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Morro Bay delivers on H1 objectives, marches towards Peñoles PEA

Morro Bay Resources' Peñoles gold/silver project, in Mexico’s Durango state.

Morro Bay Resources' Peñoles gold/silver project, in Mexico’s Durango state.

Photo by Morro Bay Resources

10th July 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Junior exploration companies have been butchered in the brutal aftermath of the Great Recession, from December 2007 to June 2009; however, one of the defining features of a successful junior explorer in today’s market is productivity.

Companies making tangible progress in achieving set goals on shoestring budgets, with the bare minimum of people on the ground, were attracting continued investor confidence as their projects progressed along the value curve.

Calgary, Alberta-based explorer Morro Bay was one such forward-moving company, having achieved all major objectives at its flagship Peñoles gold/silver project, in Mexico’s Durango state.

During the first half of the year, the company had, under the reins of CEO John Zang, completed further exploration drilling, announced strong assay results, issued a maiden resource, exercised its option on the project and was now in the middle of raising additional funds for continued drilling, with a preliminary economic assessment (PEA) in the works for completion early next year.

MAIDEN RESOURCE
Morro Bay, which held a 51% controlling interest in the Peñoles project with joint venture partner Riverside Resources, in April published the first National Instrument 43-101-compliant inferred resource for the project, estimating the combined El Capitan gold and Jesus Maria silver target to hold 28.29-million tonnes, grading 0.364 g/t of gold and 18.7 g/t of silver for 331 000 oz of contained gold and 16.99-million ounces of silver.

Zang on Thursday told Mining Weekly Online in Toronto that the initial resource contained a lot more silver than expected, underlining the exploration potential at the two targets.

The ‘base case’ cutoff grades of 0.25 g/t of gold at El Capitan and 30 g/t of silver at Jesus Maria were based on projected metal prices of $1 300/oz of gold and $20/oz of silver.

The Durango region had seen strong demand for new projects in recent years, which were being snapped up by midtier and senior miners, and Zang said he was hopeful that a project partner or outright buyer would step forward as the resources were being added to the Peñoles with further drilling.

Declining reserves and slowing production had pushed large producers towards acquisitions. Mexico continued to attract global interest owing to its geological endowment, favourable mining laws, low operating costs and access to infrastructure.

The technical report estimated that the Jesus Maria silver zone contained an inferred resource of 7.6-million tonnes, containing 15.15-million ounces of silver at an average grade of 62.3 g/t and 26 000 oz of gold at an average grade of 0.105 g/t based on results from 30 diamond drill-core holes and 3 114 m of drilling completed as at December 30.

Based on results from 50 diamond drill-core holes and 7 004 m of drilling at the El Capitan gold zone, the technical report estimated an inferred resource of 20.7-million tonnes, containing 305 000 oz gold at an average grade of 0.458 g/t, and 1.83-million ounces of silver at an average grade of 2.8 g/t.

Following the resource statement, Morro Bay had in May exercised an option to earn a 51% interest in the project, foregoing an option to obtain a further 14% for a cash payment by the end of June.

EXPLORATION STRATEGY
Zang explained that the known mineralised zones at Peñoles were only partially drilled off and that there was excellent potential for extension along strike and new discoveries at depth.

A 2 000 m drilling programme, starting in September, would aim to test whether the Jesus Maria silver zone and the El Capitan gold zone, in fact, merged into a single large mineralised zone.

Further, Morro Bay proceeded with a private placement of between $1-million and $1.5-million, announced on April 6, with two tranches having closed in May and June.

The units (consisting of one common share and one common share purchase warrant) were being offered at a price of $0.05c a unit.

The company expected to spend about $750 000 on its fall drilling programme, hoping to drill 30 more holes by January 2016.

Meanwhile, work on a PEA would proceed, with a deadline of March next year.

Morro Bay had on Monday appointed mining veteran Andrew Daniels its new COO. He had more than 30 years' international experience in the mining industry with some of the world’s leading companies. This experience included four-and-a-half years in capital markets and mining finance as a consultant and later as director of global finance at Deutsche Bank. Before that, Daniels was VP exploration for Peñoles project partner Riverside Resources before Morro Bay became involved.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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