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 Mon Apr 23, 2018
Bottom-Fish Comment: Arizona Silver shifts focus from Ramsey to Sycamore Canyon project
    Publisher: Kaiser Research Online
    Author: Copyright 2018 John A. Kaiser

 
Arizona Silver Exploration Inc (AZS-V: $0.13)
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Bottom-Fish Comment - April 23, 2018: Arizona Silver shifts focus from Ramsey to Sycamore Canyon project

Arizona Silver Exploration Inc reported disappointing results on April 9, 2018 for the latest drill program on the Ramsey silver project in Arizona. Silver grades came in at 15-26 g/t over intervals of 4-52 m above the regional detachment fault contact at depths of 370-590 ft (roughly 100-200 m depth). At these grades the rock value at the current silver price is below USD $10 per tonne, too low to mine profitably, especially with a flat-lying deposit covered by 100 metres of waste rock. The original target model at Ramsey was to develop a bulk tonnage deposit of 30-60 g/t silver out of the mineralized halo surrounding the very high grade Ramsey vein, with the high grade portion contributing to the overall grade. In 2017 Arizona Silver drilled to the west of the Ramsey vein in a gravel covered area where the geophysics suggested a down-dropped extension of the Ramsey vein. That hypothesis proved incorrect and the stock price collapsed in May 2017 when the bad news was released. Later drilling of an intriguing IP chargeability anomaly that showed up in the course of developing the Ramsey hypothesis also delivered a bust. Arizona Silver shifted its attention to the east of the Ramsey vein where drilling demonstrated a flattening of the zone of silver mineralization which revived the bulk tonnage target.

The diagram above from the latest corporate presentation depicts Greg Hahn's current interpretation of the local geology. The theory is that the detachment fault pre-dates the Ramsey vein and that the unconformity with the basement rock ("chloritic breccia") served as a fluid pathway. The diagram below shows the latest line of 2018 holes about 100 metres northeast of the Ramsey vein. The blue "pins" show the direction Arizona Silver planned to march fences of holes to outline a bulk tonnage target parked above the detachment fault. Based on analysis of other elements in the hole Greg Hahn has concluded that the system is fading in that direction, and that heading toward the southeast in the direction of the small Creosote vein is where the junior has the best chance of achieving ore grade mineralization. I have marked up the company's graphic below with a circled X to indicate the dead trend and a blue arrow for the prospective direction. Arizona Silver, however, will not resume drilling at Ramsey before the fall because the junior has acquired a new project in Arizona called Sycamore Canyon that will be the drilling focus for 2018.

The Sycamore Canyon project is in southeastern Arizona near the New Mexico border in an area where exploration has not delivered much to write home about. The target is a 600 m by 20-80 m wide outcropping silicified breccia body which has yielded gold-silver grab samples but has never been drilled. The vendors have owned the property for several decades but were unable to attract any exploration partners. When Greg Hahn connected with them he recognized that the erratic values at surface were a reason little was ever done with this prospect, but it also struck him that the setting was similar to the upper part of a low sulphidation epithermal system such as the Comstock Lode (8.2 million oz gold 192 million oz silver) in Nevada. In fact, a target like this in Nevada's Walker Lane would have been swiss-cheesed to death a long time ago. Hahn was able to swing a sweet deal for Arizona Silver: USD $100,000 in lease payments over 5 years to purchase 100%. The vendors retain a 2% NSR of which Arizona Silver can buy back half for $500,000. An important condition is that Sycamore Canyon gets drilled in 2018.

Arizona Silver has conducted a VLF-EM survey over the target and a rock chip sampling program for which results are still awaited. The junior plans to conduct a shallow 8 hole RC program consisting of 2 holes per section of the breccia body. Drilling cannot start before late August or early September because that is at least as long as it will take to get drill and road permits from the US Forest Service. The property is at an elevation of 5,200 ft and does not have the hot summer temperature problem of Ramsey, nor do thousands of snowbirds descend upon this area during the cooler winter months. If Sycamore Canyon delivers a discovery it can be drilled year round. The company expects the initial drill program to cost only about $100,000 which will deplete half the remaining working capital of about CAD $300,000. Arizona Silver still has only 28.9 million shares issued and 30.1 million fully diluted. Management still owns the share positions it started with in late 2016 and in some cases owns more. The board has recently been beefed up with the appointment of David Vincent and Scott Hean who also own shares. Future drilling of Ramsey will depend on additional financing, which will likely hinge on the extent that Sycamore Canyon delivers results supporting Greg Hahn's Comstock Hypothesis. Meaningful Sycamore Canyon results cannot be expected before mid-October, which also means that revisiting Ramsey will not be possible until Q4 of 2018 or early 2019. The shallow nature of the initial Sycamore Canyon drill program makes it unlikely that Arizona Silver will deliver a barnburner discovery hole that intersects a Comstock-style bonanza zone; the purpose will be to generate a geological context which justifies a bigger and deeper drill program in search of high grade silver-gold zones. Arizona Silver is well below the $0.20-$0.29 bottom-fish accumulation range I assigned when I downgraded the company from an SVH Buy on January 17, 2018. The current level of $0.10-$0.15, however, is a function of the market writing off the Ramsey project and the timeline for getting the new Sycamore Canyon focus ramped up. It is not telling us that Arizona Silver is a rollback candidate and I confirm that Arizona Silver Corp remains a bottom-fish accumulation target.

On February 22, 2018 Arizona Silver announced that is a founding member of an "Ethereum Blockchain Strategic Alliance" involving five juniors which will explore crypto-token offerings backed by silver-gold streaming royalties. This may make sense for Arizona Silver's sister company, Canamex Gold Corp, which hopes to develop its smallish Bruner gold deposit in Nevada. But it makes no sense for a discovery exploration junior such as Arizona Silver. Mike Stark assures me that there are no plans for a crypto-token offering involving Arizona Silver. Bottom-fishers can rest assured that the upside potential for Arizona Silver will not be muddied with blockchain related complications.

 
 

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