TORONTO (miningweekly.com) –  Mexico-focused Great Panther intends to start, as soon as possible, surface drilling at the Coricancha mine complex, through which it has gained a foothold in Peru, the second largest silver producing country in Latin America.

The surface drilling will focus on defining and expanding zones of higher grade mineralisation, followed by underground drilling, development and start-up evaluations.

The TSX- and NYSE-listed company had struck a two-year option agreement with Belgium's Nyrstar, through which it could acquire a 100% interest in the Coricancha mine complex, in the central Andes of Peru, about 90 km east of the city of Lima.

"Coricancha represents a near-term production opportunity and the two-year option will allow us to gain comfort with the project without having to make an immediate and significant financial commitment in the current environment of low metal prices and depressed market conditions," Great Panther president and CEO Robert Archer said on Tuesday.

The Coricancha mine had been on care and maintenance since August 2013 and comprised fully permitted and operational 600 t/d flotation and bio-oxidation bio-leach plants, along with supporting mining infrastructure. 

The property comprised more than 3 700 ha in the prolific Central Polymetallic Belt and production at the mine dated back to 1906. 

Coricancha’s gold/silver/lead/zinc/copper mineralisation, which was about 80% gold and silver, occurred as massive sulphide veins that had been mined underground by cut-and-fill methods.

Under the terms of the option agreement, Great Panther made an initial cash payment of $1.5-million on signing. A second option payment of $1.5-million would be due on the first anniversary of signing to extend the option for a second year. 

Should Great Panther exercise the option on or before the second anniversary, an already negotiated share purchase agreement would take effect, whereupon Great Panther would make a cash payment of $5-million for 100% of the shares of Coricancha.

A further contingent payment of $4-million would be payable to Nyrstar under certain conditions. Further to the cash payments, the option agreement called for Great Panther to incur exploration expenditures of $2-million in the first year of the option and $3-million in the second year.

The Coricancha mine complex contained a historical noncompliant mineral reserve and resource estimate comprising a proven and probable reserve of 640 000 t, grading 4.35 g/t gold, 149.12 g/t silver, 0.32% copper, 1.77% lead and 2.6% zinc.

The complex also held a historic measured and indicated resource of 890 000 t, grading 5.04 g/t gold, 174.62 g/t silver, 0.42% copper, 1.97% lead and 3.11% zinc, as well as an inferred resource of 4.88-million tonnes, grading 4.91 g/t gold, 224.54 g/t silver, 0.48% copper, 1.57% lead and 2.98% zinc.

This represented silver equivalent ounces of 13.5-million in proven and probable reserves, 21.96-million in measured and indicated resources and 124.6-million in inferred resources.