Mining, Developing & Exploring
In April 2009, Pan American announced that it had reached an agreement with Orko Silver Corp., which would allow them to jointly develop the La Preciosa silver project. As per the terms of the agreement, Pan American became the operator of the project and, in order to retain a 55% interest in the project, it agreed to (i) make certain expenditures, (ii) prepare a feasibility study within 36 months, and (iii) contribute 100% of the funds necessary to develop and construct an operating mine. In October 2009, the parties entered into a formal joint- venture agreement in respect of the La Preciosa project.
The La Preciosa project is located in the state of Durango, Mexico, approximately 47 km northeast of the city of Durango. The project lies on the eastern flank of the Sierra Madre Occidental, on the highlands of the Mexican Altas Llanuras, an extensive volcanic plateau characterized by narrow, northwest-trending fault-controlled ranges separated by wide flat-floored basins. La Preciosa hosts silver-bearing vein mineralization with associated gold, zinc and lead. The property consists of a block of mineral exploitation concessions covering approximately 32,400 hectares and covers gold and silver-bearing epithermal quartz veins, with barite and lesser quantities of base metals, primarily zinc and lead.
The La Preciosa silver project is a historic mine, which is thought to have produced in the order of 30,000 tonnes of ore from the Abundancia and the La Gloria veins during the late 1800s. Recent exploration on the property began in 1981 when Luismin S.A. de C.V. ("Luismin") conducted a limited two-year sampling and drilling program.
In December 2003, Orko Gold Corp. negotiated a joint-venture option agreement with Luismin. Geologic mapping and surface sampling began in 2004 and target areas were identified for more detailed work. Core drilling began in 2005 and continued through 2008. In 2006, Orko announced that it reached an earn-in position and by agreement now holds 100% of the La Preciosa project, with Goldcorp holding an equity interest in Orko. Significant mineralization was encountered in numerous vein systems including the deeper, larger-tonnage Martha vein, first drilled in November 2006 and the assays from which were received beginning in February 2007.
In April of 2009, Pan American and Orko announced that they had entered into a joint-venture agreement, by virtue of which Pan American became the operator of La Preciosa. Pan American has the option of gaining a 55% interest in the project by preparing a Feasibility Report and building a mine. Pan American and Orko entered into a formal joint-venture agreement in October 2009.
La Preciosa covers Tertiary aged gold and silver bearing epithermal quartz veins, with barite and lesser quantities of base metals, primarily zinc and lead. There are three major vein and vein-breccia systems exposed on a series of hills and ridges, separated by flat floored valleys roughly 800 m wide. The main vein system consists of northward striking and westward dipping veins, plus east striking south dipping cross-cutting veins. The eastern vein-breccia system (Zona Oriente) strikes northwest. Two systems may intersect to the north beneath younger basalt. To the west of these is a third sub-parallel vein system, with north and northwest trending veins, dipping to the west.
The veins are composed of poly-phase veins of quartz, often banded, smoky, chalcedonic and amathystine, with a substantial amount of barite laths. Sulphide mineralization is scarce on surface and in the shallow underground workings. Drill core contains disseminated sphalerite, galena, pyrite and acanthite, plus iron and manganese oxides. Wall rocks adjacent to the veins are silicified, particularly between the prominent veins La Gloria and Abundancia. Kaolinite and hematite alteration is common, as well as more distal propylitic chlorite, epidote and pyrite.
Multiple veins in the main structural zone of La Preciosa ridge have been traced on surface for over 5 kilometres and drilling has revealed that the veins continue to the north beneath the basaltic cover. The veins are also interpreted to extend further south of known exposures. Individual veins have been traced for up to 4 km.
Of the entire structural zone, the Abundancia and La Gloria veins, plus more recently the Martha vein, have been explored in the greatest detail. The Abundancia and La Gloria veins coalesce at depth, the merged vein is known as the Abundancia vein. There are 2.5 km of underground drifts, following the Abundancia and La Gloria veins, as well as a small portion of the Transversal vein.
1 Mineral Resources published by Orko Silver Corp. For detailed information on La Preciosa's current Mineral Resources, please refer to the report "Technical Report Mineral Resource Estimate – VI", dated March 31, 2009 (http://www.orkosilver.com).
In 2009, Pan American invested $5.6 million and completed approximately 28,000 metres of diamond drilling. In 2010, the Company invested approximately $10 million and completed 62,934 metres of diamond drilling at La Preciosa. Pan American has completed a first phase detailed metallurgical program, which included work index tests, abrasion tests, mineralogical studies, gravity tests, floatation tests and cyanide leach tests. The program was a follow-up to the preliminary testing conducted in 2008 by Orko. Additional flotation studies are still underway.
In late 2010, Pan American announced that it would delay the completion of La Preciosa's Preliminary Assessment until mid-2011. The delay will allow the assessment of all possible mining methods, in order to optimize the extraction of the property's ore, given the current more favourable metal prices environment. Pan American is examining various scenarios for the economic evaluation of La Preciosa, including coordinating the work of external engineering studies. In 2011, Pan American expects to invest $1 million to complete the Preliminary Assessment, which is now expected to be completed during the third quarter of 2011.
Currently, Pan American does not consider the La Preciosa property to be material for the purposes of NI 51-102. For more information on La Preciosa, please refer to the Technical Report published by Orko Silver, which can be obtained from Orko's website at http://www.orkosilver.com.