Seeking Alpha

Proactive Investor's  Instablog

Proactive Investor
Send Message
Proactiveinvestors is a leading multimedia news organization, investor portal and events management business with offices in New York, Sydney, Toronto and London. Proactiveinvestors operates five financial websites in four languages providing breaking news, comment and analysis on hundreds of... More
My company:
Proactiveinvestors
My blog:
Proactiveinvestors
  • SilverCrest Mines Sees Attractive Economics From Santa Elena Expansion Plan 0 comments
    Jul 25, 2013 4:51 PM | about stocks: SVLC

    SilverCrest Mines (CVE:SVL)(NYSE MKT:SVLC) has announced its prefeasibility study for the junior miner's expansion plan at the Santa Elena mine in Mexico, adding more detail to the stellar reserve and resource figures released in May, which feed into the company's target to dramatically increase output at the site.

    The headline financials boast a pre-tax net present value of $243.7 million, and a whopping 88 per cent internal rate of return (NYSE:IRR), with eight years of mine life added after the company released updated reserve and resource estimates for the mine earlier this year, which in some cases doubled the estimates previously available for the 100 per cent owned project.

    Key to the newly- increased figures, which include 19.7 million contained ounces of silver and 327,430 contained ounces of gold in probable reserves, 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 3,000 tonnes per day (tpd) run rate by late March. 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 675,000 ounces of silver and 33,000 ounces of gold in 2013, with the mill set to have a substantial impact on the amount of production from the mine next year.

    The economic analysis of the expansion plan, which uses base case metal prices of $1,450 per ounce of gold and $28 per ounce of silver, estimates total operating revenue of $684.9 million for the additional 8 years of mine life beginning in January 2014, from estimated sales of 12.11 million ounces of silver and 262,739 ounces of gold.

    The pre-tax net present value is still strong at an estimated $128.7 million even using lower metal prices of $1,250 an ounce of gold and $19.50 per ounce of silver, with an IRR of 49 per cent.

    "We are extremely pleased with the results of the PFS which confirms our expectations that the transition from our open pit heap leach operation to a conventional mill and underground operation will represent a very attractive project with robust economics even at current reduced metal prices," said chairman and CEO J. Scott Drever in the statement released Thursday.

    Total operating costs of $282.2 million are expected, with average cash operating costs pegged at US$11 per ounce of silver equivalent. Total capital costs are estimated at $87.8 million, including contingency, but excluding sunk costs up to April 30 of this year.

    According to the company statement, total pre-tax cash flow is seen at $302.5 million, which includes an estimated US$5 million in cost deductions for closure, and working capital of US$1.8 million.

    The payback period for the expansion plan is expected to be one year.

    "The 8 year mine life will give SilverCrest a strong corporate cash flow providing a solid foundation for continued systematic and aggressive growth," said Drever. The company said Thursday only mineral reserves were used in the prefeasibility mine plan and economic analysis, adding that mineralization at the mine is still open in most directions with "excellent potential" to further boost resources and reserves.

    "We look forward to a banner year in 2014 with the commissioning of the new processing facility in the first quarter and the significant expansion of our annual metals production at Santa Elena."

    Indeed, the company is looking to boost 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.

    SilverCrest said it will look for more ways to optimize the mine schedule, including grade improvements versus stoping costs and the potential to expand underground production with a second ramp. These plans will be looked at in more details after commercial production starts from the new mill facility next year.

    The silver miner, which ended the latest quarter with cash and equivalents of $41.1 million and has cash flow of 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.

    Shares of SilverCrest were trading at $1.83 on the TSX Venture Exchange Thursday.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: SVLC
Back To Proactive Investor's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.