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Endeavour Silver Looking to Revitalize El Cubo in a Hurry

In 2012, cash costs associated with mining at El Cubo were $35.27 per ounce of silver equivalent. Endeavour claims that their cash costs per ounce will be significantly lower in 2013. They had better be, otherwise this mine is losing money!

Disclaimer: This is an editorial review of a public press release and not an endorsement. It may include opinions or points of view that may not be shared by the companies mentioned in the release. The editorial comments are highlighted so as to be easily separated from the release text and portions of the release not affecting this review may be deleted.  Please view the full release here.

VANCOUVER, BRITISH COLUMBIA–(Marketwired – Sept. 11, 2013) – Endeavour Silver Corp. (NYSE:EXK) (TSX:EDR) announced today that exploration drilling at the Company’s El Cubo mine in Guanajuato State, Mexico has intersected high grade gold-silver mineralization in two veins near historic mine workings in the Asunción area of the Villalpando vein system.

Below are location maps extracted from a technical report for Endeavour Silver Corporation.

The veins that were intersected are low-sulphidation epithermal veins. Mineralization within epithermal veins can occur within vertical intervals of a few hundred metres, within vein thicknesses of 1-2m and lengths of up to several hundred metres.

Location of the El Cubo mine, Mexico

Location of the El Cubo mine, Mexico

Guanajuato Silver District

The Guanajuato Silver District

 

 

 

 

 

 

 

 

 

In 2012, cash costs associated with mining at El Cubo were $35.27 per ounce of silver equivalent. Endeavour Silver Corporation claims that their cash costs per ounce would be significantly lower in 2013. They had better be, otherwise the mine will be losing money! Today’s price for silver is only US$22.94 per ounce after peaking at US$48.58 per ounce in mid-2011. Just looking at these figures shows how marginal the mine really is.

Drilling intersected strong mineralization in both the Villalpando vein and the Asunción vein. Drilling highlights include 375 grams per tonne (gpt) silver and 1.80 gpt gold over 4.14 metres (m) true width, or 14.1 ounces per ton (opT) silver equivalents over 13.6 feet (ft), in hole CAS-6, including 768 gpt silver and 2.69 gpt gold over 0.49 m true width, or 27.1 opT silver equivalents over 1.6 ft.

Although it highlights the highest grade results, the use of “including” in drill results (see table below) can be more than a little confusing. Let’s scratch those out and look at the average grades across the larger interval. Also note that they have listed the intervals as “true widths”.

The “including” intervals are thin and could only be mined (without significant dilution) using traditional hand methods. This would reduce the production rate and raise costs associated with mining personnel. All the more reason to ignore these thin intervals in the table. Larger veins can be mined as whole by mechanical means, which makes for a cheaper operation.

El Cubo Drilling Highlights

Hole Structure From True Width Au Ag Ag Eq.
(m) (m) (gpt) (gpt) (gpt)
CAS-06 Villalpando 335.20 4.14 1.80 375 483
Including 337.15 0.49 2.69 768 929
CAS-08 Villalpando 271.80 1.62 0.60 330 366
Including 273.35 0.42 1.60 1185 1281
CAS-09 Villalpando 350.45 1.67 1.59 168 263
Including 352.40 0.35 2.95 293 470
CAS-10 Villalpando 350.90 1.72 1.20 136 208
Including 350.90 0.61 0.74 238 282
CAS-12 Villalpando 204.10 5.16 0.61 122 159
Including 207.60 0.66 0.99 181 240
CAS-04 Asunción 373.20 1.84 1.29 126 203
Including 374.70 0.38 1.64 280 378
CAS-10 Asunción 331.90 1.73 1.59 249 344
Including 333.30 0.29 2.07 303 427

 

One of the supposedly thickest intersections of 5.16m has the lowest gold (0.61 g/t Au) and silver grades (122 g/t Ag). I suspect the interval is actually thinner than this and the lower grades are due to dilution from the wall rock. The best vein intersection of 4.14m  true width on the Villalpando structure has the best grades of 1.80 g/t Au and 375 g/t Ag. However, the gold grade itself is quite low and is not really enough to justify mining on the contained gold alone, even by underground methods. And as we saw earlier, mining it for the contained silver and gold, i.e. silver equivalent, is marginal as evidenced by the company’s cash costs for this mine.

Click here to view the Villalpando-Asunción Longitudinal Sections. Silver equivalents are calculated at a ratio of 60:1 silver:gold.

The gold to silver ratio (Au:Ag) continually changes. In the past year it has fluctuated between 67.24 and 50.36. On September 19, 2013, when this press release review was written, the ratio was 59.3. The silver equivalent (Ag Eq) values will continue to fluctuate over time so care needs to be exercised when using these figures for investment decisions.

Additionally, consider that there is still much uncertainty in future gold prices with corresponding uncertainty over all precious metals including silver. Any further falls in silver price would be unwelcome by most silver miners and could make marginal mines unprofitable overnight.

Since the hyperlink to the Villalpando-Asunción Longitudinal Sections doesn’t work in the original  press release, we’ve dug up a couple of longitudinal sections from a technical report for Endeavour Silver Corporation. They are shown below.
Section along the length of the central part of the Villalpando vein

Section along the length of the central part of the Villalpando vein

The thing to note here are the grey coloured areas. These are stopes or mined out regions of the Villalpando vein. When it comes to underground mining it is always better to start with a clean slate rather than having to negotiate around mined out regions. There are definite safety risks associated with mining in around stopes, which are usually open voids where vein material has been removed. Rock falls within stopes are a real possibility unless they have been specifically engineered to prevent such incidents from occurring. It was only a couple of weeks ago that Endeavour Silver Corporation reported a fatality at the Guanacevi Mine resulting from a rock fall underground near a pump station at Porvenir Cuatro. The company would now being doing its utmost to prevent a similar accident from recurring, which may include a reassessment of future mining plans.

Section along the length of the northern part of the Villalpando vein

The new mineralized zones extend about 200 m long by 100 m deep, and have already been accessed by an underground crosscut from the historic workings. Fast track mine development is now underway to better define these mineralized veins and exploration drilling is expected to resume this month.

Luis Castro, Vice President of Exploration, commented, “The discovery of these two mineralized veins near the historic Asunción mine workings at El Cubo represents our first exploration success since acquiring the El Cubo mine last year, and validates our view that the exploration potential for new discoveries at El Cubo is very high.”

Godfrey Walton, M.Sc., P.Geo. President and COO, is the Qualified Person who reviewed and approved this news release and supervised the drilling programs at El Cubo. A Quality Control sampling program of reference standards, blanks and duplicates has been instituted to monitor the integrity of all assay results. All samples were split at the El Cubo field office and shipped to ALS-Chemex Labs, where they are dried, crushed, split and 50 gram pulp samples are prepared for analysis. Gold and silver are determined by fire assay with an atomic absorption (AA) finish. Other elements are determined by AA.

We have written an article on the QA/QC of geochemical data for those wanting to know more.

About Endeavour Silver – Endeavour is a mid-tier silver mining company focused on growing its profits, production, reserves and resources in Mexico. Since start-up in 2004, Endeavour has posted eight consecutive years of accretive growth of its silver mining operations. The organic expansion programs now underway at Endeavour’s three silver-gold mines in Mexico combined with its strategic acquisition and exploration programs should facilitate Endeavour’s goal to become a premier senior silver producer.

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Geology for Investors seeks to demystify mineral exploration and mining projects for mining company investors. All of our writers and contributors are experienced and educated in geology and the geosciences.