Report on Silver Mining in Mexico 2005;

Mexico’s Polymetallic Trend, Case Study and Current Active Silver Mining Participants in Mexico
By Brian Winters, Staff Mining Journalist - March 15, 2005

Preface: Silver Mining in Mexico

 
Mexico is the single largest producing country of silver, and a major producer of base metals and gold. Silver is by and large produced as by products of base metals and gold mining activities. Mexico is categorized as especially attractive to foreign investors for mining due in part to outstanding geological potential, and favorable mining and foreign investment law which came into being in the 90’s. These laws include the allowance of direct foreign investment with up to 100% ownership of the capital stock, favorable exploration and exploitation mining concession limits, no limits on mining concession surfaces, and a suitable system of concession timing and authorities. Of the total number of foreign companies investing in Mexico mining (estimated at 450) 370 are American or Canadian.
 

The Polymetallic (SILVER – LEAD - ZINC) Trend That Makes Mexico Resource Rich: The major current producers and majority of silver exploration are set in the exceptionally large area of the Basin & Range extensional province that trends SSE from the Texas border to the Trans Mexico Volcanic Belt. More than two-thirds of world resources of silver are associated with copper, lead, and zinc deposits, often at great depths. Our case study region, indicated on the map to the left, has the advantage of deposits being "near surface" and thus amenable to "low cost, high yield silver production".

CASE STUDY: Silver mine appears imminent in polymetallic trend offering insight and opportunity for investors in Starcore International Ventures Ltd.(SAM.V)
 
Starcore is a TSX Venture Exchange listed exploration company and emerging silver producer, ticker symbol SAM.V, with its head office in Vancouver. Starcore International Ventures Ltd. has structured an acquisition of up to an 80% interest in the silver-lead-zinc rich Cerro Dolores property in Mexico from Wheaton. Their plan is now to complete a 300T/day mill which is outlined in the Pincock, Allen & Holt prefeasibility study which also indicates a strong belief of an additional 3-5M tonne ore of similar grade located on the property. Starcore has a proven track record of similar successful ventures where all capital costs were recovered from production within 3 months; the plan here at Cerro Dolores is the same.... especially with in-situ values of silver being 11.2 oz per ton (@ $7.55/oz) giving us $84.56 of production silver per tonne, Company figures with lead and zinc returns added in give us total projections of $169.37 per tonne revenue. This deposit was chosen for initial attention by Starcore because it has an established ore reserve and appears amenable for low-cost, fast track production. Of the mineral resource base of 552769 tonnes grading 11.2 oz/tonne silver, 2.6% lead, and 5.3% zinc, a large portion appears to be amenable to open pit mining methods.

The original claim block acquired from Wheaton River Minerals on February, 2004, the Cerro Delores property, contains the El Transito Deposit, a silver-lead-zinc replacement orebody defined by more than $US 2 million in development expenditures by previous operators. The resource was the subject of a Prefeasibility Study conducted for Industrias Luismin SA de CV in 1988 and was estimated to contain 552,769 tonnes grading 348 gpt silver, 2.62% lead and 5.33% zinc in the Proven, Possible and Drill-Indicated Categories. Luismin, based on a few subsequent drill holes and "cutting" of high silver values produced an internal estimate (1991) of the resources at El Transito of 975,567 tonnes grading 172 gpt silver, 1.9% lead and 5.1% zinc in all categories.

 
In excess of $2.4 million has already historically been spent on the target region at Cerro Dolores and Starcore management has indicated they plan to open a silver-lead-zinc mine at Cerro Dolores. Recent activities involving this property include:

- commissioned and received a NI 43-101 Report;
- compiled the data and map base in electronic format and entered critical data in SURPAC development software;
- received two independent cost estimates for mining activity at the project;
- selected sites for water access, processing and tailings disposal;
- conducted bench scale metallurgical testing of underground samples;
- sourced and costed out key process equipment;
- ascertained that the existing underground workings into the mineralization are accessible;
- initiated environmental studies;
- obtained term sheets from smelters and estimated transportation costs;
- determined drill sites for resource potential expansion; and
- conducted internal production and financial models for the possible mining and processing of the El Transito Deposit to monitor financial viability and identify critical variables

The compilation of key Scoping Study inputs is work in progress and it is expected to be complete and a decision made regarding start up of operations in the Spring of 2005.

If all warrants are exercised (fully diluted according to plan; 10,425,445 shares outstanding plus warrants of 6,609,220 (as of Feb. 17, 2005 according to Company website) the company's current market cap of $6,132,479 compared to comparable Junior Mining Companies is undervalued, which indicates to many that a reasonable trading ground for the share price would be closer to $2 a share fully diluted, and naturally substantially higher if planed exploration findings dictate. Certainly the stock price of SAM.V can be considered undervalued with silver ounces in the ground currently priced at well under $1 per ounce based on historical engineering figures mentioned above and considering the reserve appear amenable for low-cost, fast track production. (Besides Mexico, Starcore owns newly acquired silver property in Arizona that is described by management as “Low risk, High Reward, Drill Ready”).

Notable Participants in Silver Mining in Mexico:

Mexico's Industrias Penoles, whos Company shares are quoted on the Mexican Stock Exchange (BMV: PE&OLES), is the world's largest producer of refined silver and the leading producer in Mexico. More notable participants are active miners that are listed on more traditional exchanges favored by institutional and retail investors. Some of these participants taking advantage of Mexico's polymetallic region include include:

• Silver Standard Resources Inc. (AMEX: SSRI); Silver Standard is an exploration-stage company and none of its properties it owns are beyond the advanced exploration stage. It's principal interest in Mexico is La Pitarrilla in Durango State.

• Pan American Silver Corp. (NASDQ: PAAS); Pan American Silver Corp. is principally engaged in the exploration for, and the acquisition, development and operation of, silver properties primarily in Peru, Mexico, Bolivia and Argentina, with a secondary focus on the United States and the Americas. Pan American's principal products and sources of revenue are silver-rich zinc, lead and copper concentrates. In Mexico PAAS is developing The Alamo Dorado deposit which is located in northern Mexico in the state of Sonora, approximately 200 miles from the state capital of Hermosillo. The Alamo Dorado deposit is the only economic primary silver discovery made in the last decade. Corner Bay Silver, a Toronto-listed exploration company, began grassroots reconnaissance of the area in 1997, received encouraging surface mapping and assay results and conducted the first phase of confirmation drilling in mid-1998. In 1999 a preliminary resource was calculated and a scoping study prompted further infill drilling and metallurgical testing. Pan American Silver acquired Corner Bay and the Alamo Dorado project in February, 2003.

• Apex Silver Mines Ltd. (AMEX: SIL); In Mexico Apex Silver controls approximately 45,800 hectares (113,126 acres) of highly prospective ground and is actively exploring for additional promising projects. In most cases, Apex seeks to control all of its properties through direct ownership of claims and leases.

Listing of Active (& Some Recent) Participants in Silver Exploration in Mexico:

Mexico in Relation To The World in Silver Production, Reserves, and Reserve Base:

According to the U.S. Department of The Interior (Geological Survey Mine), Mexico's mine production of silver ranked number 1 in 2004, followed closely by Peru and China. Since most silver resources are associated with base-metal ores, the extraction of silver from base-metal discoveries is ultimately driven by demand for these base metals and is a function of the global economy. The deficit between world silver fabrication demand and worlds silver supply (mine production and scrap) remained large in 2004 at about 1,700 tons.

World Mine Production, Reserves, and Reserve Base (includes silver recoverable from base-metal ores):

	Mine Production 2003	Mine Production 2004	Reserves	Reserve base
United States	1,240	1,200	25,000	80,000
Australia	1,872	2,230	31,000	37,000
Canada	1,309	1,300	16,000	35,000
Chile	1,250	1,300	N/A	N/A
China	2,500	2,600	26,000	120,000
Mexico	2,569	2,850	37,000	40,000
Peru	2,774	2,800	36,000	37,000
Poland	1,200	1,200	51,000	140,000
Other countries	4,100	4,000	50,000	80,000
World total (rounded)	18,800	19,500	270,000	570,000

Disclaimer & Disclosure: The information contained herein is believed to be accurate but this cannot be guaranteed. The analysis does not purport to be a complete study of securities mentioned herein, and readers are advised to discuss any related purchase or sale decisions with a registered securities broker. Companies mentioned herein may be very early stages of development and thus can therefore be subject to business failure, and are to be considered speculative and high risk in nature. Reports herein are for information purposes and are not solicitations to buy or sell any of the securities mentioned. The author may or may not hold a position (long or short) in the securities mentioned herein. This is a journalistic article and the author is not a registered securities advisor, and opinions expressed should not be considered as investment advice to buy or sell securities, but rather opinion only. The publisher may make take journalistic liberties employing the use of pseudonyms as reference contacts and accepting information at face value from what it believes to be credible sources. Further disclaimer and disclosure regarding various aspects of this report / article including compensation and other points may be seen at http://www.madisonaveresearch.com/disclaimer.htm.