Western Silver to fast-track Penasquito

Vancouver — An independent prefeasibility study has concluded that the Chile Colorado zone on Western Silver‘s (WTC-V) Penasquito property in Mexico can be mined economically. The study by Arizona based M3 Engineering & Technology estimates an after-tax internal rate of return of 15.3% with a payback of almost five years.

Western Silver’s 13 mining concessions in the Penasquito district cover 379 sq. km. The Chile Colorado deposit hosts folded felsic-to-intermediate marine volcanics and volcaniclastics. Mineralization occurs as veins and fracture fillings.

Penasquito is in Zacatecas state, a historical centre for silver mining in central Mexico, and was discovered in the late 1800s.

Former owner Kennecott carried out geophysics, geochemical surveys and drilling on the property between 1994 and 1997. Western Silver (known as Western Copper Holdings until a year ago), aquired the property from Kennecott in 1998 for about US$5 million. In 2000, Western Silver optioned the property to Minera Hochschild, which performed 4,600 metres of drilling, and then walked away.

Western Copper did more than 22,000 metres of drilling between 1998 and 2002, and in a scoping study last year, M3 estimated an pretax IRR of 25.6% (at a silver price of US$5 per oz. and a gold price of US$325 per oz.) over a mine life of 12.2 years and a daily production rate of 20,000 tonnes. The capital cost of the project is pegged at US$148 million.

Gerald Prosalendis, Western Copper’s vice-president of corporate development, describes the proposed operation as bulk-minable and open-pit.

SNC-Lavalin (snc-t) recently estimated that the Chile Colorado deposit has a measured and indicated resource of 148.7 million tonnes grading 34.3 grams silver and 0.34 gram gold per tonne, plus 0.29% lead and 0.84% zinc. Proven and probable reserves total 98.4 million tonnes grading 39.65 grams silver, 0.36 gram gold, 0.34% lead and 0.93% zinc. The estimates are based on conservative metal prices of US$5.50 per oz. silver, US$350 per oz. gold, US30 per lb. lead, and US45 per lb. zinc. At today’s higher metal prices, an IRR of 26.4% is achievable.

Metallurgical studies are under way.

About 25 million tonnes of oxide material are considered waste, though the company plans to study the potential for heap leaching. Measured and indicated oxide resources have an average grade of 15.3 grams silver, 0.15 gram gold, 0.26% lead and 0.3% zinc. And there is an additional 4.7 million tonnes grading 11.6 grams silver, 0.11 gram gold, 0.18% lead and 0.17% zinc at a cutoff grade of 5 grams silver per tonne.

Over a projected life of 13.5 years, the mine would produce about 1.4 million tonnes of zinc concentrate and 509,000 tonnes of lead concentrate containing 103 million oz. silver, 626,000 oz. gold, 287,000 tonnes lead, and 835,000 tonnes zinc.

The average production rate would be 20,000 tonnes per day; the total capital investment, US$164.4 million; and operating costs, US$5.63 per tonne. The projected life-of-mine cash cost per ounce of silver is US32.

Western Silver will proceed to a full feasibility study, to be completed by early 2005. The study will examine the potential for recovering gold and silver from oxides and for mining the nearby deposit known a Outcrop Breccia. The company will release a resource estimate for Outcrop Breccia in the coming months. Meanwhile, delineation drilling is planned for this and other zones.