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 Wed Jun 14, 2017
SVH Tracker: Worst case scenario already factored into Arizona Silver price
    Publisher: Kaiser Research Online
    Author: Copyright 2017 John A. kaiser

 
Arizona Silver Exploration Inc (AZS-V: $0.25)
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SVH Tracker - June 14, 2017: Worst case scenario already factored into Arizona Silver price

Arizona Silver Exploration Inc, which was recommended a Good Relative Spec Value Buy at $0.61 on May 18, 2017 based on drilling evidence that the hypothesized extension of the Ramsey silver vein was present under gravel cover to the northwest of its fault truncation, will soon report assays for RC holes #4 and #5 drilled 150 m to the south of holes #1, #2 and #3. Following my recommendation the stock ran as high as $1.23 on May 29, but crashed brutally on May 30 after the junior reported disappointing results for #2 and #3. The news came out just before I was to head for the airport, and I managed to dash off a quick Tracker comment which conceded that the prospects for my visualized outcome of a 60 million tonne open-pittable deposit of 125 g/t silver had diminished badly. The Ramsey vein system was present on the other side of the northeast trending down-slip fault, but the down-dropped northwest striking northeast dipping detachment fault that hosts the high grade silver vein is only weakly mineralized in the area of holes #2 & #3 drilled on IP line #3.

During my site visit a core hole to twin #2, and extend it, was just getting underway. According to CEO Greg Hahn the core hole failed to encounter the Ramsey detachment fault and instead drilled through clean quartz veining with little potential for any mineralization. Local faulting has clearly made a mess of the hypothesized Ramsey vein extension in this area. The core rig was sent home and the RC rig was dispatched to the other side of the dip-slip fault to test the down-dip extension of the Ramsey vein. I have not heard whether or not these holes intersected the vein, but it does not matter from an economic perspective because the target in this area is too deep for an open-pittable scenario and the high grade tonnage footprint too small to plausibly imagine an underground mining scenario. The value of this drilling lies in furnishing more information about what makes the Ramsey vein tick, for the system on the other side of the fault still offers hope.

According to Greg Hahn holes #4 and #5 did encounter the detachment fault and exhibited a greater degree of vugginess than in hole #3 which also passed through the detachment fault. It is thus possible that we will soon get the sort of grades the market hoped to see, but the tonnage footprint has shrunk in half to about 30 million tonnes. If the silver grade has improved substantially from the 0.5-3.0 g/t observed 150 m to the north in hole #3, Arizona Silver plans to drill more RC holes in this area to get a handle on the geometry. Another potential wild card is the hematitic material encountered by initial drilling whose anomalous metal signature resembles that of the Copperstone IOCG system 25 miles to the north. The initial assay batch did not include gold because Arizona Silver was not expecting any, but selected intervals have been sent for gold assays. If gold smoke is present it will further support the idea that although a big fat extension of the Ramsey silver vein may not be present, Arizona Silver may be dealing with a mineralized system of a much different, and perhaps economically better nature than the original scenario.

Arizona Silver has stopped drilling due to high temperatures in the Arizona desert. What the company does next will depend on the next batch of assays, but Hahn has declared that in the fall when a permit is in hand for building a road into the area at the western limit of the Line #2 IP survey the junior will definitely drill a deep scout hole to test the intense chargeability anomaly. The cause is no doubt sulphides, and probably just barren pyrite, but Hahn thinks this could be the pyritic shell of a porphyry system. Because this possible pyrite shell shows up at a depth of about 300 metres, any potential deeper copper mineralization would have to be underground mined, and thus would have to grade in the 2% to 4% range.

Such enriched copper deposits do exist in Arizona, of which the San Manuel Mine is the most famous. About 700 million tonnes were ultimately mined, mainly through block-caving, but what is really intriguing about San Manuel is that the upper half of the cylindrical dipping deposit was sliced off from the lower half by a thrust fault and transported 2,400 m away where geological sleuthing by David Lowell found the missing half in 1967, called Kalamazoo, at a depth of 1,100 m (see History of the San Manuel-Kalamazoo Mine).

While the discovery of a blind high grade copper deposit is a longshot, there is a certain degree of serendipity at work here, the sort that leads to surprise discoveries. The story started off with Greg Hahn's team investigating the old small scale Ramsey Mine to see if there was more to it than the 50,000 ounces hauled out by old-timers. An electro-magnetic survey over the general area revealed the presence of the fault that truncated the Ramsey Vein and indicated a substantially bigger anomaly on the other side than associated with the old mine workings. This led to the fault-offset extension hypothesis, which in turn led to an IP survey over the magnetic anomaly which had a footprint of 500 m by 500 m that became the basis for the Real de Angels analog. Although the crew was instructed to limit the IP lines to this magnetic anomaly, when the crew noticed the rising response as it headed westward on line #2 the workers could not stop themselves from disobeying orders. The result was an intense chargeability anomaly starting at a depth of 300 m in an area with 100 metres or more of gravel cover. Because the Ramsey Mine is off the beaten track as far as big deposits go, nobody in their right mind would ever have funded an IP survey in this gravel covered area unless driven by something like the Ramsey Vein extension hypothesis. And while that original hypothesis is looking like a bust, it may have served as the gateway to finding something much better. Greg Hahn has on several occasions pointed out that the drilling bottomed in a Precambrian quartz monzonite which I thought rather uninteresting, until I later learned that the San Manuel deposit formed when another stock intruded this tombstone rock.

I am sticking with my Good Relative Spec Value Buy recommendation for several reasons. First, the Ramsey silver extension hypothesis needs additional bad results to be properly declared dead. Second, there may be something of an IOCG nature going on in the target area which further drilling will need to flesh out, for which anomalous gold values would be a green light. Third, in September Arizona Silver will drill a deep scout hole into the IP anomaly at the western edge of the original target area which could result in a major blind copper discovery. Fourth, Arizona still has about $1.1 million working capital and a capital structure of only 28.7 million issued and 32.9 million fully diluted, which means the market is assigning a value of only $8 million to the Ramsey project. Fifth, the company has an excellent technical team, and, judging by the frenzy that drove the stock to $1.23 ahead of confirmatory assays, no lack of promotional talent. Finally, all the gamblers who chased the stock up have abandoned the stock, selling their losing positions to investors with a longer game in mind. A good part of the founder stock is still tied up in escrow, and the 7.5 million shares done at $0.20 by private placement do not come free trading until late July. At the current stock price of $0.25 those investors will not be in a rush to sell, especially since they did not get any warrants to clip while the flip the stock. If one could not see the chart pattern of a stock rocketing towards the moon and abruptly crashing back to earth, one would think the stock an outright bargain, with sufficient liquidity that one can just go into the market to buy a meaningful position.

 
 

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