Pan American Silver Reports After-Tax NPV(8%) Of $1.09 Billion For La Colorada Skarn Project
Vancouver-based Pan American Silver Corp. (TSX: PAAS) has disclosed a preliminary economic assessment (PEA) for its La Colorada Skarn project in Zacatecas, Mexico, positioned below and adjacent to its actively producing La Colorada mine.
Pan American Silver President and CEO, Michael Steinmann, expressed enthusiasm about the project’s potential, stating, “Our objective is to provide investors with exposure to silver, and the La Colorada Skarn provides that exposure in scale, with average annual production estimated to average 17.2 million ounces during the first 10 years.” Steinmann also highlighted the anticipated annual production of 427,000 tonnes of zinc and 218,000 tonnes of lead, aligning with market dynamics.
The PEA envisions a 50,000 tonnes per day sub-level cave mining method, supported by decline ramps and ventilation shafts. A selective zinc and lead flotation processing plant, along with a dry-stack tailings facility, is proposed to yield silver-bearing mineral concentrates. The estimated 17-year mine life is based on an indicated mineral resource of 173.6 million tonnes, containing 183 million ounces of silver, 4.8 million tonnes of zinc, and 2.3 million tonnes of lead.
Despite the positive outlook, some analysts have raised concerns about the project’s cost. Jackie Przybylowski, a mining analyst at BMO Capital Markets, commented, “This is a large project for Pan American Silver, but in our view, it is a manageable size for the company to build.” However, Przybylowski estimated a higher construction cost of $3.5 billion, compared to the company’s projection of $2.8 billion, citing early-stage risks that could impact the final expense.
Steinmann addressed these concerns, noting that the current mineral resource estimate does not include drill results from 2023. He anticipates that ongoing drilling activities will expand the resource envelope and enhance the project’s economic viability.
The La Colorada Skarn deposit, discovered in 2018, holds substantial indicated and inferred resources, with further exploration and infill drilling planned for mid-2024. Pan American Silver is actively assessing interest from base metal producers and potential partners to establish long-term collaborations for the development of this project.
The PEA’s financial projections, including an estimated initial capital cost of $2.8 billion over a six-year construction period, indicate a payback period of 4.3 years. The total life of mine sustaining capital is estimated at $951 million, with a cumulative after-tax cash flow of $5.7 billion. The after-tax net present value (NPV) stands at $1.09 billion at an 8% discount rate, underlining the project’s potential for generating substantial returns.
Information for this briefing was found via Sedar, The Northern Miner, and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
