Interview of Eric Zaunscherb, Chairman & CEO, GR Silver Mining (TSXV|GRSL, OTCQB|GRSLF, FRANKFURT|GPE): District-Scale Silver and Gold Portfolio and Resource Expansion in a Prolific Mining District in Mexico
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By Dr. Allen Alper, PhD Economic Geology and Petrology, Columbia University, NYC, USA
on 10/13/2022
We spoke with Eric Zaunscherb, Chairman and CEO of GR Silver Mining Ltd. (TSXV|GRSL, OTCQB|GRSLF, FRANKFURT|GPE), a Canadian-based, Mexico-focused, junior mineral exploration company, engaged in cost effective silver-gold resource expansion, on its 100%-owned assets, located on the eastern edge of the Rosario Mining District, in the southeast of Sinaloa State, Mexico. GR Silver Mining controls 100% of two past producers, precious metal underground and open pit mines, within the expanded Plomosas Project, which includes the integrated San Marcial Area and La Trinidad acquisition. In conjunction with a portfolio of early to advanced stage exploration targets, the Company holds 734 km2 of concessions, containing several structural corridors, totaling over 75 km, in strike length. The recent drilling results include Drill Hole 22-10, which intersected 101.6 meters at 308 grams per tonne silver, from 98.5 meters downhole.
GR Silver Mining
Dr. Allen Alper:
This is Dr. Allen Alper, Editor-in-Chief of Metals News, talking with Eric Zaunscherb, Chairman and CEO of GR Silver Mining. Eric, could you give our readers/investors an overview of your Company and what differentiates it from others?
Eric Zaunscherb:
We owe a great deal to our Founder, President, and COO Marcio Fonseca, for having the vision, several years ago, to put together this property portfolio in Sinaloa, Mexico, largely spanning El Rosario district, a historic mining district that started operations over 250 years ago.
Marcio built up this property portfolio, with several acquisitions that were done on an effective and inexpensive basis to create a group of properties that span, in total, over 730 square kilometers and a core that is over 430 square kilometers. There is excellent access, you drive for one hour on a paved highway out of Mazatlán to El Rosario and then by dirt road for about an hour and a half into the project area. Having two former producers, means that we have power directly to site, as well as in a couple of cases, the agreements, and the permits to operate. So, it's a very, very well-structured situation.
Dr. Allen Alper:
It's excellent to have such interest and infrastructure available and being a part of the mining community.
Eric Zaunscherb:
Yes, absolutely, it is very important. And it diminishes risk as we proceed forward. It, hopefully, also reduces timelines.
Dr. Allen Alper:
That's great. Could you tell me more about your projects? I know they are rich, high-grade projects.
Eric Zaunscherb:
We are focused on the core, which is called the Plomosas Project. And there are two areas, within the project: The Plomosas Mine Area, the former mine area, and the San Marcial Area. The Plomosas Mine was in operation from 1986 to 2001. It was a base metal mine, run by Grupo Mexico, and it still has 7.4 kilometers of underground development, in excellent condition. They produced a lead and zinc concentrate that went to their refiners. In addition to the lead and zinc, in the concentrate, there was also an average of 190 grams per tonne silver and 0.96 grams per tonne gold. So, a very, very nice credit. At the San Marcial area, that's about five kilometers to the south of Plomosas, the discovery was made of predominantly silver mineralization at surface.
We are now finding an extension to depth, as well as extension towards a new area and new discovery. We're calling it the Southeast Area, where we are also expanding mineralization. So, it has quite a lot of upside. Farther to the west, is the former La Trinidad Mine, which was an open pit, heap leach, oxide gold project.
The key, to understanding all of this, is that there are several strong northwest structures. That is the sort of dominant geological fabric, in this area, to the west of the Sierra Madre Occidental area. Understanding the controls on mineralization and how they relate to these structures is key.
Dr. Allen Alper:
Could you tell us a little bit more about the resources that you've found, up to now?
Eric Zaunscherb:
Yes, of course. In February 2019, we published a resource for the original San Marcial Area, and that amounts to 7.6 million tonnes indicated, grading 117 grams per tonne silver, with some lead and zinc credits, for a total of 36 million ounces of silver equivalent or 29 million ounces silver. On the inferred side, 3.4 million tonnes, grading 91 grams per tonne silver, for 10 million ounces of pure silver and 12 million ounces of silver equivalent, if you include the lead and zinc.
What's interesting about the San Marcial Area is that there's a core in the hydrothermal breccia, and then there's some stockwork around it. So, the core average is something closer to 133 grams per tonne. At Plomosas, we published a resource, in August of 2021, and that resource, I have to admit, was somewhat disappointing. We had an indicated resource of around 2.4 million tonnes, grading 44 grams per tonne silver, 0.68 grams per tonne gold, and then some lead and zinc.
The inferred at Plomosas is 5.8 million tonnes, grading 46 grams per tonne silver and 0.46 grams per tonne gold. So, it's important to ask why do we have a silver grade of around 45 grams per tonne silver, when the historical mined grade there is 190 grams per tonne, with a really strong gold credit as well? I think the key to understanding that is that we were using many historical holes. A large chunk of those were drilled by Grupo Mexico, a base metal miner. It's important to understand that when the base metal geologists were sampling their core, they were sampling selectively.
In other words, where they saw sphalerite, where they saw galena, where they saw the sulfides, they sampled that, but they did not sample in between. We know from literally thousands of underground samples that we're seeing significant silver, within those areas where one does not see sulfides. We started at the beginning of the year, a very detailed, surgically targeted drill program at Plomosas, to see what's in those areas that are currently in the resource model, at very low grades, sub 100 grams. We got some very nice intersections that we've reported on, things like 13.5 meters of 372 grams of silver, including almost a meter of 3.9 kilos of silver.
In another area we reported 24.2 meters grading 1.1 kilos of silver, including 0.6 of 7.2 kilos. So, some very, very high grades of silver, in areas that in the current resource model, due to selective sampling and other reasons, are at a very low grade. So, we're very excited as we've been doing this surgical drilling, this targeted drilling, infill drilling at Plomosas that we are going to deliver, in the first quarter of 2023, a resource update at Plomosas that will have a grade that will reflect, more clearly, what the true grades are. Obviously, I'm not going to pretend or promise that we're going to get 190 grams per tonne in that resource update, but we are going to move it upwards from that 45 grams per tonne area and push it up into a higher level. So, I think that's an important part of the rerating, that we expect in the first quarter of 2023, as we deliver more ounces, at a higher grade.
Dr. Allen Alper:
Well, it's a very exciting time for your shareholders and stakeholders, as you drill and get more data. Just recently you announced very exciting results.
Eric Zaunscherb:
Indeed, we did. Basically, it was at the beginning of August, we announced a drill hole, in an area about 250 meters to the southeast of the resource area, at San Marcial. And what we reported is the result from Drill Hole 22-10, which intersected 101.6 meters at 308 grams per tonne silver, from 98.5 meters downhole. Interestingly enough, there are some very high-grade intervals over a kilo, over significant widths, within the entire length of that hole.
Also, importantly, is that the mineralization style is distinctly different from what we see in the main San Marcial Area. Some of those high-grade hits include things like 7.1 kilos over 0.8 meters, that sort of thing. Near the bottom of the hole, 16.2 meters of 414 grams, including 1.3 meters of 1.4 kilos. So, there's very significant high grade in there. But what we are particularly excited about is that we're having a greater understanding of what the controls on mineralization are.
The original San Marcial Resource seems to be sitting in a hydrothermal breccia that sits in the contact between upper volcanics and lower volcanics, and that area has a lot of structure associated with it. So, the geologists on our Team, headed by Marcio Fonseca and our VP Exploration and Corporate Development, Trevor Woolfe, and an excellent Team of Mexican geologists that we've recruited. They have peeled the geological onion, and they now see this geological setting, between the upper volcanics and the lower volcanics, and the structures associated with that contact.
To the Southeast there is an awful lot of exploration potential that has never been drilled before. And so, one of the first things they did was an extensive XRF sampling program, a litho-geochemical sampling program, with over 15,000 samples. That highlighted seven new areas of silver anomalies that have some very interesting geophysics associated with them, as well. We're now moving the drill program farther to the southeast. This new discovery, that you referred to, is the beginning of a program testing that geological setting, so we're quite excited about that.
Dr. Allen Alper:
That’s excellent! It's a great time for GR Silver, as you explore, and as you grow and discover more and more high-grade silver. So that sounds like fun!!
Eric Zaunscherb:
Thank you. Yes, we are very excited!
Dr. Allen Alper:
That's excellent! Eric, could you tell our readers/investors, a little bit about your background, your Team, and your Board?
Eric Zaunscherb:
I started off as a geologist in the bush and when I got married and realized I wanted to stay being married, I came out of the bush and started to pick up some business courses and eventually did the Chartered Financial Analyst Program. I went as a mining analyst and did that for over 34 years, as a mining analyst. Ended up as the Head of Global Mining Equity Research, for one of the larger firms in Canada, and retired from that at the end of 2019.
One of the first Boards that I joined was GR Silver. I'd been meeting several times, with Marcio and really, really respected what he was doing and was very excited about the project that GR Silver had put together. It was an honor to join the Board. It wasn't until a few months later that I became the Chair of that Board, and then effective March 1st this year, I became the CEO of the Company.
This change allows Marcio to focus on what is happening in Mexico, on the project, doing his magic there and mentoring the geologists there. And allows me, as a capital markets guy, for several decades to be on the capital market side, as the face of the Company and making sure that he has the resources that he needs and that the market understands what it is that we're doing.
We have a wonderful Team. I've mentioned Trevor Woolfe, the VP Exploration and Corporate Development. He's a geologist with over 25 years’ experience, largely in Latin America. Brenda Dayton is a super VP Corporate Communications, and Blaine Bailey our CFO, is highly experienced in the CFO role.
On the Board, we have several very interesting people, including Laura Diaz. She's a Mexico City based lawyer. She is an incredible resource, when understanding what's happening in Mexico and how the bureaucracy works. Especially, as she was the former General Director of Mines, in the Ministry of Economy, for Mexico. We also have, on the Board, Jonathan Rubenstein, who is the former Chair of MAG Silver Corp. which is one of the great success stories in silver, in Mexico.
Dr. Allen Alper:
You all have very impressive backgrounds and success and experience and a very well-balanced Board and Team. That sounds excellent to me! Eric, could you tell our readers and investors a little bit about your share and capital structure?
Eric Zaunscherb:
I think, given that we have survived one of the toughest periods in the markets, in the 40 years that I've been tracking the industry, I think we're doing quite all right. We have recently completed a financing for $5.4 million Canadian, which puts us in the position of being fully funded, to deliver resource updates. As I mentioned earlier, at Plomosas and San Marcial, we have promised to have that out in the first quarter of 2023, and I think that should be a very important catalyst for the stock, potentially.
In terms of numbers of shares outstanding, it's about 230 million shares basic. A lot of the fully diluted instruments, warrants and options are not in the money. So, we have ownership of around 11% with First Majestic, which is one of the companies that sold one of the projects to the Company. Management is around 7% and institutional investors around 25%, the rest being high-net-worth and other retail.
In terms of how the stock is trading, it's currently trading at an enterprise value, per silver ounce in the ground, on a measured and indicated basis, at around $0.50 US per ounce, in the ground. The mean of peers in Mexico appears to be around $1.75. So, we are excited, as we increase the number of ounces and increase the overall grade of our resource, that we anticipate a potential rerating, as we deliver on those promises.
Dr. Allen Alper:
That’s an excellent opportunity for your shareholders and stakeholders. As you drill, you can get more data in, as you discover high-grade silver in your projects.
Eric Zaunscherb:
Indeed!
Dr. Allen Alper:
Eric, could you tell our readers/investors the primary reasons they should consider investing in GR Silver?
Eric Zaunscherb:
As an analyst, what I was always looking for, in recommending to investors, was what I call the four P's. One is the project, and I think I've outlined how we have a project that is extensive, that has all the geological features that one looks for, on a very large land package that provides exposure to a lot of exploration upside. We have the people that have the experience to advance and de-risk the project.
We are in Sinaloa, a place in which the rule of law is clear, and we have a clear title to our land. We have the agreements in place, with the locals and with the government, that we need to advance and de-risk. That's an extremely important thing to have in place. We do see problems, in some parts of Mexico, with blockades and such, but we have an excellent relationship with the local people.
They have mining in their DNA, and we have an exceptional relationship, built on trust and mutual respect. We've brought a lot of healthcare, such as COVID protocols, to the project, that demonstrates our care for people and we're educating and training a great number of people.
Then in terms of price, that's always an important consideration, specifically valuation. As I mentioned, we're trading at a significant discount to peers, and I can't help but think that as we deliver on what we're promising, in terms of resource updates, and demonstrate an increase in numbers of ounces and grade, that that discount can be expected to be rerated, as we go forward.
Dr. Allen Alper:
Well, those sound like very compelling reasons for readers/investors to consider investing in GR Silver. Eric, is there anything else you'd like to add?
Eric Zaunscherb:
Well, I do appreciate you taking the time to hear our story. It's a story that we think is a very strong one. We understand how we have been trading at a discount, because of the low grade that we put out in our resource estimate last year. But I'm very confident that the Team now understands where the high-grade lives and the hit rate has now increased dramatically, at the project. We are demonstrating the geological understanding there. I think that's a key thing to understand about any company's project.
Dr. Allen Alper:
Well, that's excellent! Sounds like the months ahead will really make a difference, as you confirm the high-grade extent of GR Silver and get the total evaluation of the Company, so that will be very significant for your shareholders.
Eric Zaunscherb:
That is the plan!
Dr. Allen Alper:
Oh, that's excellent! We’ll publish your press releases as they come out so our readers/investors can follow your progress.
https://grsilvermining.com/
GR Silver Mining Ltd.
Eric Zaunscherb
Chairman & CEO
For further information, please contact:
Brenda Dayton
VP Corporate Communications
Telephone: +1.604.417.7952
Email: bdayton@grsilvermining.com
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