Palisade Research - Tue, Nov 14, 2017

(V.MEX) Mexican Gold: Monster Hole, Drills 38m of 9.24 g/t AuEq Within 94m of Mineralization

picture of a hand holding drill core behind text of the gold assay

Mexican Gold (CVE:MEX, FRA:4QW1)

Barely a month ago on October 14, 2017, Mexican Gold's CEO Brian Robertson received a frantic call from site. Matt Laird, the company's head geologist, was beginning to pull the third hole of the season's drill program at Las Minas.

The call lasted just two minutes, as Matt struggled to express what was unfolding before his very eyes.

A daisy chain of phone calls erupted - Brian to Chairman Ali Zamani, Ali to the Director John Anderson, John to the remaining Board Members; 20 hours later, Palisade's Sean Zubick received word. The next morning, the news hit the wire: Drill hole LM-17-ED-40 hit 77.2 meters of Mineralization in Resource Expansion.

The Phase II drill program set out with three goals in mind - in-fill drilling, step-out drilling, and discovery drilling at Cinco Senores. LM-17-ED-40 fit into the first category: the hole was meant to provide missing information in the resource model, upgrading inferred ounces to measured and indicated. It was not intended to be a barnburner.

But what Matt Laird pulled that day was relayed as "the best hole ever drilled on the project." Purple and gold streaks indicated the presence of chalcopyrite throughout - and it clearly exceeded the mantra of resource expansion.

Even without completed assay results, Brian was sure that LM-17-ED-40 was an absolute game changer for the investors of Mexican Gold; taking a look at the drilled core below, it's hard to disagree. Only assays stood between the market and a clear road towards multi-million ounce potential at Las Minas.

picture of a hand holding drill core with visible gold
(Drill hole LM-17-ED-40)

And the assays are in!

The long awaited assays were received on November 10. Brian Robertson had barely finished half the report when he dialed IIROC to request a self-imposed trade halt. That's code for these numbers are really, really good! And here they are...

...a cumulative 94.35 meters of high-grade mineralization over three zones. The main zone, which is the largest of the three zones returned 54.0 meters grading 6.91 grams/tonne Gold Equivalent (g/t Au Eq), including 38.0 meters at 9.24 g/t Au Eq.

This hole represents the best EVER from Las Minas, both in grade and in length, and quite possibly the best hole to come from Mexico in the past few years.

After publishing a maiden resource of 1Moz of AuEq just months prior, the MEX technical team now believes they have found the high grade feeder zone. The open pit concept was already one of the highest grade in Mexico. And yet, this hole is significant in that it will add to the overall tonnage, while further improving the grade.

Looking at the map below, LM-17-ED-40 is pictured near the center of the resource model. It intercepted two BRAND NEW zones of mineralization above the known deposit - 19 meters of 2.45 g/t AuEq in the Upper Zone and 21 meters of 2.45 g/t AuEq in the Middle Zone.

The Main Zone, which includes the maiden resource, intercepted 54 metres of high grade. That extends the mineralization of the maiden resource by 16 meters, an astounding 30% increase in depth of the deposit with one drill hole. Obviously, further drilling is required to see if those thicknesses hold. Bottom line - there is significant room to improve at depth.

diagram of Las Minas project's drill intersections
(Drill holes LM-17-ED-40, LM-17-JB-19, LM-17-JB-20, LM-17-JB-21 shown in context of the maiden resource in blue.)

One drill hole increased the depth of the resource by 30%, THE OTHER THREE EXTENDED THE WIDTH BY 40%!

Likely to be overshadowed by LM-17-ED-40 are 3 more drill holes also released in today's news - step-outs from the western flank of the resource. Holes 1, 2, and 4, (labeled LM-17-JB-19, LM-17-JB-20, and LM-17-JB-21, respectively), stepped out 65 meters from the western extent of the maiden resource. Here are highlights from those three holes:

Highlights from diamond drill hole LM-17-JB-19

  • 4.01 g/t Au Eq over 5.00 metres in upper zone
  • 3.45 g/t Au Eq over 9.00 metres in lower zone

Highlights from diamond drill hole LM-17-JB-20

  • 3.12 g/t Au Eq over 4.00 metres

Highlights from diamond drill hole LM -17-JB-21

  • 2.89 g/t Au Eq over 12.80 metres

These holes demonstrate similar widths and grades to the maiden resource. Why is this so important?

The maiden resource contemplated a width of 300 meters. Since these steps outs extend 65 meters to the west of the resource, the potential width of the deposit just grew from 300 meters to 430 meters, a 40% increase in the size of the resource. How so? Because a 65 meter step out means an inferred diameter around the holes of roughly 130 meters, give or take.

picture of drill core
(Drill hole LM-17-ED-40)


At our recent Palisade Hard Asset Conference on Jekyll Island, billionaire investor Eric Sprott shared a few of his most important criteria to successful resource investing.

"Being a successful investor requires knowing in advance what the market will ultimately find out." - Eric Sprott

Mexican Gold currently has a resource of 1-million ounces. But, in light of these drill results, how much could they have?

The following is highly speculative math and represents the views of the author, and not necessarily the views of Mexican Gold Corp or its management.

The sensational LM-17-ED-40 shows improved grade that is certain to boost ounces within the constrains of the intial resource model. But it also exposed two new mineralized zones above the existing resource. That is great news for an open pit - more ounces closer to surface means more gold and less waste rock.

Further, the hole extended the depth of the Main Zone deposit by 30%. If this holds across the width of the deposit, back of the napkin numbers reveal an additional 300,000 ounces if not more, from just the extended depth. Add in the high-grade of LM-17-ED-40, as well as the two new zones - Upper and Middle. We could be looking at 500,000 ounces of gold.

The three step out holes expand the width of the deposit by 130 meters, an additional 40%. That provides us with the potential for yet another 400,000-500,000 ounces of gold.

Of course, more drilling will be needed to fill in the gaps to better understand the constraints of the deposit. Though highly speculative, its clear to see how these four drill holes open the door for an additional 1M ounces at the Juan Bran/El Dorado. And that is with just four holes!

Don't forget, the initial resource only contemplates two of eight known zones on the property. For this reason, our internal estimate at Palisade shows Las Minas potentially hosting 5M ounces of gold. Is it any wonder we own 19.9% of this company?

Prior to the stock being halted, MEX had a market cap of just $11M CAD or $7M USD. That equates to $7 per ounce of gold in the ground, against a peer average of $41 per ounce.

Now, if five million ounces are ultimately delineated, that means that the company is poised to be a 10-bagger, if not 100. And in the words of Eric Sprott, - "We invest for ten baggers." Our thoughts exactly Eric!

"You look at what you have everyday and say how much more can this still go up? Don't look at how much it's gone up by, but say how much more can it go up by?" - Eric Sprott

The market will soon begin to wake up to the potential of Las Minas. Palisade is a long term believer in this project and we will stick around for the big gains.

Reading the press release, what can we presume the future spells for Mexican Gold? Perhaps the Spanish had it right all along; after all they did name this place "Las Minas" — translation "The Mines." Results like this are few and far between in the mining business, and lead us to one conclusion: around this small mining town is a monster amount of gold!

Palisade Global Investments Limited holds shares of Mexican Gold. We receive either monetary or securities compensation for our services. We stand to benefit from any volume this write-up may generate. The information contained in such write-ups is not intended as individual investment advice and is not designed to meet your personal financial situation. Information contained in this report is obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The opinions expressed in this report are those of Palisade Global Investments and are subject to change without notice. The information in this report may become outdated and there is no obligation to update any such information. Do your own due diligence. publishes interesting contributor articles in addition to its own content. We have not verified any of the above details.

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