Mercado Minerals’ flagship is Copalito, an optioned low sulphidation epithermal vein system roughly 120 km northeast of Culiacán and about 35 km from McEwen’s El Gallo complex, with a second 100 percent owned project called Zamora about 110 km north of Mazatlán and signed LOIs over San Rafael and La California in the San Dimas district of Durango. In this interview, we went through the usual smell test on incentives and ownership, then spent most of the time on the just-completed maiden drill program, what Phase II looks like, treasury, and the Sinaloa security question.

TL;DR

They finished a 25-hole maiden program at Copalito in June across seven structures, with assays running into August, and they now map about 11 km of cumulative vein strike including a new 1,100 m Renata vein that has never been drilled. Cash is just under C$3 million, and the CEO told me a 10,000 m Phase II would cost over C$3 million, so a big program means going back to the market. Attention is shifting to Zamora in the near term, where he expects roughly 3,000 hectares of concessions back in good standing in five to six months and says they have the capital to turn drills there. No resource estimate is planned yet, and he was clear he would rather grow the picture than print a small number he gets valued against.

What have they done for shareholders lately?

Permits landed February 10, the first hole was collared March 10, and the 25-hole program wrapped at the end of June, with results released through the summer. Before drilling they re-assayed 12 of the 81 historical holes left by the previous operator, Kootenay Silver, and he said the results came back broadly in line with some variance, enough for their QP to adopt the historical data as their own. They also ran LiDAR, drone magnetics, soil sampling and mapping, which extended four veins and turned up two new ones including Renata, with chip samples he put in the 200 g/t silver equivalent range and vein widths up to 5 m. At Zamora they have been mapping and channel sampling, reporting kilogram-range silver and 15 plus g/t gold at surface, and working through community access and permitting. They also signed the Durango LOIs in June, though nothing has closed.

How much money do they have and what are they spending it on?

He said they are just under the C$3 million mark, having raised about C$6.6 million in two tranches, a C$5.6 million financing closed December 1 and a further C$1 million, both at C$0.20 with a three year full warrant at C$0.35. G&A runs around C$60,000 a month and mostly includes marketing, with a marketing budget of roughly C$400,000 set at the time of the raise, spent on video and newsletter coverage, conferences, a marketing services group, and some early digital advertising. Ongoing obligations include the Copalito option, which totals $3.5 million in cash over five years and is tail-heavy with the big payments in years four and five, a $140,000 payment made for year one, small ejido payments at Zamora of around 100,000 pesos, and a couple hundred thousand US of back taxes on concessions that can be paid over 36 months. There are also share obligations from the Concordia Silver acquisition, 10 million shares in total with 6 million issued, 2 million due within about a month and 2 million next year, all escrowed.

Upcoming catalysts

Technical: assay and interpretation work feeding into updated long sections for Copalito, which he said are coming to market sooner than later; a first drill test of Zamora once concessions are resolved, which he thinks they have the capital to start; and Phase II drilling at Copalito on El Agua, El Pilar, the new extensions and Renata, sized somewhere between 3,000 m and 10,000 m with step-outs of 25 to 50 m.

Operational: Zamora ejido agreements and the administrative process to return about 3,000 hectares to good standing, expected in five to six months, plus a fresh drill permit for Copalito Phase II that he said turns around in about a month.

Corporate: a financing decision ahead of any large Phase II program, a decision on whether to extend or advance the San Rafael and La California LOIs after rain slowed due diligence, and further acquisitions in the region. No metallurgical work is planned yet and no resource estimate is committed, though he said next year could be a time they decide to do one.

Risks

The obvious one is funding, because a meaningful Phase II at Copalito plus drilling Zamora does not fit inside C$3 million, so dilution is likely, and the warrant and escrow overhang sits on top of that. Geologically, 5 Señores is cut off or offset at about 120 m and they have not solved it, so the highest grade silver vein is not where the next capital goes, and the wider system still has no defined geometry, continuity, met work, or resource. Jurisdiction is the pushback he hears most, and while he says security is managed, is not adding cost, and the January incident was isolated, it remains outside their control, as does the silver price after a roughly 40 percent drawdown that helped take the stock from the high 40s to the mid teens. Rainy season limits drilling, the portable rig is slow to move, and insider ownership at around 6 percent is thin for a company this size.

Mercado Minerals CEO Interview

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