Mexico's environmental authority halts Almaden's Ixtaca project

Mexico's environmental authority, Semarnat, has suspended the permitting process for Almaden Minerals' (TSX: AMM; NYSE: AAU) Ixtaca gold-silver project in the state of Puebla, pending the resolution of a lawsuit that challenges the country's mineral-title system.

The lawsuit, filed by the Tecoltemi community of about 150 people in Puebla state, contends that the granting of mineral titles without prior indigenous consultation is unconstitutional and a violation of human rights as set out under the International Labour Organization's Convention 169.

In April, a lower court in the state ruled that Mexico's mineral-title system is unconstitutional and as a result, the original mineral claims that had been granted to Almaden should be suspended while the necessary consultation is completed.

Almaden Minerals' Ixtaca gold-silver project area in Mexico's Puebla State, east of Mexico City. Credit: Almaden Minerals.

The court's decision is currently being appealed by the Mexican Congress, the Senate, the Secretary of Economy and Mining authorities and the company as an affected third party to the lawsuit.

Morgan Poliquin, Almaden's president and CEO, says the claims the company currently owns have nothing to do with the Tecoltemi community. "Our development of the mining area is kilometres away, and our current mineral claims do not overlap with this community," he said in a recent interview with The Northern Miner.

Poliquin also said the company has been advised that Semarnat has no grounds to delay the permitting process on this basis because its mandate is to review the technical merits of environmental-permit applications and that none of the 12 communities within the area of Almaden's current claims covering the Ixtaca project are parties to the lawsuit.

The Ixtaca project, 95 km north of Puebla city, is located on the Tuligtic property owned by Almaden's subsidiary, Compania Minera Gorri??n S.A. de C.V.

Almaden submitted a writ to Semarnat on Oct. 24 to clarify that the company has already abandoned mineral claims in the area of the Tecoltemi community and that the company has no interest in holding any mineral claims in that area.

"We have been there for 18 years, working very happily," Poliquin says, adding that the company has had more than 70 local people working on the project during the exploration stage. "The highest levels of government have pointed out that mining is part of their investment strategy and they welcome mining that respects the labour law, that respects communities, that respects the environmental law. So we feel very positive about Mexico."

Geologists examine a map at Almaden Minerals' Ixtaca epithermal gold-silver deposit 95 km north of Puebla City, Mexico. Credit: Almaden Minerals.

He adds that the lawsuit should be a concern to investors in Mexico, and is part of a broader effort by special interest groups in the country to use Almaden's mineral claims as a basis to challenge the Mexican government and change the mining law.

"What it speaks to is the fact that there are strategic attacks on the institution of Mexico right now," Poliquin says, given that every other mineral title in the country had been granted under the existing law.

The permitting suspension has affected the project's timeline. "We would like them to remove that halt to the process, and we are working on that," Poliquin says.

Almaden identified the Ixtaca gold-silver deposit in 2001 during the company's regional exploration program.

The Ixtaca deposit is a low sulphidation epithermal vein system. Most of the gold and silver mineralization occurs as zones of high-grade vein and veinlets in the carbonate basement units.

The property originally consisted of two concessions covering 140 square kilometres. Almaden filed an application in 2015 to reduce the aggregate claim size to those areas that are considered prospective. That application was completed in 2017.

The Tuligtic property comprises seven mineral claims covering a total area of 72 square kilometres.

Almadex Minerals (TSX: DEX), a Vancouver-based exploration company, holds a 2% net smelter return royalty on the property.

Almaden plans to continue advancing Ixtaca's development, and Poliquin says he is "hopeful that they will resolve it soon."

A 2018 feasibility study envisions a conventional open-pit mine producing 1.79 million gold-equivalent oz. and 134.3 million silver equivalent oz. over an 11-year mine life.

A drill crew at Almaden Minerals' Ixtaca gold-silver deposit in Mexico. Credit: Almaden Minerals.

The study forecast all-in sustaining costs (AISCs) of US$850 per gold-equivalent oz. and US$11.30 per silver equivalent oz., respectively.

Initial capex was pegged at US$174 million. The study estimated an after-tax net present value of US$310 million at a 5% discount rate and a 42% after-tax internal rate of return with a payback period of 1.9 years, using a gold price of US$1,275 per oz. and a silver price of US$17 per ounce.

Measured resources stand at 43.4 million tonnes grading 0.62 gram gold per tonne and 36.27 grams silver for 862,000 oz. contained gold and 50.6 million oz. contained silver.

The project has indicated resources of 80.7 million tonnes grading 0.44 gram gold and 22.67 grams silver for 1.14 million oz. contained gold and 58.9 million oz. contained silver.

Inferred resources add 40.4 million tonnes grading 0.32 gram gold and 16.83 grams silver for 412,000 oz. contained gold and 21.9 million oz. contained silver.

Mexico has been the world's top silver-producing country for the last two years in a row, producing 197 million oz. silver last year, according to the 2019 World Silver Survey. The country was among the top 10 gold-producing countries in 2018, producing 115.4 tonnes gold.

Almaden's shares were trading at 61 ? at press time with a 52-week trading range of 57 ? to $1.19. The company has 112 million common shares outstanding for a $68-million market capitalization.