Miners take key steps forward at Mexican projects

Mining companies have taken major steps forward at Mexican precious metals projects, which could pave the way for first production in 2022.

The firms announced financing, procurement and technical milestones in late December and early January as they seek to advance development of the assets.

LAS CHISPAS

SilverCrest Metals announced two significant advances at Las Chispas, potentially Mexico’s highest return primary silver project, on January 4.

The company secured a US$120mn financing facility from an affiliate of RK Mine Finance to help fund construction of the Sonora state asset.

SilverCrest has drawn US$30mn of the US$120mn, with the remaining US$90mn, combined with estimated end-2020 cash of US$135mn, set to provide a substantial component of funding for construction, exploration and regional growth initiatives, the company said in a release.

“In our opinion, this is positive and nearly completes SilverCrest’s financing needs,” Scotia Capital analyst Trevor Turnbull said in a note.

The company will likely pursue a small equity financing to ensure adequate funds for regional exploration and project enhancement opportunities, including recent vein discoveries at Las Chispas and the nearby Picacho property, Turnbull added.

Las Chispas is expected to produce 5.4Moz/y silver and 55,700oz/y gold, according to a 2019 PEA, with initial capex estimated at US$100mn, delivering a 78% post-tax IRR at US$16.68/oz silver and US$1,269/oz gold prices.

But metrics are likely to change in a feasibility study due out in late January, with Scotia Capital estimating an increase in initial capex to around US$150mn.

EPC CONTRACT

In a second milestone, SilverCrest signed an EPC contract with Ausenco Engineering Canada for construction of the Las Chispas processing plant.

Following the fixed-price US$76.5mn agreement, work is due to begin in February, with commissioning of the 1,250t/d throughput plant targeted for 2Q22.

“This news marks another important milestone on our path to production at Las Chispas,” SilverCrest CEO Eric Fier said.

In addition to the plant, the project involves underground mine development and construction of a camp, powerline, dry stack tailings facility and the establishment of an analytical laboratory in the community.

FÉNIX PROJECT

McEwen Mining reported highlights of a feasibility study for its Fénix project on December 31, which the company said demonstrates attractive returns.

The project extends the life of the El Gallo operation in Sinaloa state for 9.5 years.

Production is envisaged to average 26,000oz/y gold in the first phase, followed by 4.2Moz/y silver equivalent in phase 2, from year seven.

Initial phase 1 capex is US$42mn, with a further US$24mn required in year six for phase 2 development.

Post-tax IRR put at 28% at US$1,500/oz gold and US$17/oz silver prices, rising to 55% at current spot prices of around US$1,900/oz gold and US$25/oz silver.

McEwen plans to begin detailed engineering and assessing procurement and financing options, CEO Rob McEwen said.

While no construction decision has been announced, McEwen COO Peter Mah said in October that 2021 could be the key construction year for Fénix, pending financing.

OTHER MILESTONES

Other recent project milestones include Orla Mining’s completion of a layback agreement with Fresnillo, which paves the way for a significant boost to production at the US$123mn Camino Rojo gold project.

The US$62.8mn deal allows Orla to extend the pit wall at Camino Rojo into Fresnillo’s neighboring concession, enabling it to access mineral resources below the open pit outlined in a 2019 feasibility study.

An updated feasibility study incorporating the changes is expected early this year.

OUTLOOK

Recent milestones at Las Chispas, Fénix and Camino Rojo help pave the way for mining production growth in Mexico over the coming 24 months.

In November, BNamericas listed 13 mining projects expected to come into operation in 2021-22, with combined capex of US$1.68bn.

Significant investments include Fresnillo and MAG Silver’s US$440mn Juanicipio silver-gold project, due for commissioning around mid-2021, Southern Copper’s US$413mn Buenavista Zinc project and Equinox Gold’s US$213mn Los Filos Expansion.

The list has been swelled by a string of small-scale projects expected to come into production this year, including Sonoro Gold’s Cerro Caliche and Golden Minerals’ Rodeo and Velardeña assets.