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Metals & Minerals Digest - Insight Into the Potential at La Verde (Cu-Au-Ag-Zn)

One of the real differences of what Yale is pursuing at La Verde is that they are not trying to find something – the fact is Yale has a deposit. Now the question is “What size is it and what’s the average grade?”

It is apparent from the crude mining techniques used at the historic local workings at La Verde Grande Mine that the former miners had gone into the deposit and taken out what was high grade mineralization at the easily accessible parts by following the mineralization on a horizontal basis. As an example, in the north-east extension, there are workings that have gone down 20 meters through mineralization that is high in zinc and low in silver and moderate copper grades, and then at the bottom they reach 3% copper. Then the former miners worked on the lower level of the north-east extension which has better grades - so the vertical shafts to the trained eye appear more expository. Horizontal levels are where they have encountered higher grade mineralization, however still to be discovered is the orientation of these workings and why they didn't extend any further.

These vertical shafts are essentially drill holes that are 2 meters in diameter

The June 19, 2008 news of Yale testing the vertical shafts leads us to think logically about a bigger picture with regard to how the whole deposit might fit together. The sampling has proven that there is mineralization between the horizontal tunnelling thus giving a three dimensional deposit.

The Math

If you just deal with the copper, the rest of the math takes care of itself. If you use the average of 1.5% copper sampled from the horizontal workings and then use a weighted average of 0.65% copper from the sampling of the vertical shafts (calculated by us) we have a combined grade of 2.15% copper. Now assuming that the deposit is 50/50 high and low grade we have an average copper grade of 1.1% over a possible resource 1.22 million (250m x 50m x30m x 3.25 tonnes per m3)  tonnes pre-drilling. It is this formula that we have applied to the other metals in the mine shown on the table. When we put just those numbers into a rock value calculator (like the one located here) you come up with some very significant numbers for the value per tonne for the mineralization.

 
By inputting “conservative” values in our calculations the writer easily derives $100 per tonne rock (significantly below values that would reflect market price for commodities). If we apply complete high-end processing costs and mining costs of $50 a tonne, that would leave $50 per tonne net … if you have say 1.5 million tonnes – the math gets very exciting in Yale’s case. Why is it important to play with these numbers? It gives everyone the encouragement to move forward and prove the numbers. If Yale can prove these numbers, the math states that it is an economic deposit.
 
Yale cannot, as a publicly trading company, say "the rock is worth $X a tonne and they have X million tonnes of it" - because in order to properly define the deposit, they have to do a definition drill program. This will give a much better idea as to the dimensions of the deposit and the distribution of mineralization, to better determine average grade, allowing for a rough resource model which combined with metallurgy will be able to talk about dollar value with the Company.
 
When planning mines we have to assume less than stellar commodity price forecasts; if this deposit is economic at nominal commodity prices of $2 copper, $0.60 zinc, $12 silver, and $500 gold – that is a good sign. It’s an esoteric concept because Yale is still in the early stages – if we can understand the significance of the results – then that goes a long way to show that Yale has a significant deposit.
  

Mexico, the land of the small scale production

One advantage of producing precious metal in Mexico is that Mexico is “the land of the small scale production”; it is possible to build an operating 200TPD plant for $500,000. If Yale proves up 1.5M tonnes, and is economic, a 500TPD there is 7.5 years of production at Le Verde. When Yale is able to show the full nature of the asset at La Verde then Yale will always have a base value plus much more exploration and potential … There seems to be a major conceptual problem in the investing public from the perspective that “It has to be big to be economic” – the bottom line is that "small is low cost to put into production" and therefore the economics are even more favorable. The mill/operation cash flow from an initial mine operation would cash flow the other deposits and things would build from there without further dilution.
 

A good way to look at Yale Resouces’ La Verde project is to look at "blocks of mineralization" in the half million tonnes and think of those as a "unit" because there are four other known deposits on the property. – what happens if Yale’s La Tescalama for example is the same size as La Verde? Then Yale would have a 1000TPD operation for 7.5 years – everything on top of that starts multiplying; Let’s say the potential is greater than 3 units at La Verde Grande - What happens if La Cobiza has one unit and Tescalama has two units and Picacho has one unit? – All of these can be processed through a central plant and they all add to the underlying value of Yale Resources.
 
Yale Resources Ltd. is proceeding according to plan. With exceptional properties, management and prospects, Yale's future as small low cost producer seems to have moved closer toward fruition. The Company has stated in it's June 19, 2008 release "The Company's goal is to have a resource estimate completed before the end of the year." YLL.V presents an exceptional risk reward scenario and appears in line for upside price adjustment.
  

Below is a list of the weighted averages from the six vertical shafts within the La Verde Grande Mine (Source: June 19, 2008 release):
 

  1 - Refer to longitudinal section for location of each shaft.