Disseminated on behalf of: Behalf of: Regency Silver Corp.
Bruce Bragagnolo, CEO of Regency Silver Corp. (TSXV: RSMX | OTCQB: RSMXF | FSE: ZJ90), discusses the company’s plan to add Jabali, a high-grade, past-producing gold mine in Sonora, Mexico, just 20 kilometres from its Dios Padre Project, where Regency has drilled into a high-grade gold-silver-copper deposit four hours east of the mining hub of Hermosillo. As the company transitions from explorer to producer, and as the capital cost of putting a mine into production has increased, Regency Silver is positioning to restart Jabali through a toll milling arrangement rather than building a standalone mill, with the goal of generating positive cash flow while minimizing shareholder dilution.
Past-producing Jabali Gold Project brings high grades and known metallurgy
Because Jabali has been in production before, Bragagnolo says it can be put back into production on a much less complicated basis. “First of all, it was the grade. The grade is exceptional,” he says. The metallurgy and type of deposit are known, and metallurgical studies by previous operators showed 94% recoveries using cyanidation. Historical drilling includes 6.91 grams per tonne gold over 63 metres and over seven grams of gold over 12 metres, completed by a public company five years ago with independently verified assay certificates.
Bragagnolo draws a parallel to Timmins Gold, a past-producing mine returned to production after a review of its historical work. Here, toll milling replaces the upfront cost of a mill. “You don’t have to spend money upfront. You can spend it as you go instead,” Bragagnolo says, noting it costs a bit more on an operating basis but is beneficial overall.
Sonora gold district near Mulatos and La India mines anchors the investment case
Jabali sits in a very prolific district of big producing gold mines in Mexico. The project is six kilometres from Alamos Gold’s Mulatos mine, one of the biggest mines in Mexico and a really good producer for a number of years, 10 kilometres from Agnico Eagle’s La India mine, another very prolific producer, and 20 kilometres from Dios Padre, giving Regency reach across the district.
The La Dura mine, part of Jabali, was described in old reports as a very clear analog to Mulatos. Infrastructure put in place by those mines, including roads, good relationships with locals, a very skilled labour force, and small towns that can house workers, is very conducive to operations. Bragagnolo adds that Regency will not dilute itself excessively to pick up the project, and that the cost is good and the returns should be good as well.
Verification drilling and toll milling contract are next Jabali catalysts
Regency Silver is already relying on the historical database, which it believes was performed in accordance with National Instrument 43-101. Next steps include verification drilling of its own, independent assays, and a mine plan with an updated resource estimate. Bragagnolo says a production decision will show the public what the economics look like, and the company is confident in the economics, given nearby mines and its inherited historical database, and in reaching a toll milling contract. “A successful operation at Jabali would allow us to minimize dilution, provide us with positive cash flow, get us out of the situation where we have to raise money every few months, and allow us to focus on operations and building the company,” he says.
A high-grade path from explorer to producer in Sonora, Mexico
As Regency Silver transitions from explorer to producer, it stands at the intersection of a high-grade, past-producing asset and a district built out by major gold producers. With a high-grade historical database in hand and a toll milling strategy designed to reduce upfront capital, the company is positioned to pursue disciplined, cash-flow-focused growth in Sonora, Mexico.
Transcript
Transcript lightly edited for clarity
Jim Gordon: Hi, I’m Jim Gordon, and you’re watching Market One Minute. Joining us is Bruce Bragagnolo. He’s the CEO of Regency Silver Corp. Bruce, it has been a number of years. Welcome back.
Bruce Bragagnolo: Jim, thank you. It’s a pleasure to be back.
Jim Gordon: It’s great to have you here. Okay, let’s jump right in. Talk a bit about Regency Silver and Jabali.
Bruce Bragagnolo: Regency Silver is an explorer in Mexico, and now we’re transitioning into a producer as well. We already have the existing Dios Padre Project four hours to the east of Hermosillo, the mining hub of Mexico, where we’ve drilled into a high-grade gold-silver-copper, high-sulfidation, perhaps porphyry deposit.
Jabali is an outstanding past-producing gold mine. It’s high grade. When you walk into the mine itself, there’s a big structure that looks like it continues at depth. It’s only 20 kilometres from our Dios Padre Project. It is only 10 kilometres to the mill of the Mulatos mine. It’s 10 kilometres from the La India mine. It’s in a very prolific district of big producing gold mines in Mexico, and it looks like a perfect fit for the portfolio of Regency Silver.
Jim Gordon: And you mentioned Jabali. Can you talk more about that and what made it so attractive to Regency Silver?
Bruce Bragagnolo: First of all, it was the grade. The grade is exceptional. It was in production before, which means that we can put it into production again on a much less complicated basis, let’s say. The metallurgy is known, the type of deposit is known, and it’s in our snack bracket too. So we’re not going to be diluting ourselves excessively to pick it up. The cost is good, and the returns should be good as well.
Jim Gordon: You drew a comparison to the model that worked at Timmins Gold. Can you talk about that parallel and why a toll milling arrangement makes sense here rather than building a standalone mill?
Bruce Bragagnolo: With Timmins Gold, we had a past-producing mine. We reviewed the infrastructure. There wasn’t much of it, but there was some infrastructure. We looked at the historical work that had been done, and that allowed us to make a decision to put it back into production.
With Jabali, there’s been a lot of work done on the drilling side. It’s a past producer. You can easily see the mineralization just by entering the old workings, and it’s very close to existing mines. So the infrastructure in the district is very good. It’s been improved by the existing mines, and we hope to reach a toll milling arrangement very quickly.
Toll milling is very important because it reduces your CapEx, which is a bit of an issue with putting a mine into production. The CapEx these days has increased. So instead of building a mill, it’s much cheaper upfront to do a toll milling arrangement. And the real advantage is you don’t have to spend money upfront. You can spend it as you go instead. It does cost a bit more on an operating expense basis, but overall, it’s a beneficial arrangement.
Jim Gordon: Now, Bruce, this project sits close to Alamos Gold’s Mulatos mine and Agnico Eagle’s La India mine. How much weight does that proximity carry in the investment case?
Bruce Bragagnolo: Jabali fits in with our overall regional strategy. It’s only six kilometres from the Mulatos mine. It’s 10 kilometres from the La India mine, and it’s 20 kilometres from Dios Padre. So it gives us a lot of reach in the district.
Mulatos is one of the biggest mines in Mexico. It’s been a really good producer for Alamos Gold for a number of years. The La Dura mine, which is part of Jabali, was touted in old reports as a very clear analog to Mulatos, not as big perhaps, but certainly the mineralization is similar. And then you have La India, which has been a very prolific producer for Agnico Eagle for a number of years.
So, the infrastructure that was put in place by those mines, including roads, good relationships with the locals, a very skilled labour force, and small towns that can handle your workers, is very conducive to overall operations.
Jim Gordon: And Bruce, there’s a substantial historical drill database at Jabali, including some strong gold intercepts. What can you tell us about that data, and what still needs to be done before it can be relied on?
Bruce Bragagnolo: We’re actually already quite reliant upon that data. We feel that it was performed in accordance with National Instrument 43-101. It was performed by a public company only five years ago, and it has independently verified assay certificates.
It has exceptional grades, 6.91 grams per tonne of gold over 63 metres, for example, and over seven grams of gold over 12 metres. It’s high-grade. We have a lot of faith in the information we’ve received.
The mineralization at the deposit also looks fairly homogeneous. It’s a big structure that looks like it’s approximately the same type of rock. And the metallurgical studies performed by previous operators, 94% recoveries, for example, using cyanidation, lead us to believe the metallurgy should not be an issue for an NI 43-101 mine plan and report.
What we have to do now is probably do some verification drilling of our own, send that out for independent assay, then do a mine plan with an updated resource estimate.
Jim Gordon: And finally, Bruce, let’s talk about Regency’s broader Sonora strategy. Two-parter here: how does Jabali fit in alongside Dios Padre, and what should investors watch for as the transaction moves toward closing?
Bruce Bragagnolo: It fits in perfectly with our Dios Padre strategy. Once we’re to the point where we can make a production decision, that will alert the public to what the economics look like. We’re very confident in the economics given what we know about mining in the district, given the historical database that we’ve inherited, and the fact that there are existing mines nearby.
We’re also confident in coming to some form of arrangement for a toll milling contract. So those are items that the public should look out for in the future. A successful operation at Jabali would allow us to minimize dilution, provide us with positive cash flow, get us out of the situation where we have to raise money every few months, and allow us to focus on operations and building the company.
Jim Gordon: Bruce, it’s been a pleasure to have you. Thanks for joining us.
Bruce Bragagnolo: Thanks, Jim. Let’s make sure it’s not three years next time.
Jim Gordon: Deal.
The scientific and technical information contained within this article has been reviewed and approved by Michael Tucker, P.Geo, who is a Qualified Person as defined under National Instrument 43-101.
About Regency Silver Corp.
Regency Silver is a Canadian resource company exploring for high-grade gold, copper, and silver in Mexico. The company’s flagship Dios Padre project in Sonora, Mexico has returned significant drill results across an expanding gold-copper-silver discovery zone.
Learn more at regency-silver.com.
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