Miners target US$1bn splurge at LatAm gold, silver projects

Mining companies are planning a US$1bn investment spree across five Latin American gold and silver projects, after technical studies revealed potentially viable paths to production.

Firms concluded at least three PEAs and two feasibility studies for regional assets since the start of Q3 – with results of three studies announced in the first week of October.

The studies outline projects with combined capex of US$999mn and capable of boosting the region’s output by about 282,000oz/y gold and 12.7Moz/y silver equivalent.

Expansions and higher production forecast in the early years of operations at some projects could result in a substantial increase to the annual gold output figure.

But companies may need to revise their economic assumptions following a slump in gold and silver prices.

Gold and silver hit two-year lows of US$1,618.20/oz and US$17.77/oz, respectively, in London last month, after trading broadly in the US$1,700-2,000/oz and US$22-30/oz ranges for around 24 months from mid-2020.

Price assumptions in the five studies range from US$1,600-1,750/oz gold, and US$21.95/oz in the silver study.

Four of the five assets are owned by junior explorers or emerging producers, with the fifth in the hands of a mid-tier primary gold producer.

TOP LATAM GOLD, SILVER STUDIES

1. La Cumbre, Colombia

Capex: US$170mn, plus US$248mn expansion

Metals: Gold, silver

Study: PEA

Batero Gold’s PEA gives an indication of the economic viability of its La Cumbre project, with a two-phased open pit operation delivering high returns.

The study shows an initial 15,000t/d-throughput project producing 75,400oz/y gold over six years, and a phase 2 expansion doubling throughput to 30,000t/a and extending operations to 14 years, with output rising to 131,700oz/y (life of mine production averages 116,571oz/y, according to BNamericas calculations).

Capex requirements are US$170mn for phase 1, and US$248mn for the phase 2 expansion.

Post-tax IRR is 47.5%, but the study assumes a gold price of US$1,750/oz, compared to current spot prices of around US$1,700/oz.

Batero is currently advancing consultation with the local Emberá Karambá indigenous community, ahead of a planned submission of an environmental impact study.

2. Cerro Las Minitas, Mexico

Capex: US$341mn

Metals: Silver, copper, lead, zinc

Study: PEA

Southern Silver Exploration’s PEA outlines the potential of a large-scale underground mine at Cerro Las Minitas (in picture).

While economics are borderline at lower metals prices, the company says the Mexican asset’s untapped exploration potential could boost returns.

Cerro Las Minitas is expected to produce 11.3Moz/y silver equivalent, including 4.7Moz/y silver, after processing, treatment and refining, with initial capex estimated at US$341mn.

Post-tax IRR is 17.9% at price assumptions of US$21.95/oz silver, US$3.78/lb copper, and US$0.94/lb lead and US$1.33/lb zinc.

Silver is currently trading around US$20/oz. A 15% drop in assumed metals price would see post-tax IRR dip to 10.6% – a level which is unlikely to warrant investment.

But Southern plans to deliver further value through the drill-bit.

“The property remains under-explored and the current PEA … presents the outline of a large-scale, underground, silver and base metal mine with robust economics which can only grow larger and more valuable as drilling continues to define additional high-grade mineralization,” company president Lawrence Page said in the August release.

Drilling through August 2022 has confirmed extensions to the Mina La Bocona and Skarn Front deposits which have yet to be incorporated into the resource model, while other deposits remain open laterally and to depth, the company added.

3. Matupá, Brazil

Capex: US$107mn

Metal: Gold

Study: Feasibility

Aura Minerals is planning to swiftly advance its Matupá project to construction, while evaluating potential to extend operations through exploration.

Feasibility study results from earlier in October show a US$107mn capex open pit operation producing around 55,000oz/y gold over the first four years, or 42,000oz/y over the seven-year mine life.

Post-tax IRR is 27.5% at US$1,664/oz gold, falling to 6.2% at US$1,200/oz.

Aura, which has producing assets in Brazil, Mexico and Honduras, plans to push ahead at Matupá while expanding drilling to areas beyond the X1 deposit, on which the feasibility study was based.

“Our strategy is to move to construction as soon as possible with the highest ESG … standards, while we continue to uncover the exploration potential property-wide,” CEO Rodrigo Barbosa said in a release.

Barbosa told BNamericas last month that the company had planned to begin construction in 1H23, but will now assess whether to start building the Matupá or Borborema – another Brazilian gold project – first.

4. La India, Nicaragua

Capex: US$105mn

Metals: Gold, silver

Study: Feasibility

Condor Gold’s feasibility study showed the economic viability of its La India open pit project in Nicaragua – but the company expects to quickly expand the project with the addition of other pits.

The study showed total production of 548,000oz gold over an 8.4-year mine life, averaging about 65,000oz/y gold.

Production in the first six years will be 81,524oz/y, with initial capex of US$105mn, delivering a 23% IRR at US$1,600/oz gold.

But further growth will come quickly, with Condor planning to boost production to 100,000oz/y through the addition of two permitted high-grade feeder pits in the early years, CEO Mark Child said in a September release.

Further growth will stem from a stage 2 expansion, with Condor targeting average production of 150,000oz/y gold from open pit and underground resources, as outlined in a 2021 PEA.

Condor plans to advance land acquisition to de-risk the project, with 99.6% of core areas already secured, and obtain secondary environmental approvals (an environmental permit was approved in 2018).

5. Cerro de Oro, Mexico

Capex: US$28.1mn

Metal: Gold

Study: PEA

Minera Alamos plans to push its Cerro de Oro gold project in Mexico into the permitting stage as it seeks a path forward following a PEA.

The October study showed a US$28.1mn pre-production capex open pit operation, producing 58,400oz/y gold over an 8.2-year mine life.

Post-tax IRR for the 20,000t/d- throughput heap leach mine is estimated at 111% – one of the highest in the industry – assuming US$1,600/oz gold prices.

Work is currently underway to prepare environmental and change of land use permits, prior to a potential construction decision, the company said.

Minera Alamos is currently ramping up operations at its smaller Santana gold project, also in Mexico.