewhere along the mine. It was not. Hole 133 was very exciting because we saw almost 70 meters of 1.49 g/t gold equivalent, mostly gold, and that started to tell us that we may be looking at a potential second clavos at Gold Hill. That would be a very good discovery that would suggest the mineralization continues beyond the southern extent of the historical mine.
GJ: After Hole 133, we continued to drill Holes 134-138. You can see on the drill hole location map how we started to move south beyond the end of the mine. We decided to step-out to the south and drilled Holes 139 and 140. You can see how far that is from Hole 133, where we first started to get an indication of another potential clavos. Hole 139 delivered some good mineralization, which you can see in the press release, and Hole 140 delivered 9 meters with 1.86 g/t gold equivalent. These were true step-out holes. I don’t want to call them wildcat holes, but we had not really mapped that far south. We were stepping-out 400-500 meters south of the old mine and we had to eyeball the drill locations. Both holes hit substantial mineralization on first-pass drilling.
GJ: Those test holes greatly extended our strike length to the south. The mineralization is open past Hole 140 to south. We will plan and undertake a new drill program to the south of the old El Tigre mine there. We are working on those plans now and we will get to that.
GJ: If you look at slide 10, then you can start to see all the targets that we are establishing immediately around the Main Deposit at the old mine site. All of the black dots show drill holes. Once that comes out, we will immediately start on a PEA at the Main Deposit and continue to explore to the north and south of the old El Tigre mine.
GJ: Our map shows that another red star to the south of the Main Deposit at Gold Hill. You can see two dots south of the star at Gold Hill and those represent Holes 139 and 140. We consider that to be a new discovery based on our intersection of what may be a new potential clavos there. That target will need to be tested and drilled with many more holes but we are very excited about what we have seen there so far.
GJ: The last holes of our drill program were step-outs to the North. We have identified three veins to the north, but I will start by describing Protectora because we believe it is a continuation of the vein system at the old El Tigre Mine. The old-timers gave it a new name as it moved north, but we believe it is a continuation of the El Tigre Vein system. Our team was bold in stepping out 800 meters and drilling this area while finishing up the resource-definition program at the Main Deposit. We were pleased with the results.
GJ: We have extensive data on the "tenor of the deposit" at the old El Tigre Mine from historical production records, which allows us a detailed understanding of the high-grade veins that were mined one-hundred years ago. Our own drilling helps us understand the halo of mineralization around the veins, as well. Together, we can get a deep understanding of what amounts of metals could be present at prospective areas along trend that have not been mined before.
GJ: Again, the average grade of mined material at El Tigre Mine was 1.3 kg/t silver and over 7.5 g/t gold. The El Tigre Mine starts at the camp and extends south along trend. The veins have not yet been mined north of the camp. We announced the highlights for one hole at on Protectora June 7, 2017 -- Hole 144. This hole was 800 meters north of the old El Tigre Mine. In that news release, we also reported, "surface mapping shows that the Protectora vein and alteration zone, that has not been mined, extends along strike to the north from the old El Tigre mine for 1,500 meters." At surface, the Protectora vein is at least as long as the historical El Tigre Mine.
GJ: We were anxious to go north and test the Protectora vein system because it had been mapped by the old timers at the turn of the century. We have done extensive mapping and sampling there since acquiring the project, but it has not seen much drilling. There have been a few holes, but no substantial drilling. If you look at our map of the area, we have a big arrow showing where Hole 144 was located on Protectora. Again, this was a first-pass drill hole just like the ones to the south. There wasn't a lot of science going into where we drilled but there was a lot of experience and expertise.
GJ: I just mentioned that the veins daylight for 1.5 kilometers at Protectora and you can imagine how that helped us determine where to drill. There is actually a neat story there: one of our drill roads just crossed the vein, so we set up the drill there and put in a test hole. That was step-out Hole ET-17-144. We were very pleased with the results. At about 50 meters vertically or 80 meters downhole, we ran into substantial mineralization with over 7.3 kg/t silver and over 37 g/t gold over 0.85 meters, which was included in 3.15 meters of 36.6 g/t gold equivalent. Those are exceptional results. As we went further downhole, we intersected a second vein that had over 1 kg/t silver over 1.5 meters.
GJ: It was encouraging to encounter similar grade 800 meters to the north at Protectora as what was mined historically at El Tigre. Based on what we know about grades of historical production, these drill results from Protectora are starting to confirm our hypothesis that the mineralization mined at El Tigre could potentially continue along trend. This mineralization we encountered at Protectora could be described as "bonanza grades", but it is not unusual for what the old-timers mined at El Tigre. Again, these results are beginning to confirm what we were hoping, which is that the continuation of the El Tigre vein system to the north carries grade. But one hole does not a resource make and we will need to undertake a full drill program at Protectora.
GJ: It is June 26, 2017 today and the rainy season is fast approaching at El Tigre. We were planning to not drill through the rainy season in the summer this year to give the guys a break, but after that test hole at Protectora it will be hard to turn those drills off until late September.
GJ: Right now we are developing and planning a drill program for Protectora that we hope to start drilling Protectora in July-August. We are going to start a drill program there and that will generate new results. We are excited to get back up there and continue exploration, just as we are excited to do more exploration in the south at our new discovery at Gold Hill.
GJ: As we have said before, we just have to keep doing our work. We did that over the last eighteen months and it worked out well. It wasn't exciting drilling -- it was infill drilling over the old mine -- but that is finished now. They are putting the bow on it as we speak. The resource estimate for that open-pit, heap leach will be released and the report will follow. Everyone can look to understand in detail what we have been doing. However, I consider the time ahead of us to be the most exciting because we are doing exploration on several step-out targets that have not been mined before.
GJ: I mentioned Protectora to the north, but we will also work at Fundadora. There was a large, 300-meter underground exploration drift put in at Fundadora back in the 1980s by Anaconda as they were looking for flux. Anaconda was a very large mining company at the time. They left those underground workings and we have access to them now. We are sampling along Fundadora and more information will be coming from there. We are going to have to drill Fundadora, as well. Fundadora is a priority target for us after we establish this new program on Protectora.
GJ: And don't forget about Chula, which is a new vein system that we have identified to the north. It is early days there and we are mapping and sampling there. La Chula provides us with another exploration target and we will get to that in due course.
GJ: The rest of 2017 will be very busy at El Tigre. We will begin a drill program to the north at Protectora this summer. A drill program to the south at Gold Hill will be planned and undertaken this year. A PEA will be commenced for the open-pit, heap leach at the Main Deposit once the resource estimate is released. We will continue to explore north and south along strike on our 35KM long property.
PB: Glenn, thank you very much for all your thoughts!
