Aquiline slides on positive scoping study from Navidad

Vancouver – Positive results from a scoping study looking at developing one zone of the Navidad silver project in Chubut province, Argentina, weren’t enough to save Aquiline Resources (AQI-T) from the market slaughterhouse.

A preliminary economic assessment estimated that putting the near-surface, high-grade Loma de la Plata zone into production would cost US$272.6 million. The project carries a pre-tax net present value (NPR) of US$135.6 million, using a 7.5% discount rate, and an internal rate of return (IRR) of 22%.

According to an estimate from late 2007, the Loma zone contains 9.1 million indicated tonnes grading 225 grams silver plus 17.3 million inferred tonnes grading 159 grams silver. Loma is one out of seven zones identified at Navidad and accounts for roughly 25% of the project’s silver ounces.

Almost US$200 million of the capital cost would support development of a 10,000 tonne-per-day processing plant, designed for easy expansion to 30,000 tonnes per day. Average yearly silver production would be 15 million oz., with peak production of 23 million oz. in the first year. Operations based on Loma alone could continue for 6.6 years.

The deposit would be mined out of two pits. Mill feed for the first three years would come from the first pit, which carries an average grade of 231 grams silver per tonne and a stripping ration of better than 1:1. This higher grade pit would enable Aquiline to repay capital costs within 25 months.

The head grade would decline to 140 grams silver in the second pit, known as the cutback pit. Production costs in the first pit will run at US$4.75 per oz. silver but are expected to increase in the cutback pit due to higher strip and lower grade. Over the 6.6-year mine life, costs average out to US$5.22 per oz.

The scoping study used a silver price of $12.52 per oz. and a copper price of $3.23 per lb. (three year average prices) and assumed 80% silver recoveries using conventional flotation. A change of US$1 per oz. in the price of silver changes the NPV by almost US$60 million; at US$14 per oz. silver the NPV rises to US$224 million and at US$9.20 per oz. the project is cash break-even.

Aquiline is now investigating whether other silver zones on the project have sufficiently comparable mineralogy to impact the Loma development scenario. Company president and CEO Marc Henderson says one key question will be whether the recently discovered, high grade Valle Esperanza zone displays similar flotation response, as that could materially impact the economics of the initial phase of operations.

Valle Esperanza was not included in the 2007 resource estimate but Aquiline says that, based on the results of some 40 drill holes now completed in the zone, it appears to contain high silver grades with low base metal values. One recent hole for Valle Esperanza returned 19.7 metres grading 870 grams silver and 0.12% lead, starting 138 metres downhole. Another strong result of late from the zone came from hole 768, which hit 30.3 metres grading 347 grams silver and 0.32% lead.

The company will also investigate how ore from Barite Hill responds to metallurgical testwork. Barite Hill hosts 6.5 million indicated tonnes grading 176 grams silver and 0.38% lead as well as 400,000 inferred tonnes grading 44 grams silver. If these zones respond well to conventional flotation tests, the company will embark on a wider pre-feasibility study investigating sourcing ore from areas outside of Loma.

Aquiline has four drill rigs on the Navidad property. Two are drilling infill and delineation hole at Loma, one is performing condemnation drilling for future infrastructure sites, and the fourth is dedicated to exploration drilling in Valle Esperanza and other areas. Drilling at Navidad to date amounts to 802 holes totalling 154,480 metres.

Unfortunately for Aquiline, news of the positive scoping study came on another day of market turmoil. The company closed the day down 30 or 10%, at $2.60. Aquiline has a 52-week trading range of $2.49 to $11.89 and has 62.7 million shares issued.