Santa Elena now hosts a mining reserve sufficient for eight years’ production
SilverCrest’s recently completed pre-feasibility study incorporates an NI 43-
101-compliant proven and probable mining reserve of 6.54 million tonnes,
averaging 1.61 grams of gold and 56.7 grams of silver per tonne. The company
has an additional indicated and inferred mineral resource of 4.07 million
tonnes, averaging 1.52 grams of gold and 91.2 grams of silver.
SilverCrest envisages a 2,500-tonne-per-day mine at Santa Elena
SilverCrest’s preliminary mine plan calls for a 2,500-tonne-per-day open pit,
heap leach operation at Santa Elena. Based on expected recovery rates, the
pre-feasibility study projects the mine will produce 30,000 ounces of gold and
500,000 ounces of silver annually.
Gold and silver prices retreat, but remain robust
The price of gold has retreated to just over US$800 per ounce after briefly
topping US$1,000 per ounce earlier this year, but remains well above its longterm,
inflation-adjusted average of US$550 per ounce (in current dollars). At
US$13.70 per ounce, silver is also well above its long-term, inflation-adjusted
mean of US$6.75, although sharply lower than prices noted early this summer.
Cost projections remain modest, supporting an expected high rate of return
SilverCrest’s pre-feasibility study projects the capital cost of the proposed Santa
Elena mine at US$20m, including provisions for contingencies and working
capital. The cash operating costs are projected at US$328 per ounce in current
dollars, and less than US$250 per ounce over the first two years, providing a
quick payback.
Valuation modestly lower but more robust on gathering confidence
Our revised model places a base-case value of C$1.32 per share on SilverCrest
Mines, slightly lower than our C$1.39 initiation note estimate of February 2008
and the result of several counter-veiling influences. Most prominently, the
completion of the pre-feasibility study has increased our confidence in success
at Santa Elena, whilst the dilutive effect of a large equity placement exerted a
significant negative influence. Our more optimistic assessment of C$1.48 per
share is based on higher probabilities of exploration success, reflecting the
potential offered by further drilling.
