Sierra Madre Gold and Silver (SM.V) released an updated resource calculation for the La Guitarra project, the flagship asset of the company, earlier this week.
The updated resource now contains 3.84 million tonnes of rock in the indicated resource category at an average grade of 146 g/t silver and 0.96 g/t gold while the inferred resource contains 4.1 million tonnes at an average grade of 113 g/t silver and 0.52 g/t gold. The respective silver-equivalent grades are 220 g/t in for the indicated resources and 153 g/t for the inferred resources.
This also means the total resource across all categories now stands at just over 33 million ounces of silver and 180,000 ounces of gold for a silver-equivalent content of just over 47 million ounces. The breakdown of the ounces in the indicated resource category versus the inferred resource category can be found in the table above.
As we were expecting the company to show 35 million ounces silver-equivalent throughout all categories, the 47 million ounce resource is a nice surprise although the silver-equivalent grade of 220 g/t and 153 g/t in the indicated and the inferred resource categories respectively was a bit lower than we had anticipated. This could be explained by the anticipated mining and milling costs of US$50/t for cut and fill operations and US$38/t when using the long hole stoping technique. These relatively low operating costs for an underground mine likely helped to lower the cutoff grade.
And of course, as you can see above, the tailings were included in the inferred resource category and the low grade of 75 g/t silver-equivalent (which was already known- dragged down the average grade of the entire inferred resource category. As you can see in the image above, the average grade of the inferred resource excluding the tailings was a much more respectable 233 g/t silver-equivalent.
All things considered, we are happy with this resource update. The total amount of ounces in both reported resource categories was higher than we had anticipated without conceding too much on grade. As Sierra Madre is working towards restarting the mine in the not so distant future, coming out of the gate with almost 50 million ounces silver-equivalent with in excess of half those ounces in the higher quality indicated resource category feels like a flying start.
Disclosure: The author has a long position in Sierra Madre Gold and Silver. Sierra Madre is a sponsor of the website. Please read the disclaimer.
