Ann: Drilling set to re-start at Sara Alicia Gold-Cobalt project, page-30

Full Report 21.02.18

Surface finds point to potentially more

A resource drill programme of 76 holes totalling 4,196 metres across Azure Mineral’s Oposura silver, zinc and lead project in Mexico has been keeping the company busy. The drill programme has now completed and we recently, in FAT-MIN-604, reported on the excellent first-up assay results. Further assay results will soon be to hand and we will report on these when announced. In the intervening time, drilling is underway at other regions of interest across the Oposura site. The following figure shows the location of the company’s Mexican assets (Ag – silver, Au – gold, Cu – copper, Zn – zinc, Pb – lead and Co – cobalt):

Source: Azure Minerals
The drill programme was designed to better define the known East Zone mineralised ore body with a view to establishing a maiden mineral resource estimate. The company cited that it remained on track to complete the mineral resource estimate by April 2018.
The focus of the drill programme has been on the East Zone prospect at Oposura. The following figure shows the region of interest, exploration activity and the geological setting of the East Zone prospect:

Source: Azure Minerals
Some of the better assayed results from this programme include 6.9 metres graded at 13.2% zinc and lead from 42.2 metres, 16.6 metres graded at 22.2% zinc and lead from 21.2 metres and two metres graded at 42.6% zinc and lead from 37.5 metres. These are outstanding results as to grade, seam width and depth, and will certainly in our view set the base for a maiden mineral resource.
The company’s current drill programme across the East Zone will, in our view, enable the company to declare a maiden mineral resource for its Oposura project. What is now adding to the excitement in the Oposura project is that surface activities outside of the expected mineral resource envelope has returned further indications of zinc and lead. The following figure shows the East Zone prospect and the zone of interest (highlighted) outside the expected mineral resource envelope:

Source: Azure Minerals
Rock-chip activities have returned results of up to 8.3% lead and 2.3% zinc with the find being a first indication that the mineralised ore could extend further to the north. The company will now focus some attention to drilling out the new find.
With Oposura returning excellent results, the maiden drill programme at the company’s Sara Alicia project is also joining in on the good news party. The following figure shows the Sara Alicia project and the zones of activity overlayed on a ground magnetic survey:

Source: Azure Minerals
The company completed a six hole drill programme that was focussed on establishing (or otherwise) a mineral presences at Sara Alicia. Drill hole DSA-03 (highlighted in the above figure) returned an assayed result of 26.2 metres graded at 9.5 grams per tonne (g/t) gold and 1.26% cobalt from 6.35 metres and included an enriched zone of 12.6 metres graded at 16.8g/t gold and 6.35 metres graded at 3.57% cobalt. These are all-round significant results and will certainly warrant further exploration. To this end, the company is already planning a second drill programme.

Turning to the daily chart, dynamic support is evident at the uptrend line (upward sloping green line) at the $0.30 region, if the bears were to maintain downward pressure over the near-term. Positively, from a relative strength (RSI) perspective, this indicator has strengthened out from oversold territory. This is suggestive of an exhaustion in short-term selling pressure, and hence, would be fair to say that an interim low or turning point is near. From a macro standpoint, and in order for the short-term technical outlook to improve, a sustained break above overhead resistance of $0.42 as marked by the horizontal thin-red line is required. Should this favourable scenario evolve, then the path is clear for further gains over the medium-term time horizon.
The company had a cash resource of A$3.5 million at 31 December 2017. Budgeted cash out flows for the March quarter 2018 are estimated at A$2.2 million. Of this amount, A$1.4 million has been earmarked for exploration and evaluation activities. We consider the company has sufficient cash resources to complete all its current undertakings.

With reference to the monthly chart, the broader downtrend remains very much in play, with major support situated at the June 2015 low of $0.18 as marked by the horizontal blue line. In order for the medium-term technical outlook to improve, a sustained break above the November 2017 high of $0.75 as shown by the horizontal thin-red line is required. Should this occur, then upward momentum would strengthen and thus give rise to a broader ascent towards the next band of resistance evident between $1.06 and $1.41. This consists of the May 2016 and June 2013 high respectively, as shown by the horizontal solid-red lines.
With Teck Resources now exploring across the Alacran project, to earn its 51% interest, Azure Minerals now has the time and cash resources to thoroughly explore two, in or view, very prospective projects in Oposura and Sara Alicia. Assay results from exploration success to date for both projects have certainly reinforced our view. Our belief that both the Oposura and Sara Alicia projects can be potential company changing projects continues to be reinforced.
On drill results announced to date the Oposura project is advancing toward playing a major role in the future value of the company. Moreover, the results from Sara Alicia are only swelling the momentum. With Alacran now under active exploration by Teck Resources, and the company also actively exploring across Oposura and Sara Alicia, the news flow, we believe, will be positive.
As a consequence, we continue to recommend Azure Minerals as a buy for Members who have no exposure to the stock.