Outcrop Silver & Gold Corp. (OCG:TSX.V; OCGSF:OTCQX; MRG1:DB) has released drill results from four holes that expand the Megapozo Shoot at its 100%-owned flagship Santa Ana project in Colombia.
Compositing two close-spaced veins in drill hole DH316 gives a true thickness of 5.89 meters of 426 grams equivalent silver per tonne (g/t Ag eq). Drill hold DH319 also intercepted 2.72 meters true thickness of 445 g/t Ag eq.
Megapozo is one of several high-grade shoots being explored in preparation for Santa Ana's maiden resource estimate expected this quarter.
Research analyst Stuart McDougall of Research Capital Corp. noted in January that the Megapozo and Ivana shoots had average recoveries of 96% for gold and 94% for silver to a concentrate grading about 83 g/t gold (Au) and 6,540 g/t Ag using conventional milling techniques.
"Those two shoots are expected to contribute more than half of the contained metal in the initial resource estimate," McDougall said.
In February, he reiterated his Speculative Buy rating of the stock with a target of CA$0.75 a share based on an expected resource of 50 million ounces (Moz) Ag.
Stuart McDougall of Research Capital Corp. noted that the Megapozo and Ivana shoots had average recoveries of 96% for gold and 94% for silver to a concentrate grading about 83 g/t gold (Au) and 6,540 g/t Ag using conventional milling techniques.
"If achieved, we think this bodes well for a re-rating of the stock, given the market's expectation for one-quarter of our expectation, based on a select group of comparable explorers," McDougall wrote.
The new results extend Megapozo toward the northwest, the company said. Drilling definition shows that it extends from the surface to 600 meters down dip, where mineralization remains open.
"Megapozo provides another example of the occurrence of close-spaced veins that can be composited together while maintaining significant grades," Outcrop Chief Executive Officer Joseph Hebert said. "This ability to composite vein packages together may positively impact overall average true widths in the vein systems at Santa Ana."
Asset manager and author of the What is Chen Buying? What is Chen Selling? newsletter Chen Lin is bullish on silver this year, saying the precious metal will be vital in the green economy transition, and had high expectations for Outcrop.
"They will have a resource estimate in early 2023 to confirm they have one of the highest-grade silver deposits in the world,” Chen wrote on Jan. 3.
The Catalyst: Untested Potential
The company said 53 holes have been drilled to date in the Megapozo shoot; 21 of them have returned high-grade assays. The shoot has an average estimated true width of 0.71 meter with a weighted average grade of 1,311 g/t Ag eq.
Outcrop continues to identify and drill new targets at the project. Three rigs are drilling 1,700 to 1,900 meters per month, Hebert said.
In Hebert’s annual letter to shareholders in January, he said less than 10% of Santa Ana’s potential has been tested.
"They will have a resource estimate in early 2023 to confirm they have one of the highest-grade silver deposits in the world,” Chen wrote on Jan. 3.
"We should have another great year of drilling, with three core rigs turning continually to drill high-grade mineralization of 13 shoots to depth and laterally and drilling our best new greenfield targets,” he wrote.
The results will likely add to the scope of Santa Ana, which covers a significant part of the Mariquita District, where mining records date to at least 1585. The district was once the highest-grade primary silver district in Colombia, the company said.
Santa Ana covers 27,000 hectares. Spanish Royal Archives reports said the area historically had 14 mines producing an average of 4,000 g/t Ag over an average of 1.4 meters, with some mines finding as much as 17,000 g/t Ag.
The company has continually broken its own assay records at the project over the last year, culminating in Hole DH317 in the Las Abejas shoot in the El Dorado vein system, which intersected 3.05 meters of 3,975 g/t Eq Ag, including 0.63 meters of 16,690 g/t Eq Ag.
Green Economy Needs Silver
Almost all computers, phones, cars, and appliances contain silver, which is excellent at coating electrical contacts. It's also an important element in solar technology.
Because of this demand from the new green economy, the Silver Institute has predicted that global silver demand will reach a new high of 1.21 billion ounces in 2022, up 16% from the year before. Industrial demand is on course to grow to 539 million ounces Moz.
Streetwise Ownership Overview*
Outcrop Silver & Gold Corp. (OCG:TSX.V; OCGSF:OTCQX; MRG1:DB)
"Developments such as ongoing vehicle electrification (despite sluggish vehicle sales), growing adoption of 5G technologies, and government commitments to green infrastructure will have industrial demand overcome macro-economic headwinds and weaker consumer electronics demand,” the report said.
The global silver market is forecasted to record a second consecutive deficit between supply and demand this year, the Institute said. At 194 Moz, it will be a multi-decade high and four times 2021’s level.
Ownership and Share Structure
Mining financier Eric Sprott owns about 14% of Outcrop. Management and directors own about 12%, and the rest is held by high-net-worth investors and retail, the company said.
Major inside shareholders include Executive Chairman of the Board Ian Slater, with about 10.2% or 20 million shares, and the CEO Hebert, with 0.96% or 1.88 million shares, according to Reuters.
Outcrop has a market cap of CA$54 million with 195.8 million shares outstanding and 145.8 million free-floating. It trades in a 52-week range of CA$0.43 and CA$0.10.
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