Golden Tag Resources Ltd V.GOG announced February 26 an updated resource estimate of its San Diego Deposit in Durango State, Mexico, a joint venture with Golden Minerals Co T.AUM. Golden Tag is the operator and has the option to increase its ownership to 60% by funding additional exploration on the property.
Indicated resources are 16.5 million tonnes grading 60 grams per tonne silver, 0.08 g/t gold, 0.71% lead, 1.22% zinc and 0.1% copper (105 g/t silver equivalent) for 31.6 million ounces silver (55.5 million ounces AgEq). Inferred resources are 42 million tonnes grading 62 g/t silver, 0.07 g/t gold, 0.9% lead, 1.31% zinc and 0.1% copper (115 g/t AgEq) for 83.8 million ounces silver (160 million ounces AgEq).
CEO David Rigg spoke to Kevin Michael Grace February 26.
RW: Let’s start by talking about how much of an improvement this is over your previous resource estimate of four years ago.
DR: We had a different method of doing it in 2009. The new estimate is more geostatistically based; the method in 2009 was more geologically driven. This geostatistical approach with SGS has resulted in much tighter definitions of indicated and inferred resources. We had previously a resource that was mostly inferred, and the big change is that we got a large amount of indicated resources now.
RW: How many ounces indicated?
DR: We’ve gone up to 31.6 million ounces of silver alone in the indicated bracket, and before we had a very minor amount. Previously we only had 370,000 tonnes of indicated, and now it’s 16.5 million tonnes.
On the inferred side, we’ve doubled the size from 22 million tonnes to 42 million tonnes, and we’re showing 83.8 million ounces of silver in the inferred category. So the total between the two of them is 115 million ounces, up from 70 million.
RW: If you look at the silver equivalent, you’re up to 55.5 million ounces indicated and 160 million ounces inferred.
DR: That’s right.
RW: The silver-equivalent grade is about 120 grams per tonne?
DR: Yeah, but you have to be very careful, though, and that’s why we structured the tables the way we did. The big thing in the new resource is the success of our 2012 drilling. We put that out in a series of press releases: very wide intercepts, some of the widest I’ve seen in my career of 35 years.
The big change is the Fernandez Zone, which is the low-grade zone, an endoskarn, not a vein-type deposit, as the other resources are. This is more of a bulk-mining target. It’s in the order of about 350 metres north-south and about 150 metres wide. It’s a very substantial part of the resource. We’ve added about 75 million ounces there with that. When you have something as big as this, it tends to pull the grade down of the average.
The Fernandez Zone is about 94 grams per tonne silver-equivalent indicated resource and 88 grams per tonne silver-equivalent inferred. Those are very good grades for a bulk-mining scenario.
RW: Trovador, a vein zone, has higher grades.
DR: Trovador is probably the biggest prize. We found that initially in 2011. The indicated resource shows 194 grams per tonne and the widths in that area are about 20 metres wide, so you add tonnage very quickly. Trovador shows about 4.4 million tonnes inferred and 300,000 tonnes indicated. There are probably about another 7 million tonnes on that structure that need to be drill defined.
So we’ve got Fernandez, a lowgrade bulk-mining situation, plus we’ve got 21 veins recognized on the property. We had only 12 in 2009. The grade of these is very decent.
RW: What are your drilling plans for 2013?
DR: Right now, we need to look at the resources in a lot more detail. We’ve done 34 different block models on different zones in the deposit because we’ve got 23 mineralized zones. This provides a lot of opportunity for us to look at the deposit in various ways. It really depends on how we want to progress with it.
We basically paid last year’s exploration costs of $2 million, and we found 75 million ounces with that. Our discovery cost is way less than two cents an ounce of silver in the ground—David Rigg
On the Fernandez Zone at depth, it’s a big block. We’ve got at about 80 or 90 grams a tonne but very large tonnage. I think that zone is open for expansion, and it’s just on the edge of intrusion and should be right through the intrusion.
I see a lot of extension to the West. There is potentially another Fernandez Zone under this side of the intrusion, which if that doubles, well you can double 75 million ounces.
RW: When would you be looking at putting out a PEA?
DR: We have to decide if we’re ready to do that. We have to talk to our joint-venture partner next week.
RW: You’re earning 60% of this property?
DR: We own 50% right now, and we have an option to earn 60%.
RW: Do you see this 60/40 split remaining or do you see Golden Tag acquiring a bigger share?
DR: That’s a good question, and I think at this stage our focus is just to get to the 60%. Golden Minerals are very good partners to have because they’re operating the mill and mine just adjacent to us. That gives us a lot of flexibility in terms of approach and access to personnel and equipment and people and technical expertise in the area. We’ve got about another year before we get to our 60%, and so we have a year to think about that. I’m not averse to increasing it, it but I think they may not want us to.
RW: How much cash do you have, and what’s your burn rate?
DR: We have about $300,000, and we’ll have about $300,000 in tax rebates from Mexico very shortly. Our burn rate is very low. There aren’t a lot of people at Golden Tag, and the office in Montreal is very cheap as well. Mark Carrier is President; I’m CEO; and we have a project geologist, Kateri Marchand. That’s it. If the money gets low, Mark and I quite often don’t take a salary. I would say our burn rate right now is probably about $20,000 a month, but we could probably drop that to $10,000 easily.
RW: How long will you have to go before financing?
DR: We do need to finance probably about $1 million to complete the 60%. It was a $3-million commitment to earn the additional 10%, which after finding Fernandez I think is a pretty good investment for Golden Tag shareholders. We basically paid last year’s exploration costs of $2 million, and we found 75 million ounces with that. Our discovery cost is way less than two cents an ounce of silver in the ground.
So we need to raise another million dollars. We can do a lot of interesting holes with that kind of budget on Trovador and bring in additional indicated and inferred resources easily. Or we go out with a couple of more deep holes and add a lot more ounces to Fernandez. So we’ve got those two, which will give us more value in the joint venture and also complete the 60%. We probably need to raise that million dollars sometime in the next nine months.
At press time, Golden Tag had 53.4 million shares trading at $0.18 for a market cap of $9.6 million.