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CMX Gold’s Alston Shows How to Create Value at the Bottom of a Cycle

Opportunistic moves during the down cycle has this junior resource company well positioned for the current rebound.

Image via CMX Gold & Silver Corp.

Even before Donald Trump pulled off the surprising win in the U.S. presidential election, metal prices were trying to reverse from an extended down cycle. What Trump and his campaign promise to spend up to $1 trillion on U.S. infrastructure did, though, was provide a sustainable reason for prices of base metals, critical to rebuilding the nation, to rise higher.

Zinc, for example, hit a 52-week low in February 2016 at 75 cents per pound before surging to 52-week high of $1.35 per pound this month, the highest price in 10 years. Lead prices have performed similarly, also right near a five-year high. The aggregate of higher prices and Trump’s pledges has miners dusting off exploration plans, including plotting the re-opening of historic mines with expectations that metal demand is going to steadily increase going forward.

For CMX Gold & Silver Corp. (CXC:CSE) (CXXMF:OTC), it’s time to ramp up efforts at their Clayton silver-lead-zinc project in southeastern Idaho, host to the past-producing Clayton Silver Mine. Although still operating in mineralization, the mine was closed in 1986 amid sinking commodity prices. Nearly 30 years later, CMX chief executive Jan Alston saw an opportunity in a once again besieged mining industry, purchasing 100% interest in the claims for the project in 2011.

In Alston’s words in 2015, “the best way to create value is starting something at the bottom of a cycle.”

The Clayton property spans 684 acres and is covered by 29 patented mining claims and 6 unpatented lode claims. In production for the most part from 1935-1986, more than 5,000 meters of underground workings have been developed across eight levels to a depth of 1,100 feet. There is also a mill on the property in need of refurbishment and another permitted mill site.

Historical production records show 2.2 million tonnes of ore from the mine yielded 7.0 million ounces of silver, 86.8 million pounds of lead, 28.2 million pounds of zinc and 1.7 million pounds of copper, as well as 1,454 ounces of gold.

That’s approximately $258 million in metals at today’s prices. This production was achieved with what can only be described as outdated techniques to mill and process the resources.

Alston, who has a successful history with brownfield projects, believes that the data shows the mine is far from being exhausted. The data suggests that mineralization is open at depth at the North Ore Body and to the east and west of the South Ore Body. Further, the company believes that the mine dump contains potential resources that newer processing technologies will be able to extract.

Having been actively mined for 51 years means that a large material dump exists, which CMX management believes could contain between 500,000 and one million tonnes of material. Sampling of 16 dump locations in 2014 yielded statistical average assay grades of 0.8 grams per tonne (g/t) gold, 24.31 g/t silver, 0.44% lead and 0.27% zinc. Three locations also had an average of 1.28% manganese. CMX plans to sample at least 75 places in the dump this year to validate previous findings and better estimate just how much material is readily available for processing.

As for the existing mine, historic data provides evidence that 227,422 tonnes grading 3.83 ounces of silver per tonne were left unmined between 800 – 1,100 feet levels in what is referred to as the “North Ore Body.” These resources need to be brought to National Instrument standards, but if accurate would be about $15.7 million in silver at $18/ounce, without mention of any concurrent lead and zinc recoveries that the property is known to have produced.

As the company samples the mine dump, modern geophysical studies will be used to identify targets for exploratory diamond drilling at the mine in the second half of the year. The company hopes to build upon the historic information and a drill hole in the 1960s that, at 1,425 feet in depth, intersected 22 feet grading 4.07 ounces of silver per tonne, 5.75% lead and 5.37% zinc to prove the mine can go deeper and wider. The significant zinc and lead values point to exciting potential underground at a time when metals prices are rising.

The Clayton project isn’t a matter of simply looking to cherry pick some low-grade gold that was left behind. In the simplest sense, data suggests that there are significant resources at all levels: at surface; through the existing mine; at greater depths and; off to the sides of the south ore body. With signs that metals are turning towards a new uptrend after slumping from peaks in mid-2011 and Trump administration policy bolstering base metal prices, now is the time for CMX to get their hands dirty and prove their contentions on the big upside potential at the Clayton property. Alston believes that historic production has only scratched the surface of what the Clayton property contains.

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