Brian Edgar and Tim Barry's Silver Bull Resources (SVB:TSX) released a Preliminary Economic Assessment (PEA) for its Sierra Mojada silver-zinc project in Coahuila, Mexico. Sierra Mojada is one of the largest undeveloped silver projects in Mexico, with an indicated resource of over 160 million ounces of silver at an average grade of 70 grams per tonne using a 25 gpt cut off. Directly beneath the silver zone at Sierra Mojada is a significant zinc deposit which contributes to the project's economics.
The PEA modeled an open pit operation averaging 8,500tpd over an 18 year mine life producing approximately 7 million ounces of silver per year.
PEA Highlights Include:
- Silver price of $23.50 per ounce and zinc price of $0.95 per pound
- After-tax NPV(5%) of $463.9 million and IRR of 23.1%
- Initial capex of $297.2 million plus life-of-mine (LOM) sustaining capital of $79.6 million
- LOM cash costs $6.58 per ounce, net of by-product credits
- LOM strip 5.6:1
- LOM average grade of 73.4g/t silver and 2.79% zinc
Tim Barry, President and CEO of Silver Bull commented, "We are fortunate to have a near surface high grade zone which will act as our starter pit and is expected to produce an average of 7 million ounces per year allowing for a fast payback on initial capital expenditures. It is also important to remember the significant upside on this project.”
Here's a link to the PEA news release: Silver Bull Completes Position Preliminary Economic Assessment for the Sierra Mojada Project
A halo of lower-grade mineralized material surrounds the conceptual pit but was not included in the economic study. The company anticipates this being brought into the pit, which would dilute the average grade, but would allow for more tonnage to be processed. This lower grade bulk tonnage material will likely become the majority of production later into the project's life. The deposit at Sierra Mojada appears to have room to grow and the company has found extensions of the mineralization to the east, west and north.
Unfortunately for Silver Bull they released their PEA on a day in which silver prices were falling, last at $20.78 USD per ounce, which is about 13% below the silver price the company used in their PEA. Any potential acquirer of the company, such as 11% holder Coeur d'Alene Mines, will no doubt make their own calculations.
At the Precious Metals Summit the week before last, Silver Bull President Tim Barry highlighted some of Sierra Mojada's attributes, including rail, paved road, power and water directly at site. Barry also suggested pending royalty regime changes in Mexico were reasonable, calling it an excellent jurisdiction for mining. Here's a link to a video of his presentation along with the accompanying slides.