Resource World Magazine

MINING Defiance Silver counts on new technology to restore an old mining district by Mike Kachanovsky For most emerging junior mining companies, at this point in the cycle, it has become very difficult to secure adequate funding in order to move business plans forward. The entire sector is mired in slump, with typical stock valuations approaching bear market lows and speculative capital hard to come by. Completing exploration work is both time consuming and expensive. Thus it has become a race to the finish line for some juniors when trying to advance a project and achieve production so they can begin earning revenues. Defiance Silver Corp. [DEF-TSXV] has arranged option deals to acquire a superb property in an established Mexican mining district and a processing plant located in close proximity. The San Acacio Project encompasses a large portion of a vein system in the State of Zacatecas. Several significant historic mine workings have been encountered within the property area. The nearby Santa Gabriela mill was in operation for several years and currently requires a thorough refurbishment along with engineering work to improve the tailings pond, but it represents a head start for processing. These assets can become the foundation on which to build a mining company. The challenge therefore is to survive the current funding drought and navigate through a difficult market while moving the project forward. Ideally, Defiance aspires to restore the mill into efficient operating condition and then begin processing lower grade, near surface, feedstock material to generate enough cash flow to advance the project into a larger scale mining operation. Zacatecas has long been one of the most prolific silver producing areas in the entire world, with several hundred years of productive mining history from dozens of mines. The key to understanding the potential for a successful operation in this area comes from the fact that most of the historic mining activity was limited to the near surface portions of epithermal vein systems. Using low tech methods the miners basically extracted what they could see, following the veins until they pinched out. Only the highest grade zones were mined and the remaining rock was discarded. And because there was no efficient pumping technology available, as the mines progressed down to the water table, underground workings flooded and the mines were abandoned. The use of modern exploration methods has led to a bonanza of new discoveries that had been overlooked around the old mine workings. Improved equipment has allowed mining activity to progress to much deeper levels, opening up the full elevation of a vein system where productive silver zones were beyond the reach of MARCH 2013 Long view of the trench on the vein from the northwest San Acacio mine property boundary looking southeast toward the Almaden shaft area. Photo courtesy of Defiance Silver. prior mine operators. Lastly, the advance of processing technology has made it possible to generate a profit running much lower average ore grades due to improved recovery efficiency, as well as enabling processing of sulphide ores that are typically encountered further at depth in a vein system. These factors have contributed to the restoration of successful operations at many historic mining districts. Defiance has been very successful in proving up silver resources from a number of sources at San Acacio. There are several waste dumps at surface to supply a tonnage of broken rock with sufficient grade to provide positive economics for restarting the mill. In addition, waste rock from historic mine operations was used as backfill in underground workings over many years of mining. This material averages 236.7 g/t (6.9 oz per short ton), and it represents ore grade feedstock for a modern milling facility. Defiance has outlined a large tonnage that can sustain the early years of processing and generate additional cash flow. Meanwhile, drilling programs have been completed that demonstrate entirely new discovery zones within the main vein system that extends across the property. It should be noted that while approximately 200 million ounces of silver are estimated to have been mined from this area in past operations, only about 30% of the productive vein system has ever been exploited. This opens the door for a great deal of potential upside for further discovery as more systematic exploration work is completed in the years ahead. If all goes according to plan, Defiance needs to raise about $5 million to complete the first phase of its long term plan. This money would enable the company to refurbish the mill and to process surface stockpiles to generate income. Thereafter the company plans to expand on its currently defined resources by testing new discovery targets below the historic mine workings at San Acacio. The clock is ticking and there are big challenges ahead, but the company has already delivered notable achievements and the potential upside is considerable, if they can resume production from this historic district. n www.resourceworld.com 43

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