I've been a shareholder in First Mexican Gold (FMG.V) since before it went public. I invested after I went to Mexico and saw it for myself. I've held stock for a decade (and bought a lot more along the way) because I believe in what the geology is telling me. And perhaps just as important, I believe in the CEO, Jim Voisin. He hasn't taken a dime in salary for years, keeping the company afloat with his own money, but during that time he has turned down numerous financial offers because they would have been too dilutive to his loyal shareholders, and/or he would have lost control over the project. I have great respect for a man who makes decisions like that.

Unfortunately, it's been years since the company has put forward any exploration-related information, so I've dug into the archives as best I could, in order to produce this unofficial report. I hope it will soon be clear why I believe that there is a huge unrealized potential value in the under-explored claim package I visited about a decade ago.

Let's start with a photo of the heart of the claim group (looking east), with named targets (Figure 1). Diana is off to the left, and not visible here. I'll come back to Diana later. Erica is a subject all on her own, but let's begin with a discussion of the Karen Zone, for which FMG has obtained a USD $10million credit facility for opening a mine there.

Figure 1: View to the east of Karen and nearby mineralized zones


Just above the label "Karen Zone" is where the drilling has been done. Those pale streaks are roads for drill access. Karen East is a potentially similar zone, but there has only been surface exploration there, to date. As you'll see from the geophysics below, they may well have the same geological source (Figure 2).

Figure 2: Vertical chargeability sections, Karen and Karen East zones

I'm sure you'll notice right away that the descriptions are in German. There was a corporate presentation done entirely in German that is the source of this and other images in this report. You can access it yourself at: The web archive bot failed to download the contemporaneous English version, so this is the only source I have for certain images.

So, the image on the left in the figure above is a vertical slice through the deposit, on an east-west line. The image is from a 3D induced polarization (IP) ground geophysical program, which I will refer to again, later. What is shown here is the chargeability of the rock inside the mountain, with 100 m spacing on the grid lines. You can see where all of the (shallow) drilling has been done, at the top left. I think that it's fair to say that the deposit is open. We don't know what accounts for the chargeability zones under and around Karen, because they have never been drill sampled. The image to the right is on an east-west line fifty metres to the north of the other image, and you can easily make out a similar chargeability structure coming to surface as is seen at Karen. That "Area of Interest" is Karen East. Not only might it be a zone of similar mineralization, they may well be connected across the top of that chargeability zone. That chargeability zone on its own is open to the north and south.

As I mentioned, there has only been a limited amount of drilling at Karen (and the other targets, below) due primarily to financing challenges. There's a table in this press release with some of the results, and there are some really fine intervals reported:

There have been two Resource Estimates calculated on the Karen Zone, with wildly different results. Before I get into discussing why some of those differences might exist, I would also like to point out that every Technical Report filed to SEDAR is ultimately nothing more than one person's opinion. If you want an example to look at, I suggest you review the history of Barkerville Gold (BGM.V), which was halted for about 18 months while the geos fought over whose opinion was more worthy.

A geologist who had been on the FMG property a number of times, including doing the preliminary assessment upon which Voisin decided to option the property, completed a Resource Estimate published to SEDAR on December 8, 2014. Based on 12 holes, and at a low-cut grade of 1.0 g/t Au equivalent, the resources were said to be 316,000 tonnes containing 62,598 ounces of gold, 9,273,000 ounces of silver, at an average gold equivalent grade 15.19 g/t Au. Based on the March 13, 2018 Kitco spot price, that's USD $643.62/tonne.

In a later Technical Report filed to SEDAR November 3, 2017 (at the behest of the British Columbia Securities Commission because they deemed the earlier report to not be arm's-length), the reported resources were very much different. Based on 18 holes and 17 trenches, with a low-cut grade of 45 g/t Ag equivalent, there was now said to be 221,700 tonnes (29.8% reduction) containing 11,570 ounces of gold (81.6% reduction) and 934,000 ounces of silver (90.0% reduction) at an average silver equivalent grade of 206.9 g/t silver equivalent. That has a Kitco spot value of USD $110.69 (82.8% reduction). There are a number of factors that account for these differences. I'll leave it to you to figure out where the truth lies. (I'm somewhere on the high side of the middle.)

Many of the assumptions used by the different authors were also different. I've learned to find out what these differences are before I reach conclusions about the validity of the reported opinions. I'm just going to refer to the assumptions by the year, to differentiate them.

1. The 2014 resource was a geological resource. No attempt was made to limit the mineralized structure based on potential mining methods. The 2017 resource was modeled as an open pit, with very conservative 45 degree wall slopes. Any mineralization outside of that envelope is simply ignored using this assumption, even if drill assays are available showing continuity of mineralization outside of the pit envelope.

2. The 2014 resource composited over 2.5 m (grade average within the assayed interval) whereas 2017 used 1.5 m composites. High grade intervals would have lesser "smearing" effect, using smaller composites. 2014 is more likely to over-estimate average grade.

3. The 2014 resource estimate used 5 metre blocks (cubes 5 metres on a side) within which average grade was extrapolated from drill assays. 2017 used 2.5 m blocks (eight of those fit into one 5 m block). Again, the 2014 model would tend to smear high grade over larger volumes.

4. The 2014 resource is in situ, i.e. the actual precious metal content of the rock as it is found. 2017 used recovered precious metals, based on the metallurgical response to cyanide leaching. 19% of the in situ gold and 12% of the in situ silver disappear with this assumption, but I bet most people wouldn't even realize that had happened.

5. The 2014 report did not cap the high grade intervals. 2017 did cap the high grade. Grade capping is somewhat controversial because it arbitrarily lowers high grades to a chosen maximum value which is later used for resource estimation. Actual drill assays were up to 53.7 g/t gold, which was capped at 12.75 g/t (i.e. 12.75 was used in compositing rather than 53.7). Actual silver assays ran to 7180 g/t, capped at 1500 g/t for resource estimation.

As I already mentioned, when I weigh these factors, I come in on the high side of the mid-point between these two resource estimates, and the value per tonne of the contained mineralization. The deposit also remains open on strike, which may negate that pit assumption altogether on further drilling.

A few years ago, a significant amount of due diligence and planning was done to prepare for a proposed joint venture development program with Buenaventura Mining, a mid-tier miner based in Peru. Although that deal ultimately was not completed, the planning for development and further exploration (which included a minimum of 11,000 m of drilling over four years) has served as a template that will allow FMG to advance the project quickly. The recently announced credit facility agreement ( will be sufficient to permit, build, and begin operation of a typical heap-leach (cyanide) extraction pad with Merrill-Crowe dore recovery. Once internal cash-flow is initiated, it will permit FMG to advance exploration on the numerous under-explored targets on the property.


The Erica Zone was identified during the IP geophysical program conducted in early 2011. Figure 1 shows Erica as a parallel ridge of high ground, east of the ridge hosting Karen. Here is the 3D IP model of the Karen/Erica corridor (Figure 3). The sheer size of the Erica chargeability zone (including depth, no scale provided) is impressive. The same structure in plan view (looking down from above, Figure 5), with soil/bedrock gold sampling results superimposed (50 m grid), reveals the large size and prospectivity of this target zone. Only limited drilling was ever conducted on this zone, with inconclusive results. Figure 5 shows those drill locations, which were drilled from an existing road, at low elevations. The bulk of the Erica Zone remains untested by either drill or channel sampling programs.

Figure 3: Three dimensional chargeability model, 2011 IP geophysics

Figure 4: Diana Zone, gossan.

Figure 5: Chargeability, plan view, Erica Zone with gold sampling survey grid

Figure 6: Diana Zone, gossan.

Figure 7: Chargeability shell, Diana Zone, 2011 IP survey

Figure 8: Diana Zone, chargeability pseudo-plan view, 100 m depth


The Diana Zone is a large cigar shaped structure NW from the Karen Zone. It was selected for further exploration because of the large surface exposure of heavily weathered sulphide mineralization which stains the rock with iron oxide (gossan, Figures 4 and 6). Three drill holes and numerous channel samples for 300 m have been completed at Diana, showing a lower grade than seen at the Karen Zone, but suggesting that a large tonnage gold deposit may be present. Diana rises above the surrounding ground, which would eliminate the costs of stripping the deposit, at least in the early phase of production if a mineable resource can be determined to exist.

The Diana Zone chargeability shell (Figure 7) shows not only a continuous structure stretching for over 1 km, but also an offset zone (faulted?) to the northwest. Figure 8 shows the chargeability cross-section pseudo-plan at 100 m from surface, with drill holes superimposed upon it. Drilling to date has been conducted only on the eastern limb of the structure, which as can be seen from the IP models, is less than half of its strike length. A close comparison of the two images shows that the drill holes lie to the east of the 678000E grid line, which I have marked with a yellow arrow on Figure 7. The larger part of the structure has not yet been drilled.

Concluding Remarks

Overall, the FMG property is seriously under-explored. There has not been sufficient exploration or assessment work to provide a 43-101 compliant economic assessment, and yet plans are underway to put the Karen Zone into production. The Karen Zone is open to resource expansion. Karen East has not been assessed. The deep chargeability zone under the Karens has not been drill-tested. Erica has had minimal drilling. Diana has had only limited shallow drilling over less than half of its strike. And there are other zones of mineralization that have not yet been named, or explored.

About a century ago, an American prospector discovered a vein of tetrahedrite (which can theoretically contain up to 18% silver, by weight), down-slope from the Karen Zone. He dug a small pit and followed the vein for 90 m (known locally as the Pozo del Gringo or white man's hole), but no production data are known. A sample from the mine waste assayed 0.248 g/t Au, 1800 g/t Ag and 4.03% Cu.

During my site visit, we were driving along a recently bulldozed road (to provide access to Diana) which exposed a bed of massive galena (lead sulphide). More sulphides. Galena often carries significant silver. I have a chunk of that material hanging around my office somewhere. One of these days I'll get it in to the lab for assay.

Immediately to the west are claims developed by Corex Gold, which recently merged with Minera Alamos, which held claims contiguous to the north. They are just putting it into production. The low-grade gold on the Corex claims is low-sulphidation mineralization, which indicates that it was deposited distal to its source via groundwater convection processes. In contrast, the FMG mineralization is primarily in high-sulphidation poly-metallic deposits. Conceptually at least, both deposits could have formed due to an underlying porphyry deposit, with the high-sulphidation zone typically oriented above the porphyry body and the low-sulphidation zone offset from it. Corex did report porphyry mineralization, but it may have been dykes or shoots radiating from a primary deposit. Is there a porphyry underlying FMG's claims? I'm speculating to even consider it, without question. Obviously, I don't know the answer. It is a good question to ponder, though.

In my opinion, the Karen Zone mineralization alone is sufficient to be holding these shares. But there's so much potential yet to be assessed. Stay tuned.