January 31, 1996 Volume 1, Number 6
LISTED: Vancouver (SXG - V)
SHARES ISSUED: 16,406,481 (18 million, fully diluted)
APPROXIMATE FLOAT: 4,000,000
52 WEEK HIGH-LOW: $2.15 - 1.45 (post re-organization)
CURRENT PRICE: $1.90 January 30, 1995 closing price
CONTACT: Jeff Dahl 800-828-1488 or 604-688-6080
SAMEX Mining Corp. is one of many examples a tired
VSE company being brought back to life with an influx of new properties,
money and management. We have long felt that Bolivia received
too little attention during the South American rush of the last
few years, though the market seems to have noticed it lately.
SAMEX has acquired a large portfolio of early phase properties
in south-western Bolivia, as well as strong Bolivian representation
and financing skills. The market has given the company's shares
a large premium (aided by the small float) and major price increases
from here will be dependent on good results from the Walter and
Santa Isabel projects. The shares should be bought on weakness
in the current price range with an exploration-dependent target
of $2.75 - $3.50 over the next 3 - 6 months.
SAMEX listed many years ago as Paragon Resources, a junior exploring for both oil and metals. The company ran out of financing and investor support and its continued existence is largely a credit to the former president, who paid for the VSE and 20-F filings for many years out of his own pocket. Paragon attempted a couple of re-organizations in the last two years but was unsuccessful until SAMEX came along last summer.
Paragon was trading for pennies and had about 5.7 million shares outstanding prior to the agreement. Paragon consolidated its shares on a 5:1 basis and change its name to the current form prior to the take-over, at which time it had 1.135 MM shares outstanding and a public float of 761,000 shares. Paragon issued 1.13 million shares for debts owed to former insiders which were, in turn, purchased by the current directors. These shares were later sold to help pay for SAMEX's original placement and became part of the public float. SAMEX issued 11.9 million shares, at a deemed price of $.050, to acquire the outstanding shares of South American Mining & Exploration Corp., a private Canadian company that had been acquiring and exploring properties in Bolivia since early 1993. South American had privately raised and expended approximately two million dollars prior to the take-over. Immediately upon re-listing the company completed a private placement of 1.5 million shares, with attached warrants for $1.00 per share. Most of the placement was purchased by insiders. The company announced a further placement of 700,000 units @ $1.75 in mid-January. Our understanding is that this placement is currently fully subscribed and should close in early February. The company should have about $2 million in the bank on completion of this financing.
There is little trading history on the stock in its
current form. The shares had a strong opening at $1.45 in early
November and moved up fairly steadily to $2.15 at the beginning
of January as the company introduced itself to the market and
the market, in turn, became more interested in Bolivia. The shares
have since settled into the $1.80 - $2.00 range. Total turnover
since the re-instatement of trading is about 3 million shares.
Most of the outstanding warrants and options are held by insiders
and are priced at $2.00 or above.
Bolivia, with adjacent parts of Peru, has the oldest known mining culture in South America and mining has been the basis for the area's wealth for at least 1,500 years. Much of the Inca and pre-Inca workings were taken over by Spain during the European colonial period and the Cerro Rico silver deposit and nearby mines provided much of the fuel for that empire. Since the Spanish arrival Cerro Rico has produced over 3 billion ounces of silver and still contains a similar amount at bulk tonnage grades between mined veins and in tailings. Though Bolivia was amongst the first South American countries to deal with run away inflation and create a framework for foreign investment it has been slow to capitalize on the changes due to bureaucratic inertia. This has now been dealt with and Bolivia is beginning to emerge as an investment opportunity, with mining priming the pump for foreign capital. HRA will have more to say on Bolivia in future issues.
SAMEX currently holds nine separate projects in the south-western area of the country, to the south of the national capital of La Paz, which is one of the main historic mining regions. The area contains circa 500 to 350 million year old (mid-Palaeozoic Epoch) ocean bottom sedimentary rocks which have been subject to volcanism beginning about 80 million years ago. The volcanism, which results from heat and deep seated faulting related to subduction along Pacific and South American tectonic plate boundary, has been particularly intense during the past 40 million years (Tertiary Epock). Most of the region's deposits developed during this later period. Many of the deposits are metalurically complex and therefor offer both the potential for polymetallic output and the problem of segregating the various metallic components within a viable cost structure. Three of these properties are currently active and are detailed below. The balance are not detailed, though most certainly hold potential for discoveries.
The core of this project is the 200 Ha Candelaria concession being earned through a local affiliate from a local miner, and the adjacent 2,345 Ha (5,600 acre) Goya/Bonete concessions being awarded as an earn-in from state mining company COMIBOL. This is one of the projects which COMIBOL, as directed by the elected government, has been awarding to private companies on a tendered bid basis. The Goya/Bonete earn-in requires US$1.14 million of spending by March/97, after which a net cash flow royalty of 5.5% during capital pay back rising to 16% thereafter is retained by COMIBOL. The Candelaria earn-in is complicated by an existing debt owing to a Bolivian exploration funding organization; payments totaling US$610,000 must be made to the owner by September/98 and then a combination of payments and settlement based on the recognized debt at that time will be needed to complete the transaction. SXG also owns outright the 1,800 Ha Esquina concession which covers an area of possible secondary mineralization.
The project covers a 1,500 Ha area of intense hydrothermal alteration (a changed mineral assemblage resulting from heated fluid movements) related to the late stages of a Tertiary volcanic event. The alteration is zoned in a concentric ring pattern typical of systems hosting bulk tonnage, porphyry copper deposits. It outcrops in ridges surrounding a rubble filled glacial bowl, where a zone of intense, disseminated pyrite alteration is visible; a pyrite "halo" is typical of economic systems of this sort. Within the pyrite alteration are a series of high grade base metal veins which are dotted with Spanish ear workings, and which were the subject of recent work by Candelaria's current owner. Though usually eroded away at most mine sites, these "distal" veins are typical of an economic system. The work focused on developing underground workings on zinc-lead-silver veins and indicated about 340,000 tonnes of reserve in three narrow veins. One of these veins, the Escalera, has a currently estimate 160,000 tonnes of 16.82% zinc, 1.49% lead and 129 g/t (3.8 oz/ton) silver at an average thickness of 1.36 metres (4.5 ft). Other veins and related breccia zones in the distal system contain varied amounts of copper, tin, and tungsten. While these veins present targets for future exploration, and help support the earn-in requirements, they are not the project focus.
The inner part of the outcropping pyrite halo along the rim of the rubble filled bowl includes some disseminated chalcopyrite mineralization. Chalcopyrite is the main copper producing sulfide mineral and it is found here where one would expect it to be in an economic system of this deposit type. This area may be a target in its own right for small bulk tonnage copper deposits. The 100+ million tonne bulk tonnage copper deposits the company is targeting are found at the core of this type of alteration-mineralization system. The rubble filled bowl at the core of the system is therefor the drill target.
SXG has completed a series of Induced Polarization (IP) lines over the rubble filled core area. The survey indicates an area of higher charge ability and low resistivity, referred to as the Central Zone, which would be expected from a system of disseminated sulfide minerals within a fractured rock. The Central Zone anomaly is up to 1 Km (3,300 ft) across and appears to be well positioned in relation to the mapped alteration. A smaller area of similar anomalous response is also found on the opposite side of valley, closer to the high grade veins. A geochemical survey would usually be carried out over the IP anomaly but is not possible in this case because of the glacial rubble. A 1,800 metre drill program will begin here in mid February to test the IP targets. While copper with gold is the main target of the drilling, we feel that in this area it is also possible that silver, tin or other more exotic bulk tonnage deposits might be discovered under the rubble. The drilling will determine which sort of mineralization, if any, is located there. Long intersections beginning near surface of +0.7% copper, or lower with gold or other metals, would mark a zone which could prompt a share price lift. Results are expected in March.
The Walter project is a group of concessions totalling about 1,600 Ha (3,800 acres) which contain a series of narrow, high grade polymetalic veins. The project is located about 145 road Km (90 miles) from the regional and mining centre of Potosi. Access has been developed to the site and some 1,126 meters of underground adits driven on three of the veins to determine grade and supply samples for metallurgical testing.
The veins appear to relate to intrusive activity and several intrusive dykes are located between them. The dykes are targets for bulk tonnage grade material. A total of ten separate veins have been outlined in the main Walter South area. Although labour intensive narrow vein mining is now rare in high wage areas it has been the bread and butter of Bolivia's mining history and continues to be viable where grades and recovery costs allow. The Potosi Vein has been traced for 2 km of strike length, and several others for over 1 Km, indicating good potential for the as yet untested depth extensions. By extrapolation to depths of 50 to 100 metres (depending on underground development), SAMEX has indicated a total of 324 Kt of probable reserves in five of the veins and a further 1,8 million tonnes of possible resource in all the known veins based on mapped strike lengths. The economic constituents are gold, silver, zinc arsenic and copper in varied amounts. In March 1995 a net value of US$7.3 million was calculated for the probable reserves using recoveries of 75% for gold, 90% for silver
and arsenic, and 70% for zinc and copper (the copper information is limited).
The traditional method for dealing with this type of deposit in Bolivia is to roast the ore so as to reduce the sulphides to arsenic oxide and free gold for gravity separation and sale. A 15 tonne sample from two of the veins has been tested by flotation recovery of the sulphides followed by roasting to produce recoveries within the specified range. A more complex flotation test was done on a small 200 Kg sample to produce separate zinc and arsenic concentrates from a zinc rich vein. Only 27% of the zinc was recovered in the zinc concentrate, which is the current limitation to developing the system as a whole. In February further adit development will
begin to continue the tonnage development and three 500 tonne samples will be shipped to determine appropriate flow sheets for segregating the zinc sulfide. Although the veins present a complex metallurgy, we feel that this testing is likely to produce a suitable recovery method for the zinc. Even if it does not the higher grade precious metal veins remain as viable development targets.
Two other areas of similar veining, known as Walter Central and Walter North, have been located along trend from the workings area. One of the veins at Central has returned 1.1 metres averaging about 6 g/t gold, 175 g/t silver and 7.6% arsenic, which is well within economic parameters. Drilling is needed to further access these areas. The work at Walter is not glamorous, but it helps to support SXG's share price while the earlier phase projects proceed.
This gold-antimony project consists of a 425 Ha concession which will be earned for US$65,400 of payments through June/96, plus 100% owned concessions totalling 3,500 Ha (8,400 acres). The target is contained by one or two bed(s) of black shale within a Palaeozoic sequence of rocks which has been drawn into tight folds. The property is within a regional belt of small, high grade antimony mines.
Past mining of high grade veins has been done to depths of 40 to 70 metres( 130 to 230 ft) along narrow, en-echelon quartz veins which have individual strike lengths of up to 100 metres. The veined system has been traced for a total 3 Km (2 miles) of strike length in two separate trends which have been displaced in several places by cross faulting. Analysis of vein material in mine dumps returned up +10 ppm (+10 g/t) gold, highest grade allowed by the analysis used, with 2.38% antimony in the sulfide mineral stibnite plus up to 1% arsenic. Individual veins rarely exceed 1 metre thickness but are accompanied by quartz stockworks which also carry gold-arsenic and antimony, and visually quartz poor areas of pyrite which also contain gold.
The principal shale beds hosting the mineralization, known as the Salamanca Zone and Triunfo Zone, are 30 to 100 metres thick. A third shale bed is also present but has not had little past work indicating mineralization. Recent mapping indicates that the Salamanca and Triunfo Zones may be a single shale bed which has been folded into a syncline (trough shaped) structure. If this is the case, which is possible since it would conform to the regional fold patter, it would mean that the nose of the fold is an area where the gold-antimony material thickens and may become more concentrated. The nose of the fold is postulated to sit at a depth of about 400 metres, but preliminary drilling will have to be completed before a proper estimate of its depth can assumed. The cross-faulting displacement would mean the nose, if it does exist, will be located at several depths at any rate.
SXG has begun testing the two shale trends by assuming their entire thickness has the potential to host bulk tonnage grades. A preliminary set of 5 core holes of from 200 to 350 metres length has begun test the systems at depth to determine grades below weathering affects and test the geometry of the postulated fold structure. Bulldozer trenches are also being excavated to expose the surface expression of the zones for detailed sampling. Drill intersections of 5 metres or better of +5 g/t gold will signal bulk underground potential; 1 to 1.5 metres of 10 to 8 g/t gold will signal mineable high grade potential. Surface grades of 2 g/t over 8 to 1 metres would allow for pittable resource development. Substantial antimony grades would lower the gold requirement.
Any of the above results could boost the share price. A series of ore quality results from the trenches or an expanded drill program could move it to the upper end of our target range.