THE CRITICAL INVESTOR

After reporting an excellent 125m @ 1.631g/t AuEq including 1.52m @ 3,477g/t Ag from 126.5m depth (residual grade of 54g/t Ag) on their first hole at Tombstone Project in Arizona, Aztec Minerals (AZT: TSX-V, OTCQB: AZZTF) delivered more strong results on June 5, 2023. Highlight step-out hole 23-05 returned 36m @ 5.02g/t AuEq from 19.8m in an all oxidized intercept, including 1.52m @ 1,470g/t Ag and 1.52m @ 53.5g/t Au, expanding mineralization to the east. These grades are very impressive for oxides, as usually economic grades for heap leachable oxides are in the 0.4-0.7g/t Au range.

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All currencies are in US Dollars, unless stated otherwise.

Please note: the views, opinions, estimates, forecasts or predictions regarding Aztec’s resource potential are those of the author alone and do not represent views, opinions, estimates, forecasts or predictions of Aztec or Aztec’s management. Aztec has not in any way endorsed the views, opinions, estimates, forecasts or predictions provided by the author.

Aztec Minerals recently completed a 7-hole diamond drill program at Tombstone, and reported another 3 holes, 23-03, -04 and -05. As the program was intended to be a 10 hole program, I asked CEO Simon Dyakowski for the reasons of this adjustment. He answered that the holes had been re-oriented to reduce the amount of drilling through in-pit fill material, and broken rock near surface, which is difficult and time consuming to drill through.  Notwithstanding the program was reduced in terms of meters, the goals of stepping out East and West, and at depth, as well as testing other targets were accomplished anyway.

The locations of the drill collars, along the Contention Pit, can be seen here:

Holes 23-03 and -04 were drilled under a slight angle, but 23-05 and the earlier reported 23-01 were drilled vertically. Sections of holes 23-03, -04 and -05 look like this:

The full table of results so far looks like this, with the company waiting assays for holes 23-02, -06 and -07:

As per the news release: “Drill holes TC23-03, TC23-04 and TC23-05 were designed to expand the known mineralization in the central and southern portions of the main Contention pit to the east and to depth.  The core drilling program was planned to be able to pass through the intricate levels of old mine workings and multiple faults and to reach, at a minimum, the water table just below the sixth level and the principal district host limestones at depth.  The drilling to date has expanded the extent of mineralization to the west, east and to depth and demonstrates the potential for the volume of oxidized Au-Ag mineralization to grow as it remains open.

Drill holes TC23-03, TC23-04 and TC23-05 intersected extensive gold and silver mineralization, extending the mineralized zone at depth east and below the Contention open pit.  The drill holes also intersected old mine stope workings, likely dating back to the late 1800’s and high-grade zones as well, indicating that the highest-grade bonanza mineralization in the area drilled was only partially mined out.”

It was interesting to hear from CEO Dyakowski that he passed up to 4 different levels of old mine workings per hole, requiring 3 times reducing diameters for the drill bits (going from PQ to HQ to NQ, and finally to BQ), Aztec also hit blue limestone at depth, which is a positive as this points to CRD (Carbonate Hosted Ore Deposit) potential at depth. The overall depth of the holes wasn’t significant, as they wanted to save on costs as it was the first program. It was also tough material to drill through, with lots of loose fill. It was the reason they couldn’t get as deep on hole TC23-03 as intended, and needed a lot of cement to stabilize the holes. Their overall plan is to follow up with RC drilling in the softer rock, and then re-enter with diamond drills after hitting the limestone to go deeper.

CEO Dyakowski believes that the newly acquired claim blocks to the west will generate good step-out targets, and is planning these now. They are awaiting assays for holes TC23-02, TC23-06 and TC23-07, and expect to receive them soon, but almost certainly before the end of the month.

As a reminder, the total drilled area measures 900m long x 230m wide, and to maximum depths of 200m. When updating my earlier back-of-the-envelope guesstimate, this could result in a slightly wider and deeper 900m x 160m x 55m x 2.75t/m3 = 21.7Mt mineralized envelope, at an average grade of 1g/t AuEq this could already result in an estimated 700koz AuEq resource. Besides this open pit potential, management firmly believes there could be large CRD type mineralized potential at depth (150-1000m depth), based on several meaningful deeper drill results which already had results like 7.16m @ 6.5%Pb and 2.6%Zn, indicating high grade CRD mantos, the presence of nearby manganese-silver rich mines, and other polymetallic mines located in the same type of host rock, in this case Paleozoic limestone. Management also believes there is potential for a mineralized porphyry-type deposit as a source of the Tombstone mineralization.

What is next for Aztec Minerals? According to CEO Dyakowski, they have done a lot of mapping and sampling at Cervantes, and are planning 2,000m of step-out RC drilling (12 holes), starting in June, with results anticipated for September. A maiden resource estimate could be ready as soon as Q4, 2023. They are also planning a follow-up drill program ( likely with a combination of RC and diamond drilling) for Tombstone, starting in late September until late November, targeting step-outs to the west, filling in gaps, and deeper CRD targets.

With a March 31 working capital position of C$1.7M, the company still has sufficient cash, after completing Tombstone drilling, to start up Cervantes RC drilling, but will likely need to raise more cash soon to complete the Cervantes program, and for follow-up Tombstone RC- and diamond drilling.

Conclusion

Although Aztec drilled 7 instead of 10 intended holes due to difficult ground conditions, they managed to complete their goals anyway for this first program, and according to my estimates it looks like the hypothetical resource could increase from 600koz to 700koz Au based on the announced results so far (keep in mind there is no current NI43-101 compliant resource estimate so far for Tombstone and Cervantes). The results of 3 more holes await, and shortly afterwards the company will start follow-up RC drilling at Cervantes. As I keep repeating myself, it seems realistic to assume that Aztec Minerals is firmly on its way to prove up not one but two heap leachable 1Moz Au deposits at very economic grades and low strip ratios, making this a potential bargain at a market cap of C$27.5M. There is still time to position yourself as the markets don’t really seem to grasp the potential here, which will undoubtedly become clear when the resource statements start coming out. Stay tuned!

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter at www.criticalinvestor.eu, in order to get an email notice of my new articles soon after they are published.

Disclaimer:

The author is not a registered investment advisor, and currently has a position in this stock. Aztec Minerals is a sponsoring company. All facts are to be checked by the reader. For more information go to www.aztecminerals.com and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.