Spotlight: SilverCrest study shows Las Chispas' economic potential

A PEA on SilverCrest Metals' Las Chispas has given the market a taste of the Mexican silver-gold project's economic potential.

But with 14 drill rigs in operation at the Sonora state asset, the company is looking to expand resources which could boost returns and result in a larger operation.

BASICS

Las Chispas is located about 180km northeast of Hermosillo and consists of 28 concessions covering 1,401ha.

The asset was in intermittent operations between 1880-1930, according to SilverCrest.

The PEA, details of which were released this month (May), sets out a proposed 1,250t/d underground mine with an 8.5-year mine life.

Production averages 9.6Moz/y silver equivalent (5.38Moz/y silver and 55,700oz/y gold). Average output over the first four years of operations is 13.7Moz silver equivalent.

Initial capex is US$100mn.

RESOURCE

The PEA is based on resources identified by February 2019.

The diluted resource stands at 3.86Mt at grades of 411g/t silver and 4.05g/t gold, or 714g/t silver equivalent.

Contained metal comprises 51Moz silver and 502,200oz gold.

ECONOMICS

High grades underpin low production costs and solid economics, at or below current metals prices.

All-in sustaining costs (AISCs) are estimated at US$7.52/oz silver equivalent, and US$4.89/oz in the first four years.

Post-tax IRR of 78% assumes US$16.68/oz silver and US$1,269/oz gold prices. While gold is currently trading slightly higher, silver spot prices are stuck in the US$14.00-15.00/oz range.

But returns remain highly attractive at US$14/oz silver and US$1,100/oz gold, at 64%, still one of the highest in Mexico's precious metals space.

EXPLORATION POTENTIAL

The PEA is based on resources identified in three years of drilling and from just 10 of the 30 drill-tested, near-surface veins.

"Continued drilling success may add significant value to the project," CEO Eric Fier said.

SilverCrest currently has 14 drill rigs running at Las Chispas, with six focused on expanding the resource and testing new targets and eight completing infill drilling to re-categorize resources.

Further exploration success could feed a higher throughput (1,500-2,000t/d) operation, while high-grade discoveries could smooth out the mine's production profile, which dips after the first four years of operations, the company said.

OTHER IMPROVEMENTS

In addition to further exploration successes, SilverCrest plans to evaluate potential improvements to recovery rates and accessing grid power, which would be cheaper than the diesel-generated electricity envisaged in the PEA.

NEXT STEPS

These possible optimizations, along with further drill results, will be evaluated in a feasibility study due for completion in 1H20.

OUTLOOK

The Las Chispas PEA showcases the project's impressive economics, which remain robust at US$14/oz silver and US$1,100/oz gold prices.

Significant exploration potential coupled with other optimizations could result in a bigger, higher-return operation.

A manageable US$100mn price-tag means SilverCrest will not have to struggle hugely to finance development, once the feasibility results are in.

But the attractiveness of the asset as defined in the PEA is likely to attract potential buyers, such as SSR Mining, which last year purchased 8.2mn shares in the company in a Cdn$31mn (US$23mn) private placement.