Kootenay Silver (TSXV: KTN) has put numbers behind one of its priority silver assets, releasing a preliminary economic assessment for the wholly owned La Cigarra project in Chihuahua, Mexico. The study sketches out a proposed open pit mine with a 14 year mine life.
At consensus metal prices, the study pegs the after-tax net present value at $763 million using a 5% discount rate, with an internal rate of return of 41% and a payback period of 1.9 years. Those economics assume silver at $50.00 per ounce, gold at $3,611 per ounce, lead at $0.91 per pound and zinc at $1.25 per pound.
Run at spot prices, which consist of $67.23 an ounce silver and $4,210 an ounce gold, the after-tax NPV climbs to $1,295 million and the IRR to 64%.
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Over the life of mine, La Cigarra is modelled to produce 63.6 million payable ounces of silver, averaging 4.55 million ounces annually. Production however is front loaded, with 6.22 million ounces a year expected to be produced across the first five years.
The proposed operation would process 6,000 tonnes per day through a conventional flotation and leaching plant, recovering an average of 89.3% of the silver. Silver does most of the heavy lifting at 94.1% of net revenue, with gold, lead and zinc credits making up the balance.
In terms of costing, building the mine would require $332 million in initial capital, plus a further $80 million in sustaining capital over the operating life. Operating cash costs are estimated at $16.85 per silver equivalent ounce, with all in sustaining costs of $18.73.
President and Chief Executive James McDonald framed the assessment as a step toward development, pointing to the mine life, annual output and return profile as evidence of a potential long-life operation in a district he noted has produced for nearly 500 years.
“We believe the combination of attractive economics, substantial resource-growth potential, existing infrastructure, and strong silver market fundamentals, positions La Cigarra as a compelling development asset, significantly adding value to the stakeholders in the region,” said McDonald.
In terms of next steps, Chairman Ken Berry commented, “With La Cigarra now supported by a positive PEA, we are evaluating the next steps to unlock additional value through resource expansion, engineering optimization, and advancement toward permitting and feasibility engineering.”
Kootenay Silver last traded at $1.47 on the TSX Venture.
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