Preparing for the Future of Silver With a World-Class AssetBy Lorenzo Núñez | Fri, 09/03/2021 - 12:44
Q: How is Discovery Silver moving forward its Cordero silver project in Chihuahua?
A: Discovery Silver operates solely in Mexico and we are developing our silver flagship project, Cordero, which is considered one of the largest undeveloped silver projects in the world. The project has over 600Moz of silver and over 1 billion oz of silver equivalent (based on the last data from 2018). We are located in Chihuahua, on one the most robust mineral belts in the world. We are also near existing infrastructure, which will help significantly with future mining operations. We are focused on an aggressive drill program where over 100,000m have been drilled in 18 months, making it one of the most aggressive drill programs in the silver industry. We are planning to publish an economic study (PEA) by the end of the year. The resource area only represents 5 percent of the total concession area and this means we should continue to develop new, exciting targets to drill test over the years, hoping to find more deposits in the district.
Q: What are your objectives for the Preliminary Economic Assessment?
A: The main purpose of this study is to deliver a technical study that is backed by a comprehensive data set and is vetted by a top-tier independent consultants. Our target for this study is to outline one of the largest primary silver operations in the industry with manageable upfront capital and operating costs, targeting the bottom half of the industry’s cost curve.We are targeting a minimum of 15 years of mine life with an average production of at least 15 million ounces of silver equivalent per year. At this rate, Cordero will position itself among the Top 10 primary silver mines in the world in terms of total production with a very realistic option to then scale up to the Top 3.
Q: What is Discovery Silver’s high-level plan to deploy its sizable capital?
A: We have around US$67 million in the bank, which puts us in a very good position. The plan is to spend around US$12 million this year and an additional US$20 million next year. The company will obtain approximately US$31 million in cash from warrants next year, giving us a balance of around US$71 million by the end of 2022. In addition, we will have between US$8 million and US$10 million more to spend on the construction decision in 2023. Funds totaling US$60 million for the construction of Cordero alone will be available. This could represent about 20-30 percent of the capital needed for the mine’s construction (depending on the size of the operation we are deciding to start with). The rest of the funds can be acquired by using a combination of debt and additional equity. This leaves us in a very strong position to take this mine into production.
Q: How will your project benefit the local community?
A: Most of our management team is based in Mexico. Mexico is like a second home to me. Our Cordero project, which is still in the exploration and development stage, has already created a significant number of jobs in the area. We are already past the 120 jobs mark and we have also started social environmental programs. To see the changes the local community experiences with the mining operations is truly incredible. During my time in Timmins Gold Corp, we built schools and hospitals plus improved roads and infrastructure. We used to take locals, including children, and give them tours of the mine and introduced them to mining and geology as well. I would like to think that we were responsible for many high-school children who eventually became geologists and engineers. This is an area that is very dear to me. Mexico is a mining country; it is in its people’s blood. It has been a great experience to be working in communities and in a country that actually understand mining.
I want to point out that ESG practices are very important for us and we will be publishing our inaugural ESG company report later this fall, which will outline our key initiatives in this area. We strongly believe that mining companies must partner with their host communities (and nation) and agree on the responsibilities they have, for example hiring the local workforce, supporting local initiatives and boosting safety. Safety has become such a key pillar for the mining industry with mining companies pushing for zero harm operations.
Q: What does the future hold for silver?
A: Silver is really getting a new kind of reputation for being a green metal, which is fantastic for us. We knew this a while ago but it is actually now becoming very clear. There is optimism for a major economic recovery, meaning that silver will benefit from the ongoing bull run in the industrial metals complex. This is mainly related to the growing interest in the green energy fiscal stimulus, the Electrification and Green Technology infrastructure plan to rebuild America. Silver will play a huge role in this and its industrial use is expected to rise in the coming years in three main sectors. It will see significant growth with electric vehicles, solar panels and 5G and 6G networks. The silver use for these technologies cannot be replaced because it has the best conductivity performance of any metal. However, the forecasted shortage of silver at the end of this decade, according to the Silver Institute, is over 250 million ounces a year, which is over 25 percent of the global mining supply. There is going to be a huge demand for silver and there are not enough mines to be able to keep up with such demand and that bodes well for the price of silver. There are about a 100 million ounces of silver being used in the automotive industry and by 2030, this figure is expected to increase to 300 million. In the solar panel business, it is expected to go from 100 million to 200 million ounces. In the networking sector, which uses around 10 million, it is expected to use up to 30 million ounces of silver.
Q: What is Discovery Silver aiming to achieve by the end of the year?
A: It has been a very busy year for us, just like we had last year. Nevertheless, this year is turning out to be even busier and we are very excited. We will continue to put out our drilling results every four weeks. Brand-new metallurgical results should come out as well in 3Q21, as well as a brand-new resource estimate. A month later, the new PEA for the project, which outlines its economics, is expected to be published. This is in addition to the ESG report that is coming out this fall.
We have a world-class silver asset that will continue to get better as we de-risk and optimize it. Discovery offers a compelling value with near-term significant milestones. We believe these catalysts should continue to show value that is not being captured in our share price. Drill results will be ongoing in both new mining areas and with our first drill testing of brand-new regional targets. We have a sizable cash balance of US$67 million free of debt and we have the firepower to continue to aggressively advance our Cordero project. If you are bullish on silver in the short term, there are not many companies with the leverage that we have. This is a very exciting time for us.
Discovery Silver is led by a top-tier group with a record of success in finance, discovery, project development, operations and M&A. Discovery is focused on the Cordero project located in Chihuahua.