Every week there is news flow from explorers active in Mexico and I will continue to highlight the most significant in this update. MAG Silver has several projects on the go, and this week they announced results from another drill program at Cinco De Mayo in Chihuahua State. This project was originally identified as a possible candidate for a carbonate replacement deposit (CRD), due its close proximity and similar geological characteristics with large skarn and CRD deposits that have been outlined by other companies in the district.

Several years ago the company completed a drill program that did indeed encounter some narrow intervals of CRD mineralization but nothing of the magnitude to suggest the company was on to the potential for a large deposit. However the results were certainly of interest in that they confirmed the interpretation that major regional structural features that were related to the formation of large deposits elsewhere in the district did continue on to the Cinco de Mayo property, under a layer of younger rock. The intercepts from that round of drilling constituted a ‘blind discovery’ where geologists were successful to hit alteration without the benefit of surface outcrops to provide targets for drilling.

Thereafter in 2009, MAG Silver announced a skarn discovery on the property bearing molybdenum and gold, deemed the Pozo Seco deposit. This is a zone of widespread alteration in the limestone host rock along the contact with a volcanic intrusive. Follow up work defined a large area of alteration that is significant in terms of tonnage and grade, and a resource estimate for Pozo Seco was completed that demonstrates economic potential for development.

This week MAG released drill results from the Jose Manto target area of Cinco De Mayo. Several of these drill holes encountered high grade intervals of silver – zinc - lead mineralization, including one of 4 meters bearing 386 g/t silver and 14% zinc, plus 8.2 % lead. These results confirm a high grade discovery from earlier this year and the strike length of the system now extends four kilometers. The target is also notable in that it occurs as a manto, which is a flat-lying continuous layer of alteration that presents economic advantages in terms of development. This discovery also serves as another feather in the cap for the team of geologists that have been working at Cinco De Mayo for several years to advance the project to the current stage of resource definition at several zones.

The junior producers in Mexico are also very active with exploration work, as these companies depend on the discovery and development of new resources in order to achieve their growth objectives. This has become easier for many juniors due to the high metals prices which enable them to be self-funding through internally generated cash flow. Great Panther is one company that has been gradually gaining traction on the earnings front and has been very successful to find new resource zones that contribute to the mine output.

This week Great Panther reported additional drill results from several zones of its Guanajuato mining complex. These included one interval of 44.76 g/t gold and 46 g/t silver over a true width of 1.14 meters, and in another core 17. 15 g/t gold and 36 g/t silver were encountered across a width of 3.28 meters. These high grade results are impressive, within a batch of drill results that has outlined yet another new productive zone that is close to existing mine workings and will be rapidly developed. What is more interesting about this zone however is the mine has been a historic silver producer and it appears there is a gold enrichment phase at work in this part of the structure. That is good news in an environment where gold trades solidly above $1700 per ounce, but it is also representative of the fact that even after 500 years of production from Guanajuato, the geology still presents discovery surprises.

Another junior producer in Mexico, Impact Silver, announced earnings results for the quarter that were up fivefold over the same period a year ago, despite delays in shipment of concentrates, and slightly lower silver production. This is a case study in how the higher metals prices have created a much stronger operating environment for the producing juniors. While many investors are concerned by the volatility of the metals prices, and the market value for most of these companies is sharply lower than one year ago, the actual financial performance and growth has been exceptional. Impact has also built a cushion of financial stability as its working capital position is now more than $33 million, even as it has increased capital spending for development and is funding a very aggressive exploration budget.

At some point the market is going to take notice of the strong financial results that most mining companies have been reporting this year. Silver and gold have both been rising year-over-year for most of the last 10 years, and this trend is intact despite the scary air pockets in market price that have been part of the story. If we get another increase in the metals through 2012, how much higher will the earnings numbers improve yet again for these juniors? Now that the sector is awash in cash flow, with many miners paying out increasing dividend yields, and production output is rising, one would think that the market will begin to notice these stocks and break the sector out of a nasty slump that has been in effect since the start of the year.

Shares of Pretium Gold have been on a roll this week as investors were excited by the latest resource update presented by the company for the Brucejack Project. A large near-surface deposit has been defined through several rounds of drilling, and the company has outlined a high-grade underground mine with estimated resources of more than 15 million ounces of gold, and 121 million ounces of silver using a cutoff grade of 1.25 g/t gold. This projected open pit is notable not just for the large resource, but also for the high gold grades that would suggest very strong economics for a bulk tonnage mining operation.

Recent history has demonstrated that there are many challenges in the path for a large mine development in British Columbia, and proving up a big resource with high grades is a good start but investors should not conclude that the project is a slam dunk for advancement. Pretium also presented an estimated resource for a higher grade deposit that could potentially be developed as an underground mine, yielding more than 8 million ounces of gold and 32 million ounces of silver. The company controls another advanced stage deposit in British Columbia, the Snowfield Project, located in close proximity to Brucejack.

Junior miner San Gold reported some promising drill intervals this week, including one of 27 g/t gold over a 5 meter core length, as it continues with exploration at its Rice Lake mining complex in Manitoba. In another hole, 22.9 g/t gold was encountered over an interval of 5.4 meters. These results are part of a program that punched a total of 66 drill holes targeting the L10 deposit area. Since acquiring the Rice Lake project the company has been active to explore the productive trend surrounding the original mine, and has successfully outlined seven new deposit areas in just the last couple of years. Three of these, including the L10 deposit, are currently in production.

Many chapters have been written about the productive mining history of northern Ontario, and the western extension of the Abitibi Greenstone Belt. The Town of Kirkland Lake boomed for decades as a service center in the midst of large gold mines. So integral was the mining industry to the community that the north corner of the town is truncated by the tailings pond for one of the mines, and the head frames of some mines cast their shadow over municipal buildings. When Kinross Gold announced the closure of the last mine in Kirkland lake in 1999 it appeared the town was doomed to fade to obscurity. However the resurgence in gold prices in recent years prompted junior miner Kirkland Lake Gold to acquire several of the old mine projects in town and resume production.

Today the boom times are back in Kirkland Lake, and several other companies are active to advance mining projects. Hotel rooms are hard to find, and high paying jobs for mining and contracting companies go unfilled due to a shortage of labour. Junior explorer Queenston Mining is both a beneficiary and a contributor to this boom. The company controls several projects in the Kirkland Lake mining camp and has been steadily and aggressively exploring to outline new gold deposits. This week the company announced yet another discovery and reported high grade gold assay results from its Rand Property. These included 8.4 g/t gold over a chunky 22.6 meter core length, and another interval of 6.2 g/t gold across 7 meters. The zone remains open to depth and laterally to the east. Queenston is well funded and has a budget of $25 million for exploration at several projects in the camp and the company is one of the most activity juniors in Canada this year.

On the base metals front, Rockex Mining has reported drilling results at its Western Lake St. Joseph iron project, located north of Thunder Bay, Ontario. Rockex has been engaged in a program to confirm historic resources outlined by a previous operator of this property, (where a resource of one billion tonnes grading above 29% iron had been estimated prior to the implementation of NI43-101 reporting standards), as well as extending the drilling further to depth to investigate the potential for additional iron ore resources. It appears the company has been successful in both objectives, as the first drill hole from the program encountered 500 meters grading 29% iron was announced this week. A total of nine holes have been completed so far and several more are planned in this phase. As more results are reported the potential for a much larger deposit area is very much in play, and the results will be used to complete a compliant resource estimate as the company advances towards a development decision.

Michael Kachanovsky