Studies Reveal Exponentially Larger Potential
Q: What is the strategy behind Discovery Silver’s continued success?
A: The strategy has always been to outline a business plan and then consistently execute on it. The credibility of the management team is paramount to success and you have to earn it. With Cordero, we laid out a plan when we acquired it in 3Q19 and we have consistently met or beaten our expectations and plans for the project for over the past two years.
Q: What makes the Cordero project so special for Discovery Silver?
A: Cordero is a development stage project in Chihuahua Mexico located on a well-known, major precious metals belt. We just released a technical study that presents it as one of the largest silver mines in the world, with very impressive NPV (current silver prices over CA$1.5 billion [US$1.2 billion]), IRR, payback and relatively modest capex. The combination of margin, size and scalability make this a clear Tier 1 silver asset and probably one of the most meaningful and important development-stage silver assets in the world right now.
Q: What are the highlights of your recent PEA and updated resource estimate for Cordero?
A: The total resource size of Cordero is over 1 billion oz AgEq and approximately 90 percent of this is in the M&I category (moving to Proven and Probable Reserves on completion of our Pre-Feasibility Study). Cordero ranks as one of the largest primary silver deposits in the world, just with its silver content alone.
The Cordero PEA outlines excellent project economics with a base scenario of US$22/oz, including an after-tax NPV at 5 percent of US$1.2 billion, an IRR of 38 percent and payback in 2.0 years. These financials are backed by a 16-year mine life with average annual production of 26Moz AgEq, which would make Cordero one of the largest primary silver operations in the world, comparable in scale to the total production of most senior silver producers. The average life-of-mine all-in sustaining cash costs stands at US$12.35/oz, which ranks among the lowest in the industry. The capital efficiency of the project is also industry-leading, with a base case NPV to capex ratio of 3.2.
Q: Discovery has a cash position of over CA$70 million (US$55.1 million). How far into your project timeline will this take you?
A: Our current cash balance should allow us to progress Cordero to construction within two years with approximately the same cash balance as we have now. The approximate cost of all of the work required to advance the project to this stage (drilling, engineering, permitting, among other elements), including regional work looking for new deposits, should be offset by the inflow of approximately CA$40 million (US$31.5 million) worth of warrants and options to be exercised in 2022.
Q: What is your vision for filling a pipeline of early-stage growth projects for Discovery Silver?
A: Cordero is located on a 35,000ha land package. The resource/PEA area represents less than 1,000ha of this package. During 2H21, we had reconnaissance teams mapping and sampling the property to build up targets using current and historical data. Also, several months ago, an airborne geophysics program (mag/EM) was carried out on the property as well. Between the geological, geochemical and geophysical layers of information we have compiled, we have already outlined +15 very interesting early-stage targets that have seen limited exploration work. We believe there is high potential for a brand-new discovery at this property in 2022.
Q: How is Discovery Silver providing long-term socio-economic benefits to surrounding communities?
A: Discovery is committed to improving the lives of its host communities in every possible way. We have been very active in carrying out social and environmental programs in the area, regularly providing educational support, basic supplies to families in need and carrying out extensive environmental and ecological studies with a focus on rehabilitation and improvement. Many remote areas simply have not received the environmental attention they need and have thus regressed substantially as a result of weather changes, erosion, pollution, among other factors.
Q: How does Mexico compare to other regions where you have worked in the past?
A: I have worked as an operations engineer in various regions of the world and I also was a mining equity analyst for several years. I have been able to visit and carry out analyses of mines across many countries. In Mexico, I have worked for over 10 years now, as well, from exploration through production.
There are many advantages to having a project in Mexico. Geologically, Mexico is very fertile ground for mineral resources; it is the No. 1 silver producer and a Top 10 producer of many other metals and minerals. The country also has a deep pool of skilled and knowledgeable labour; mining is an important part of the culture. Operating and capital costs, although they have gone up in the past few years, are still very competitive worldwide. Additionally, permitting is usually quite clear and straight-forward in most areas of the country.
There are other areas where I see gradual improvement. Environmental considerations are gaining much attention. Most Canadian companies operating in the country try to follow high-level standards in terms of environmental work, but recently the Mexican government has raised its expectations on this front. In terms of security, there are areas that have been quite difficult to operate in, like in other countries. Still, the security situation is fine provided you have a strong and knowledgeable local team.
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.