Land around Existing Mine Could Lead to New ProjectsWed, 10/21/2015 - 08:53
SilverCrest Mines was founded back in 2003 at a time when the market showed a demand for such investment opportunities. The company was formed by three founders who brought a wealth of different experiences to the table, laying the groundwork for possible success. Its initial mission was to acquire projects with low initial upfront payments, develop them and bring them into production in a phased approach. Once in production, the cash flow was to be used to expand operations and consequently increase shareholder value.
Eric Fier, founder and now President and COO of SilverCrest Mines, seeks to explain the concept of a phased approach. “We usually negotiate multi-year agreements in smaller, staged payments, whilst conducting quite a bit of work on the project. As said, with a discovery, we accelerate that project to production, and use the cash flow to grow operations using “de-risked” phases. This was the case with our flagship asset, the Santa Elena mine in Sonora, Mexico,” he says. For Fier, small operations can be more profitable than larger ones. “Not all ounces are created equal. That means that existing infrastructure and location can play a determinant role when a company is looking for projects.”
Based on this strategy, SilverCrest is now actively producing from its first underground stope at Santa Elena in Sonora. The company views this as its test stope and aims to reach a capacity of 1,300-1,500 t/d, which should give it reliable knowledge about mining costs, grade reconciliation, and dilution, allowing for the further improvement of operations there. Another strategy being deployed at Santa Elena is the decision to switch to the Avoca mining method, in which the ore is mined from the bottom up. Fier states that this will allow SilverCrest to reach higher grade areas soon and to backfill with waste. Mining from the bottom up will also allow the company to take out the sill and rib pillars that were designed for additional support in the mine’s pre-feasibility study, while offering the potential to add more reserves. The mine has also undergone developments such as the construction of a new mill and a CCD-Merrill Crowe processing plant. These improvements are expected to have a major impact on the recovery side. “When we operated from an open pit, heap leach standpoint, our recoveries for gold and silver were 67% and 35% respectively. With the new mill, we are expecting a 92% recovery for gold and 68% for silver,” says Fier.
Beyond the progress at Santa Elena, SilverCrest has an exploration program through which it is actively exploring promising properties within a 30-60km radius of the existing mine. The company believes that this radius will turn up a number of strong opportunities that could be easily enveloped into its growth strategy and, should major potential be found, develop into a mining district in years to come. Two such properties near Santa Elena are Ermitaño and Cumobabi, for which SilverCrest has signed option agreements with Evrim Resources. According to Fier, the company sees good potential for both these properties, while they have also significantly consolidated SilverCrest’s land position around Santa Elena. “We now control over 300km2 of mineral rights and have certain obligations to spend a minimum of US$500,000 in exploration expenditures on each project. At Ermitaño, for example, we conducted an extensive sampling program and identified three drill targets in combination with available data,” said Fier. One of those targets is named Durazno where SilverCrest commenced a drill program in the third quarter of 2014 and for which initial drill results are anticipated for early 2015.
Elsewhere in Mexico, SilverCrest’s La Joya mine in Durango presents a polymetallic deposit with values of silver, copper and gold. The preliminary economic assessment carried out back in 2013 demonstrated robust economics with estimated production costs of US$22 per ounce for silver, US$1,200 per ounce for gold and US$3 per pound for copper. However, with silver prices still low, Fier explains that the company is in no hurry to develop La Joya beyond the completion of the assessment. “Since we own 100% of the project, the maintenance costs are immaterial, which allows us to wait out the market,” says Fier
The company’s economic model has left it in a strong financial position, with working capital of US$45.1 million and market recognition as one of the lowest cost producers around. “In recent years, we were fortunate to raise capital at minimum dilution, and we secured a corporate credit facility with a major Canadian bank with very good terms. In 2014, we then drew down part of the available credit as a risk aversion strategy.” With this done, SilverCrest’s immediate investment priorities are ramping up underground ore production and development, as well as focusing on organic growth opportunities around its operations.