Tuesday, 11 June 2013

Sights set high for SilverCrest ahead of massive expansion at flagship mine

SilverCrest Mines (CVE:SVL) (NYSE:SVLC) has seen its expectations for the company’s flagship Santa Elena mine borne out by some stellar figures that feed directly into the Vancouver-based precious metals producer’s target of dramatically increasing output at its flagship property.
“Obviously, we’re pleased,” said company president J. Scott Drever of the updated reserve and resource estimate announced in late May, which in some cases doubled the estimates previously available for the 100 per cent owned project.
In the update for the property in Sonora, Mexico, probable reserves of gold increased by a factor of 50 per cent while probable reserves of silver increased by more than 100 per cent; gold indicated resources increased by 99 per cent while silver indicated resources increased by 127 per cent.
The updated probable reserves, a measure that covers underground, open pit and leach pad operations, are estimated at 8.2 million tonnes grading 74.9 grams of silver per tonne (gpt Ag) and 1.24 grams of gold per tonne (gpt Au) for 19.7 million contained ounces of silver and 327,430 contained ounces of gold.
The figures represent a doubling of the 9.7 million ounces of contained silver reported in the previous estimates from January 2012  -- that is, an increase of 103 per cent – and for contained gold a bump of half as much over the 217,800 ounces recorded in the same estimate.
The increase in reserves has twin benefits for the company.
“It sets our mine life to probably 8 years plus – to have that much ore in front of you with respect to an underground operation is sometimes unusual so we’re pleased to be able to plan over that period.”
“And the work that we did last year shows that we still don’t know the full extent of the deposit nor the new zones discovered in that process. These things make it good for us and our shareholders, showing that we have long term plans for a very profitable operation.”
Key to the newly- increased figures is the mill to be built on the site, currently in the midst of construction but expected to be up and running by early next year with a view to achieving commercial production “ at the 3000 tonnes per day (tpd)  run rate by late March,” says Drever.
With a nominal capacity of 2,500 tonnes per day currently, the Santa Elena mine’s open pit heap leach facility is expected to recover approximately 625,000 ounces of silver and 33,000 ounces of gold in 2013, although the mill will have a substantial impact on the amount of production from the mine.
As Drever points out, the difference in levels of recovery between the process of heap leaching and the conventional mill process is significant. 
“From heap leaching you get 35 to 45 per cent  silver recovery and 65 to 70 per cent  gold recovery; when you put that material through a conventional mill it’s 70 per cent for silver and plus 90 per cent for gold, so there’s a substantial amount of metal on the depleted heaps to be recovered through the mill.”
The already crushed and leached materials, of which there will be some 4 million tonnes extracted and in effect lying around on the ground at the property, would provide approximately four years worth of material were it to be run through the mill without supplementing with a any additional tonnage being extracted from the underground operations.
The company plans to feed the mill initially from the open pit mine at the site, until approximately August or September 2014, by which time the company anticipates having reached the bottom of the pit. At that point, Drever says, “we will start feeding from underground and re-running depleted heaps. We think there will be about $100 million to $120 million of recoverable value on the leach pads once the open pit is completed.  It’s a very cheap source of mill feed.”
As Drever points out, the material to be re-run through the mill is already extracted, which leads him to call the extensive capital program the company currently has underway – to the tune of $65 to $70 million, the lion’s share of which is dedicated to the new processing facility – “de-risked to the point that it’s almost a no-brainer.”
“The whole expansion plan has limited risk due to the 4 million tonnes of crushed and leached materials to be re-run through the mill, in addition to which we have close to 4 million tonnes of probable underground reserves.”
According to a company statement released with the updated resources figures in late May, the mine “has good potential for additional resources with the deposit open in most directions." Indeed, further infill and expansion drilling is recommended to potentially increase resources and convert to reserves, the company said. 
Details of the updated reserves and resources will be included in the Santa Elena expansion pre-feasibility study, which the company expects to announce by mid-July.
The mine is a high-grade, epithermal gold and silver producer, with an estimated life of mine cash cost of US$8 per ounce of silver equivalent (55:1 Ag: Au).
The silver miner, which ended the latest quarter with cash and equivalents of $41.1 million and is cash flowing approximately $2.5 million per month, is also advancing its large poly-metallic deposit at La Joya, also in Mexico, where in March it filed an NI 43-101 compliant technical report  for the resource update. At a global case cut-off grade of 15 grams per tonne of silver equivalent, inferred resources at La Joya stand at 198.6 million ounces, almost 95 per cent higher than the 101.9 million ounces previously announced at the same cut off grade.
And the year to come promises even more prosperity, as the company is looking to expand annual metals production to an estimated 3.5 to 4.0 million ounces of silver equivalent in 2014, up from the 2.37 million silver equivalent ounces it produced in 2012. 

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