A year after SilverCrest Mines (SVL-T, SVLC-X) posted an initial resource for its La Joya project, in Mexico’s Durango state, of 100 million silver-equivalent oz., the company has managed to nearly double resources to 198.6 million oz.
At a cutoff grade of 15 grams silver equivalent, La Joya contains 126.7 million tonnes grading 23.5 grams silver, 0.17 gram gold and 0.19% copper (or 48.7 grams silver-equivalent per tonne) for 198.6 million silver-equivalent oz.
The resource is contained in the Main Mineralized Trend (MMT), which is 2.5 km long and an average of 700 metres wide, plus the nearby Santo Nino deposit.
The resource comes at a slightly lower silver grade (23.5 grams silver vs. 28 grams silver) than the maiden resource, but SilverCrest has identified a high-grade portion of the MMT zone that could serve as a starter pit for a future mine.
The high-grade section contains 27.9 million tonnes grading 112.2 grams silver equivalent (or 57.5 grams silver, 0.28 gram gold, and 0.48% copper) at a silver-equivalent cutoff grade of 30 grams per tonne for 51.6 million oz. silver, 258,800 oz. gold, and 288.4 million lbs. copper.
SilverCrest plans to begin a preliminary economic assessment shortly that will examine a starter-pit scenario, and aims to have the study completed in the second half of 2013. Infill drilling is also planned to upgrade resources to the indicated category.
The Mexico-focused miner also posted an initial resource for the Contact zone, a tungsten and molybdenum deposit that is situated below the silver-gold-copper zones at La Joya. The Contact zone hosts 97.6 million inferred tonnes grading 0.055% WO3 and 0.012% molybdenum for 118 million lbs. of WO3 and 23 million lbs. of molybdenum. The company says much of the Contact zone, which has been intersected in the MMT, Santo Nino and Coloradito deposits, is near surface and could be amenable to open-pit mining.
On news of the updated resource, Nicholas Campbell, a mining analyst at Canaccord Genuity, reiterated his speculative buy target for SilverCrest, and raised his target for the stock to $4.50 from $4.25. (The stock recently traded at $2.57 in a 52-week range of $1.55-3.17.)
In a note to clients, Campbell wrote that based on his own preliminary model, the starter pit could produce 3.5 million oz. silver, 17,600 oz. gold and 22.7 million lbs. copper annually over an eight-year mine life.
La Joya is a carbonate-hosted copper skarn deposit with associated silver and gold located in the Mexican Silver Belt. The dominant form of mineralization is hosted in sub-vertical, roughly east-west striking, structurally controlled stockwork zones, with true widths of between 15 and 50 metres.
Initial metallurgical testing completed last year showed that mineralization at La Joya may be amenable to conventional flotation processes for copper concentrate with high-grade silver and gold components. Further testing is under way.
SilverCrest has an agreement to earn 100% of La Joya over three years from local vendors for $2.68 million and a 2% net smelter royalty (NSR).
The debt-free company, which had $44 million in cash at the end of 2012, also owns the high-grade silver and gold mine in Sonora state. The open-pit mine produced 2.37 million silver-equivalent oz. in 2012 and SilverCrest is planning an underground expansion and building a new mill onsite, which is expected to be up and running in early 2014. A prefeasibility study examining the underground expansion is due out during the first quarter of 2013.
The company has 106 million shares outstanding.