SilverCrest Mines (CVE:SVL)(“SilverCrest”) a junior silver-gold producer in Mexico, released the results of a Preliminary Assessment (PA) highlighting the potential for the company to double production at its flagship Santa Elena operation.
Vancouver headquartered SilverCrest Mines owns 100% of the Santa Elena Mine, located 150 kilometers north-east of Hermosillo, near Banamichi, in the State of Sonora. The project is a high grade epithermal gold and silver resource, which commenced production in September of last year.
However the project carries considerably more potential to support a larger operation. This was highlighted today by the PA which considered an additional capital development budget of $84 million (including 25% contingency), of which $47 million would be used to build a new processing facility. The additional capital investment would allow the company to lift production to an annual rate of 1.6 million ounces of silver and 39,000 ounces of gold – a 52% increase on current production.
The PA considered a 10 year mine life at the new rate, but also highlighted the possibility of expanding the throughput to 3,500 tonnes per day at the processing facility to lift production again to 5 million ounces of silver equivalent per year. The PA assumed overall recoveries of 87.2% for gold and 68.9% for silver.
At the 2,500 throughput rate on the new facility, operating costs were estimated to be US$9.70 per ounce of silver equivalent, generating annual net pre-tax cash flow of US$17 million using a silver price of $18/ounce and gold price of $1000/ounce. Applying today’s metal prices lifts the annual net pre-tax cash flow more than threefold to $62 million. Using a 5% discount rate, the project generates a NPV of US$131 million at the base case metal prices or $491 million at today’s metal prices.
"The positive results of this PA have confirmed our long standing belief that this Plan would be SilverCrest's next step to increasing production at Santa Elena and that it would provide more free cash flow from which the Company can grow and prosper,” J. Scott Drever, President of SilverCrest stated.
Drever further noted that SilverCrest would continue to drive hard at Santa Elena to take advantage of high metal prices.
“We fast tracked Phase 1 of this project initial drilling to production and now we expect to apply the same diligence to the next phase of expansion. With the excellent economic results of the PA we are anxious to begin the site programs needed to move the Plan recommendations towards a Pre-Feasibility Study and take advantage of expected buoyant precious metal prices."
The company also reported an updated mineral resource and reserve for both Santa Elena and Cruz De Mayo, taking into consideration higher metal prices, lower cut-off grades and adjustments to take into consideration ore processed from the current open pit.
Total indicated resources at Santa Elena now stand at just over 6.9 million tonnes @ 1.62 grams per tonne (g/t) gold and 77.4 g/t silver, with a further 6.198 million tonnes @ 0.78 g/t gold and 53.4 g/t silver in the inferred category.
Cruz de Mayo hosts an indicated resource of 1.14 million tonnes @ 0.06 g/t gold and 64.2 g/t silver with a further 6.065 million tonnes @ 0.07 g/t gold and 66.5 g/t silver in the inferred resource category.