-- Posted 31 January, 2011 | |

Silver production in Idaho’s Silver Valley is about to resume. United Mining Group inked a milling deal January 11 with New Jersey Mining Company. “NJMC have an existing mill and the expertise,” President Greg Stewart explains, “but the milling capacity was smaller than what we needed. So we went to them and basically reached an agreement for a commitment where, in exchange for expanding the mill, we would get the milling capacity plus an ownership position in the mill.”

The $2.3-million expansion of milling capacity for UMG’s revitalized Crescent Mine will be extensive—enough to handle 360 tonnes of ore daily. Which means that this will be no mere boutique operation. This is entirely fitting, given the Silver Valley’s fabled past. Situated in the Coeur d’Alene Mountains—now a popular tourist destination—Valley mining goes back to the 1880s. It is the second-largest silver producer in history, with over a billion ounces. The Crescent Mine, which produced 25 million ounces, lies between two other, hugely prolific properties—the Sunshine and Bunker Hill Mines, which produced 489 million ounces combined.

Director and geologist Larry Dick told ResourceClips.com in September, “The Crescent Mine has never undergone the exploration intensity that the other ones have… We’ve only scratched the surface of the amount of silver that is actually present.”

It is a common belief among geologists that as much remains of the resource in Silver Valley as has already been extracted. This hypothesis is being acted upon only now because of near-$30-an-ounce silver. Back in the 1990s, when the price fell to as low as $4, mining in the Valley became moribund. But this is a story as old as mining itself. “The whole industry,” President Greg Stewart told the Wall Street Journal December 26, “is like feast or famine.” To which he adds, “But we believe the silver market will remain strong for years to come.”

Other companies that agree include Hecla Mining, US Silver and, most important, billionaire Thomas Kaplan`s Silver Opportunity Partners, which last year bought the Sunshine Mine and its indicated and inferred silver resources of 31.2 million ounces and 231.5 ounces, respectively, for $24 million.

UMG began as Stewart Contracting, an environmental remediation company. So it how did it come to play with the big boys by earning an 80% interest in Crescent from SNS Silver? Stewart explained to us in August, “Initially, SNS purchased the Crescent Mine, and they hired us to do rehab on the existing buildings there. Then we started work on underground rehabilitation. SNS spent around $12 million drilling out a reserve. That money had already been spent, so that was money we wouldn’t need to spend to find the reserve.”

Crescent’s reserve is a NI 43-101 resource estimate of 6.1 million ounces of silver indicated, consisting of 324,000 tons grading 18.7 ounces per ton, and 4.1 million ounces inferred, consisting of 211,000 tons grading 19.5 ounces per ton.

That resource will likely grow. UMG announced December 14 the purchase of 236 hectares contiguous with its land holdings at Crescent—increasing them by roughly 265%—providing the company with considerable future exploration potential. It also closed an $8-million private placement January 7.

Meanwhile, work continues on the mine itself. “We’re putting a new decline into the ore body,” Stewart reports, referring to the Countess Portal. “We’re also doing rehab in the lower sections of the mine, with the eventual goal of connecting those two parts and establishing our secondary escape and access. We’re getting ready to start doing the tie-in between the two points.” And UMG is doing the preparatory work for bulk sampling, which Stewart says “should begin sometime early this year.”

What else does UMG have in store for 2011? According to Stewart, “Our plan is just to continue to develop the project’s infrastructure. Get everything ready. Our goal is to get into production for first quarter 2012.”