Alamo Dorado gets positive feasibility study (July 05, 2002)

Corner Bay Silver (BAY-T) has unveiled the results of a feasibility study on its Alamo Dorado silver project in Sonora state, Mexico.

The study, performed by AMEC E&C Services, tested the economics of an open pit and heap leach operation. It used a reserve of 35.5 million tonnes grading 68 grams silver and 0.26 gram gold per tonne, which provides an eight-year mine life at a mining rate of 12,500 tonnes per day.

Capital cost is estimated at US$45 million, including US$8 million in indirect costs and US$5 million for contingencies. Operating cash costs, after credits for byproduct gold, ring in at US$3.25 per oz. The internal rate of return for the project (after tax) is 17%.

The planned pit would have a stripping ratio of 1.08-to-1, and the reserve it encloses was based on prices of US$4.60 per oz. for silver and US$300 per oz. for gold. A planned operating period of 350 days annually would mean that about 4.5 million tonnes would go on the leach pad each year. The study supposes Corner Bay would engage a mining contractor.

Lower-grade material mined in the early years of the operation will be stockpiled to go on the leach pad later in the mine’s life.

Earlier metallurgical work by consulting firm Metcon was used in the study, with some supplementary work directed by AMEC. The final process would have the ore crushed to 6mm and passively agglomerated while it is conveyed to the leach pads. The ore would be pre-treated with cyanide solution and calcium oxide before being placed on the pad for cyanidation.

The leach pad itself will have a capacity of 13.5 million tonnes at the start of production, but will be progressively expanded to hold 36 million tonnes, in six lifts of 6 metres each.

Silver recovery is expected to be 71% in the first three years, falling to 51% as material from a more refractory zone of the deposit is mined. Final recovery from the leach solution will be by Merrill-Crowe zinc dust precipitation and smelting.

In a deal with Canyon Resources (CAU-X), Corner Bay has bought the crushing plant from the Briggs mine in California, for US$250,000 and 850,000 shares. The company plans to use the plant at Alamo Dorado.

Directors of Corner Bay and Pan American Silver (PAA-T) have approved final plans to amalgamate the two companies, subject to shareholder votes and approval from regulators. Pan American is offering 0.385 shares and 0.1925 purchase warrants for each Corner Bay share, with the warrants exercisable at $12 for a period of five years.

In May Pan American had offered to trade Corner Bay shares for 0.54 shares of Pan American and 0.25 shares in a new company, which would have held $5 million cash for exploration. The simpler revised offer was introduced by both companies on June 19.