Bear Creek boosts Santa Ana silver (September 05, 2008)

Vancouver – A new resource estimate for Bear Creek Mining‘s (BCM-V) Santa Ana silver deposit in southern Peru has almost tripled the site’s measured and indicated resource.

Only eight months after releasing the first estimate of Santa Ana’s leachable silver, Bear Creek has completed another 159 holes totalling almost 29,000 metres. The efforts have boosted measured and indicated resources to 56 million tonnes grading 45.7 grams silver per tonne, 0.34% lead, and 0.57% zinc, up from 21 million indicated tonnes eight months ago.

Inferred resources now stand at 23.3 million tonnes grading 50.3 grams silver, 0.32% lead, and 0.51% zinc, containing roughly the same 38 million inferred silver oz. as in the last estimate.

Bear Creek is by no means done expanding Santa Ana. News of the resource estimate included results from 28 holes completed after the resource calculation and the company still has three drill rigs turning on site, though one is scheduled to depart soon for another project. The Santa Ana deposit remains open to the north, south, and west.

“Santa Ana is a great little projectalthough now it’s no longer so little,” says Andrew Swarthout, president and CEO of Bear Creek. “We’re getting high grades more frequently as we move north, and it’s still open at depth and in three directions laterally. I just think this good news is getting lost in a morass of bad news.”

Of the new results, hole 154 returned the strongest interval: 114 metres grading 103 grams silver per tonne and 1.3% zinc, from just 6 metres depth. Hole 160, 200 metres to the northwest, hit 84 metres grading 62 grams silver and 1% zinc from 48 metres downhole. And hole 167, collared 250 metres south of hole 160, returned 124 grams silver and 0.9% zinc over 52 metres.

Some of the recent holes, including 154 and 167, added confidence to the high-grade pockets of the deposit where Bear Creek is looking to situate starter pits. Of the resource, 14 million measured and indicated tonnes average 63 grams silver and could provide a strong starting point for a mining operation.

In fact, Bear Creek is postponing the start of scoping and preliminary economic assessment studies until after the layout of high-grade material is better understood.

“Now we have high grades over some pretty robust intervals,” says Swarthout. “We want to understand how the high grade is distributed through the deposit in order to build a reasonable mining sequence. We won’t have to hold off for long.”

Another interesting aspect of the high-grade silver resource is the increasing zinc grade. As drills move north they are encountering longer intervals of zinc mineralization grading better than 1%. The silver mineralization at Santa Ana is heap-leachable, for silver recoveries around 70%; Bear Creek is now conducting flotation studies to assess the potential for added value through zinc-lead production.

Bear Creek’s share price lost 19 on news of the new Santa Ana resource and drill results to close at $2.53, though the next day saw a 7 gain. The company’s shares traded as high as $9 in March but have slid consistently since then.

“Everyone is getting creamed, there’s no secret there,” says Swarthout. “Why are we getting creamed harder than the rest? I don’t know. I think people are waiting for to continue to take risk out of these projects, and we are slowly doing that.”

Bear Creek took one major risk-reduction move a few days prior to the Santa Ana resource news when it announced modifications to the prefeasibility study currently underway for Corani, the company’s flagship silver-lead-zinc project 200 km north of Santa Ana.

A scoping study for Corani, completed in January, found the project carried robust economics based on a 30,000 tonne-per-day throughput for average annual silver production of 17 million oz., over a 12.5-year mine life. Taking into consideration the marked changes in the commodities and capital markets since the scoping study, Bear Creek is adjusting the project’s parameters to reduce capital expenditures by as much as 30% and optimize internal rate of return.

The biggest change is a reduction in the daily throughput to 15,000 tonnes. The smaller flotation mill will focus on processing higher-grade and higher-recovery ores in the mine’s early years. As a result, silver production should come in at 10 to 14 million oz. per year for the first seven years.

During those first years the plan also demands mining focus on the 100 million tonnes of the resource that boast the lowest strip ratios. That means the company can set a silver production cost of less than $3 per oz. (net of base metals).

And in March Bear Creek reached a deal with Rio Tinto (RTP-N, RIO-L) to purchase the major’s remaining 30% interest in Corani for $75 million in staged share-and-cash payments. Bear Creek now owns the project outright.