Luca Mining Advances Campo Morado and Tahuehueto Mines Amid Exploration Push
By Peter Kennedy
Luca Mining Corp. [LUCA-TSXV, LUCMF-OTCQX, Z68-Frankfurt] is entering a new growth phase as it moves to maximize the potential of its gold-silver and base metal operations in Mexico.
The long-term aim is to join the ranks of mid-tier gold miners with annual gold equivalent production in the 200,000-ounce range.
Meanwhile, the company is using $11.3 million raised from a life offering and private placement financing to fund an ongoing optimization program at the company’s two mines – Campo Morado and Tahuehueto.
The Campo Morado mine is an underground operation located in Guerrero State. It produces copper-zinc-lead concentrates with precious metals credits but is undergoing an optimization program which is generating significant improvements in recoveries and grades, efficiencies and cash flows.
The Tahuehueto gold-silver mine is a new underground operation in Durango State, which is located in a mining belt that contains the Topia polymetallic-silver mine, the Cienega gold, silver-base metals mine, and others. The company is commissioning a 1,000 tonne per-day mill and is on track to achieving commercial production in the coming months. Tahuehueto is predicated on a large epithermal gold/silver system.
It is worth noting that Campo Morado is a VMS (volcanogenic massive sulphides) deposit, with precious metals accounting for 50% of the net revenue, and the balance from base metals, copper, lead and zinc.
Luca reported consolidated production of 40,083 of AuEq (gold equivalent) in the first nine months of 2024 and revenue of US$52.6 million.
Currently gold accounts for 41% of the company’s revenue, followed by zinc at 24%, copper at 18%, silver at 15% and lead at 2%.
In 2025, the company hopes to achieve combined gold equivalent production of roughly 100,000 ounces, up from a target of up to 60,000 ounces in 2024.
Dan Barnholden, who was named CEO in July, 2024, after previously spending over 20 years in mining investment banking, leads a highly experienced management team that now includes Ramon Mendoza Reyes, the company’s new Chief Technical Officer.
In an interview, Barnholden said the company was previously hampered by a mixture of debt and lack of investment at Campo Morado, which was once owned by Farallon Mining, a former member of the Vancouver-based Hunter Dickenson group. Farallon sold the mine to Swiss company Nyrstar NV in a friendly deal for $420 million in 2010. The mine was later put on care and maintenance due to security concerns and then revived by a Luca after it bought the asset in 2017 and relaunched production in October, 2017. (It did so without relying on a feasibility study or established reserves). The intention was to increase throughput to 2,400 tonnes per day from a starting rate of 1,400 tonnes.
In late September, 2024, Luca said it had raised $11.3 million from a fully subscribed brokered private placement, consisting of 19 million units (the life units) priced at 45 cents each and a concurrent non brokered private placement of 6.12 million (non-life units) priced at 45 cents each. The final amount raised is well ahead of an original $8.5 million target.
On January 22, 2025, the shares traded at 84 cents in a 52-week range of 84 cents and 20 cents.
The company said the financing will shorten the lead time on its value creation initiatives, one of which is to come up with new discoveries.
In keeping with that goal, the company recently hired an experienced geological team to execute the company’s exploration strategy at both Tahuehueto and Campo Morado.
The primary objective is to create significant value by focusing on three key objectives:
- Identify additional high-grade, near mine mineralization that can be quickly added to the mine plans at both Tahuehueto and Campo Morado, directly enhancing cash flow.
- Leverage extensive historical data and generate new information through drilling and other exploration tools to extend mine life and expand resources.
- Demonstrate the district scale potential at both Tahuehueto and Campo Morado by targeting high-impact exploration zones further from the mine sites.
Paul Gray has been named vice-president, exploration and will lead and direct all exploration activities
Meanwhile, an exploration drilling campaign is underway at Tahuehueto. The company said this campaign is the first significant exploration program to be conducted on the property in over 10 years. The campaign is expected to include 5,000 metres of diamond core drilling in 26 holes from underground over the next four to six months. It will take advantage of recently developed areas to potentially extend the resource along the modeled veins.
On surface the company is also making progress at Campo Morado, “Our near-term objective of achieving 2,000 tonnes-per-day throughput is on track. Copper recoveries remain strong, and we are now close to 80%,” the company said. In the next few months, the mill will be producing separate zinc, copper and bulk (lead and precious metals) concentrates a move that will increase the quantity of saleable metals.
Concurrently, the company aims to capitalize on promising exploration results that Nyrstar failed to follow up after it acquired Campo Morado.
“We have all the geological data that Hunter Dickenson had,’’ Barnholden said. They include results from several drill holes – all drilled from underground along with new interpretations of the geology of the G-9 deposit at Campo Morado. Those results were released in August, 2010. At that time, Farallon said drilling had led to several new discoveries adjacent to the G-9 mine and opened up the potential for further discoveries going forward.
From that data, the company recently generated 38 exploration targets, which were subsequently narrowed to a top 10. “Four of the top ten are within our mining claim boundaries, which means that we can go out and explore there immediately,” Barnholden said.
There are over 700 exploration diamond drill holes in place at Campo Morado, which have outlined six mineralized bodies containing approximately 16.6 million tons of measured and indicated resources, grading 4.01% zinc, 0.80% copper, 0.93% lead, 123 g/t silver and 1.70 g/t gold, plus an additional 1.0 million tonnes of inferred resources.
Measured and indicated resources at Tahuehueto stand at 3.6 million tonnes, grading 2.55 g/t, 50.06 g/t silver, 0.26% copper, 1.11% lead and 1.92% zinc.
Luca currently has outstanding loans with Trafigura Mexico S.A. de C.V. totaling US$18.1 million. This includes a non-interest-bearing convertible loan of US$5.8 million due in January 2027. The remaining US$12.3 million in term debt is scheduled for repayment by mid-2026. In a press release on November 5, 2024, the company said it had resumed making principal repayments on term loans with Trafigura.
On January 7, 2025, the company further announced that it, along with arm’s-length third-party corporation Jaluca Limited, reached an agreement with Urion to repurchase 100% of Luca’s US$5.8 million Convertible Debenture held by Urion. Luca and Jaluca are repurchasing 43% and 57% of the Debenture, respectively, for a total purchase price of US$7.2 million. Luca will immediately cancel its portion of the Debenture, reducing fully diluted shares outstanding by 4.4%, while Jaluca has agreed to convert its share of the Debenture at the exercise price of $0.35. The result of these actions is the removal of US$5.8 million in debt from Luca’s balance sheet.
Luca has also continued to make principal repayments on its term loan with Trafigura Mexico S.A. de C.V., having reduced total debt outstanding by nearly 39% since October 2024 to approximately US$11.1 million.
Following the above noted actions, Luca’s cash balance is approximately US$6.75 million. Luca will continue to use proceeds from ongoing warrant exercises to pay down its debt with the objective to be debt-free by the end of 2025.
With a well-defined growth strategy in pace and Luca beginning to generate free cash flow from both of its mines, 2025 is positioned to be a transformative year for Luca Mining.