Silver Bull Lures South32 to Mexico with Zinc-Silver Project

Silver Bull Resources’ (TSX:SVB) Sierra Mojada project could benefit from a US$100-million injection after the Canadian miner signed a deal with BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) spin off South32 (ASX:S32).

Under the deal, Silver Bull has granted South32 the option to enter into 70/30 joint-venture agreement for Sierra Mojada, which has a measured and indicated resource of 58.7 million tonnes grading 3.6 percent zinc and 50 g/t silver, for 4.67 billion pounds of zinc and 90.8 million ounces of silver.

 Sierra Mojada is in Coahuila state in Mexico, in an area with historical silver, lead and zinc mining.

To maintain the option in good standing, South32 must spend at least US$10 million on exploration over a four-year period at the project, with the minimum amount spent in total increasing each year.

South32 can take 70-percent ownership of the project, which is managed by a subsidiary of Silver Bull, Minera Metalin, by contributing the US$100 million (minus the US$10 million for exploration) for project funding.

Tim Barry, president and director of Silver Bull, said the interest from the global miner backs his company’s work on the project so far. “This validates the significant success we have had in identifying high grade sulphide zones at the Sierra Mojada project,” he said.

“South32 is a globally diversified metals and mining company that will bring funding and significant technical expertise to the project. We believe this agreement recognizes the significant potential at the Sierra Mojada project,” added Barry.

If South32 decides not to proceed with the joint-venture option, ownership of Minera Metalin and the project will remained 100 percent in Silver Bull’s hands.

According to Silver Bull, the first year’s exploration program will begin “as soon as possible” and will receive at least US$3 million in contribution from South32.

The program, which will at first be managed by Silver Bull, will involve a regional airborne electromagnetic survey followed by a targeted drilling program based on previous research of the target by Minera Metalin and Silver Bull.

South32 has the option to decide whether to continue with its involvement at the end of each year of exploring, with the deal detailing that “… provided that all the exploration data and information has been made available 60 days prior to each anniversary of the option agreement, South32 shall decide 30 days prior to the relevant anniversary whether or not to fund a further tranche.”

If South32 decides to pull the trigger and enter into the 70/30 joint venture, both companies will contribute funding to the project in proportion to their ownership. The CEO of the venture would be appointed by South32.

South32 was spun off from BHP Billiton in 2015, and is made up of the mining behemoth’s non-core aluminium, manganese, nickel and zinc assets in Australia, Africa and South America.

At close of day Tuesday (June 5), Silver Bull was trading down 2.63 percent on the Toronto Stock Exchange at C$0.185, while on the Australian Securities Exchange South32 was also trading down 1.8 percent at AU$3.81.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.