Canada’s SilverCrest Metals (TSX: SIL) announced on Thursday the acquisition of El Picacho gold-silver property in Sonora, Mexico, from local American Metal Mining and an affiliate for $1.6 million.

The asset comprises 11 concessions covering 7,060ha and it’s located about 40km northeast of SilverCrest’s Las Chispas project gold-silver project, the company said.

Depending on drilling results, the Vancouver-based junior said El Picacho may be considered either a standalone mine or a satellite feeder mine to Las Chispas, which is currently under development.

SilverCrest plans to begin drilling on the property in by the end of the year, pending receipt of permits.

Analysts backed the move, saying that the addition of El Picacho, a past gold and silver producer, could boost Las Chispas mine life.

“In our view, the Picacho property could be a driver of mine life extensions for Chispas and a source of ore to blend with the ultra-high grades being delineated from some of the veins such as Babi Vista,” Scotiabank analyst Trevor Turnbull said in a note to investors.

A preliminary economic assessment on Las Chispas supports and underground operation with estimated production 5.4 million ounces of silver a year and 55,700 ounces of gold annually, over 8.5 years.

The mine would need an initial invest of $100 million.

Despite being the world’s top silver producer and price for the metals hitting historic highs, Mexico’s economic outlook is gloomy.

Latin America’s second-largest economy is expected to contract by almost 13% this year, Mexico’s central bank warned on Wednesday.

The bank noted the pandemic lockdown has thrown the country into the deepest slump since the Great Depression.

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