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 Tue May 2, 2023
Tracker: Philadelphia Story has potential to scale big in 2023
    Publisher: Kaiser Research Online
    Author: Copyright 2023 John A. Kaiser

 
Arizona Silver Exploration Inc (AZS-V: $0.490)
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Tracker - May 2, 2023: Philadelphia Story has potential to scale big in 2023

Arizona Silver Exploration Inc was confirmed on November 28, 2022 as part of the 2023 Bottom-Fish Collection at $0.27 based on expectations that in 2023 the Philadelphia gold-silver project in the Oatman district of Arizona would at a minimum confirm continuity of the high grade vein system so that it becomes plausible for development as an underground mine, and, potentially demonstrate that the hanging wall and footwall of this low sulphidation epithermal system has sufficient tonnage of disseminated gold mineralization to qualify as a bulk tonnage open-pit development target. Arizona Silver acquired the surrounding Philadelphia land package in 2019 but had a hard time getting the market's attention until early 2021 when it leased the patented Perry claim. The initial goal was to establish a high grade underground mineable resource, but drilling of the Perry vein led to the realization that the hanging wall and footwall of the Perry vein hosted disseminated gold mineralization of sufficient grade to qualify as a bulk tonnage target. This led to leasing of the Rising Fawn and Resaca patented claims in mid 2021 to give Arizona Silver title not just to 3+ km of vein strike but also the bulk tonnage heart of the system for which Greg Hahn had developed a new conceptual model. The 2022 drilling generated a speculation cycle which stalled in mid year, partly because of the overall market downturn as the Federal Reserve started a campaign of rapid interest rate hikes to contain inflation, but also because drilling the "gaps" within the Perry-Rising Fawn segment of the structure required a core rig which turned out not to be available. Furthermore, drilling the down dip extension of the east dipping vein was best done from the BLM claims to the east where the conceptual bulk tonnage target also existed. Arizona Silver started permitting drill pads on the BLM ground in 2022 but projected Q2 of 2023 as the earliest they would be granted. A core rig became available briefly in the fall but Arizona Silver was only able to drill several holes. An effort to raise $2 million at $0.25 in Q4 resulted in only $1.12 million being raised.

Tracker January 25, 2022 provided an overview of the Philadelphia story path and Tracker June 23, 2022 offered a conceptual model for how it might be possible for there to be 25 million tonnes of open-pittable resource split between the Perry and Rising Fawn claims, each of which had a strike of about 400 m. Assuming a 60° dip and a 300 m vertical open pit limit, a 35 m thickness at 2.6 specific gravity would represent a tonnage footprint of 12.7 million tonnes along a strike of 400 m. The resulting 25 million tonne footprint has the potential to host 800,000 oz gold per 1 g/t grade and 40 million oz silver per 5 g/t grade.

The missing pieces at the end of 2022 were sufficient financing to mount a major program to confirm this model, drill rig availability, and BLM permits to allow proper delineation of both the vein and bulk tonnage potential. So far Arizona Silver has had a very productive year that has translated into a near doubling of the stock price; a 12 hole RC program of 1,256 m was completed in Q1 with assays expected by mid May, a CSAMT survey was completed over the middle of the property which supported the conceptual model and revealed an intriguing target in the eastern part, and a core rig was secured to allow drilling of the deeper potential in the Perry segment and test the western edge of the CSAMT anomaly where low grade gold mineralization may be present.

Arizona Silver Exploration Inc is at an important cross roads. As of February 28, 2023 it had only $610,000 working capital. The junior has 69.3 million issued, of which visible insiders own about 9.2%, and 84.6 million fully diluted, of which 8,521,428 consists of warrants exercisable at $0.22-$0.55 until 2025-2027. Fortunately most of the financing activity has been generated directly by Arizona Silver's CEO Mike Stark and the warrants are not held by the sort of "here today gone tomorrow" clip and flippers rounded up by brokerage firms. In fact, in a recent interview Stark reported that some of these warrants have been exercised in April even though they constitute a free lunch for at least another couple years. Insider trading reports also show that insiders exercised options in April without the usual offsetting stock sales to raise the tax withholding for the deemed income defined as the difference between the exercise price and the market price on the date of exercise. Such insider option exercising activity ahead of potential market moving news can be interpreted as strong management optimism about the company's future. Arizona Silver is not yet quite ready to be turned into a KRO 2023 Favorite, but bottom-fishers should consider holding for the events that will unfold in Q2 of 2023.

On April 6, 2023 Arizona Silver published a drilling update which included 6 sections of the dozen holes drilled into the Perry and Rising Fawn targets. The diagram above shows the "gaps" within the patented claim group. The Resaca claim gap remains untested but the Q1 2023 drilling has closed the Perry gap with 7 holes fanned to cross most of the Perry gap, while the 5 holes drilled on 3 sections covered the northern half of the Rising Fawn gap. Note the purple outlined area with the reddish color, part of which overlaps with the Perry claim and the southern end of the Rising Fawn claim. The map below shows the entire Philadelphia claim package at the start of 2022 with the "purple" area now colored red and called the "heart of the system".

The diagram below is the conceptual model Greg Hahn developed in 2021. He believes the rhyolite flow dome complex sits above the primary feeder system for the low sulphidation epithermal system which fed the Philadelphia and other veins associated with the Arabian Fault that were the focus of historical small scale mining.

On February 7, 2023 Arizona Silver reported its interpretation of the CSAMT (controlled-source audio-frequency magnetotelluric) survey it conducted over the Red Hill area that juts to the east of the northeast oriented patented claim trend. The red anomaly is an area of low resistivity which sits about 500 m east of the vein at a depth of 100-200 m and is interpreted to be a clay cap above the top of the boiling zone.

The reddish area is a wild card that could be nothing or a gold-silver mineralized part of this epithermal system. The section shows two proposed holes of 45° and 80° from a location just to the east of the Arabian Fault.

The drill plan published with the April RC drilling update did not list the location of all the holes but the sections were detailed enough to allow me to annotate closeups of the drill plan so that it is easier to understand what we hope to see in the assays. The diagram above for the Perry Gap shows BLM Pad #2 for which a permit is still awaited, and the location of hole PC22-91 on the Perry claim. On April 25 Arizona Silver announced it had started core drilling the 80° hole to test the down-dip extension of PC22-91. The second shallower hole will test the western edge of the CSAMT anomaly. Total metres will be 700-750 m.

Arizona Silver drilled 5 holes on 3 lines of the Rising Fawn gap, but the spacing covers less than half the Rising Fawn gap. Note the vertical core hole PC22-96 drilled on Section RF4.

The resolution of the sections provided by Arizona Silver is low, but the mineralized intervals have been highlighted. Assays in a couple of weeks will tell us what the veins and stockwork envelope grade. This should allow the market to assess to what extent the bulk tonnage conceptual model I postulated in 2022 is becoming reality.

While preparing this update I was surprised to find a new map for the Philadelphia property that shows its total size has nearly tripled in a southeast direction. This entire discussion has been focused on the red circled area of the original claim block. Arizona Silver staked this additional area last year after it observed that this more rugged, unexplored area had evidence of hydrothermal alteration similar to the Red Hill area just to the east of the Philadelphia vein system. Obviously there is no mineralized vein soutcropping or a prospector would have found and glory-holed it a long time ago. When Arizona Silver first latched onto the Philadelphia project in 2019 I was unimpressed, seeing it as a mom-pop style story of serving up narrow high grade gold or silver intersections to thrill gold or silver bugs with no understanding of economic geology. In 2022 I took a greater interest when I saw they had expanded the strike of the vein system and developed a hypothesis for the bulk tonnage scenario. This year I am hoping for confirmation of this vein and bulk tonnage potential within the initial claim block. But it turns out that Arizona Silver has scaled up the Philadelphia story from an old mining district rethink into also being a grassroots regional play. The next hurdle is a serious financing of $5 million plus, which will be especially needed if the BLM grants drill permits. The increased scale of Philadelphia may attract the interest of mid-tier gold producers.


 
 

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